{"id":7230,"date":"2021-07-31T07:37:31","date_gmt":"2021-07-31T07:37:31","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=7230"},"modified":"2021-07-31T07:37:34","modified_gmt":"2021-07-31T07:37:34","slug":"sebi-lodr-regulations-2015","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/sebi-lodr-regulations-2015\/","title":{"rendered":"SEBI (LODR) Regulations 2015 &#8211; Related Party Transactions"},"content":{"rendered":"\n<p class=\"has-drop-cap\">In a company, whether a public or a private, listed or unlisted companies, at the time of course of their business, enter into dissimilar transactions with more than one party. Consisting of its concerning parties. Having transactions with the concerned parties is a standard rule of any business. By taking into account the relationship, related parties can enter into dissimilar transactions that unrelated parties would not. Transactions entered with associated parties involves different concerns; hence the regulator has presented transparency for the related party transactions under <strong>SEBI (LODR) Regulations 2015<\/strong>. In this write-up, we are going to understand the related party transactions under the SEBI (LODR) Regulations 2015.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3aa714b70d2\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3aa714b70d2\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-lodr-regulations-2015\/#Related_Party_Transactions_under_the_SEBI_%E2%80%93_Meaning\" title=\"Related Party Transactions\nunder the SEBI \u2013 Meaning\">Related Party Transactions\nunder the SEBI \u2013 Meaning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-lodr-regulations-2015\/#Relevant_Regulations_Appropriate_on_Related_Party_Transactions\" title=\"Relevant\nRegulations Appropriate on Related Party Transactions\">Relevant\nRegulations Appropriate on Related Party Transactions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-lodr-regulations-2015\/#Explanation_of_Related_Party_Transactions_under_Companies_Act_or_SEBI_LODR_Regulations_2015\" title=\"Explanation of Related Party Transactions under Companies Act or SEBI (LODR) Regulations 2015\">Explanation of Related Party Transactions under Companies Act or SEBI (LODR) Regulations 2015<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-lodr-regulations-2015\/#Regulation_of_the_Related_Party_Transactions_under_Companies_Act_2013_or_SEBI_LODR_Regulations_2015\" title=\"Regulation of\nthe Related Party Transactions under Companies Act 2013 or SEBI (LODR)\nRegulations 2015\">Regulation of\nthe Related Party Transactions under Companies Act 2013 or SEBI (LODR)\nRegulations 2015<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-lodr-regulations-2015\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_Party_Transactions_under_the_SEBI_%E2%80%93_Meaning\"><\/span>Related Party Transactions\nunder the SEBI \u2013 Meaning<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\nmentions transactions that an entity or a company does at the time of its\nbusiness with parties associated with it. In simple words, it refers to a deal\nbetween two parties merged by a previous business common interest or\nrelationship. Companies or entities like to acquire business deals with such\nparties with whom they have an intimacy or avail common interest. Such\ntransactions are legitimate in nature, but they can create a clash of interests\nor other problems.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Relevant_Regulations_Appropriate_on_Related_Party_Transactions\"><\/span>Relevant\nRegulations Appropriate on Related Party Transactions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare some relevant regulations appropriate on Related Party Transactions:<\/p>\n\n\n\n<ol><li><strong><em>Companies Act, 2013: Section\n177 and Section 188 of the Act<\/em><\/strong>.<\/li><li><strong><em>Rules (Companies Meeting of\nBoard &amp; its Power) Rules, 2014<\/em><\/strong>.<\/li><\/ol>\n\n\n\n<p>Listed\nentities are regulated by <strong><em>SEBI (LODR) Regulations, 2015 (Listing\nObligations &amp; Disclosure Requirements)<\/em><\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Explanation_of_Related_Party_Transactions_under_Companies_Act_or_SEBI_LODR_Regulations_2015\"><\/span>Explanation of Related Party Transactions under Companies Act or SEBI (LODR) Regulations 2015<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section\n(ZB) of the SEBI (LODR) Regulations 2015 tells that associated parties are\nindividuals or companies that have related authority over the other party or\npractices important control over the different party, directly or indirectly to\nthe entity. Parties are deemed to be linked in the case where a party has the\ncapability to make financial and operating decisions and comprises an\nindividual or a close member of such individuals\u2019 family who is associated to\nan entity in case that individual is a related party under Section 2(76) of the\nCompanies Act, 2013, which in suggestion to a company means:<\/p>\n\n\n\n<ul><li>A company wherein a manager,\ndirector or their relative is a partner;<\/li><li>Anyone corporate whose BODs\n(Board of Directors), the manager is familiar to act accordingly to the advice\nor orders of a manager or director of a company;<\/li><li>Any entity that is a\nsubsidiary, holding or a related company or a holding company\u2019s subsidiary to\nwhich it\u2019s also a subsidiary;<\/li><li>A KMP or his\/her relative;<\/li><li>A private entity wherein a\nmanager or a director or his\/her relative is a director or member;<\/li><li>Anyone company wherein a\nmanager is a director and holds along with his or her relatives, more than 2%\nof its paid-up share capital;<\/li><li>Anyone on whose orders or\ncounsel a director or a manager is familiar to act;<\/li><li>A director or his\/her relative;<\/li><li>Such other individual as may be\nprescribed. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulation_of_the_Related_Party_Transactions_under_Companies_Act_2013_or_SEBI_LODR_Regulations_2015\"><\/span>Regulation of\nthe Related Party Transactions under Companies Act 2013 or SEBI (LODR)\nRegulations 2015<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An\nassociated party is not prohibited under the SEBI or the Companies Act. But,\nregulations determine the conditions as a measure of protection that has to be\npursued by the entities when dealing with the related party transactions.<\/p>\n\n\n\n<p>As\nlong as the primary highlights of the regulations are concerned, clearness in\ndealing and required disclosures to be made to the board members &amp;\nshareholders are vital aspects.<\/p>\n\n\n\n<p><strong><em>Following\nare some significant actions to be taken by an entity or a company:<\/em><\/strong><\/p>\n\n\n\n<ol><li><strong><em>Role of Company Secretary (CS)<\/em><\/strong>: The CS or Company Secretary should work with the board members, CFO (Chief Financial Officer) and make sure to bring out the sturdy policy in order to fulfil the regulatory requirements. The CS also makes sure that the compliances are fulfilled.<\/li><li><strong><em>Role of AC (Audit Committee)<\/em><\/strong>: The (Audit Committee) has to govern and find out RPT under the Companies Act, 2013 and under the <strong>SEBI (LODR) Regulations 2015<\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/legal\/regulations\/jan-2020\/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-regulations-2015-last-amended-on-january-10-2020-_37269.html\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup>. The Audit Committee should design the control process of the company internally for RPT.<\/li><li><strong><em>Preparation of Policy on Related Party Transactions under SEBI<\/em><\/strong>: As it&#8217;s a compulsory necessity under the SEBI (LODR) Regulations 2015, the company should plan a policy on RPT for the company. It will aid in strengthening the company governance structure and would show the company&#8217;s value, and stakeholders would desire to get linked with the company. Such policy should specify the objective, procedure, scope, recognition of Related Party Transactions.<\/li><li><strong><em>Role of CFO<\/em><\/strong>: The Chief Financial Officer is accountable for executing, planning, and running the concerning financial activities of the company or entity. Hence, the Chief Financial Officer is required to make sure that adherence is made to all provisions of the Companies Act and also with the provisions of SEBI (LODR) Regulations 2015 and suggestions to the accounting benchmarks applicable. Moreover, take care in ensuring compliance with especially recognising RPTs, inspecting it is on the basis of arm&#8217;s length or otherwise.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The primary purpose of having a policy on RPTs under the SEBI (Securities and Exchange Board of India) is to make sure reporting of transactions as applicable between the company and its linked party without prejudice. It will aid in taking transparent quality information to all stakeholders as the consent process is put in place by listed entities or companies. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/sebi-decides-to-relax-timelines-for-compliance-requirements\/\">SEBI Decides to Relax Timelines for Compliance Requirements<\/a><\/mark><\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>In a company, whether a public or a private, listed or unlisted companies, at the time of course of their business, enter into dissimilar transactions with more than one party. Consisting of its concerning parties. Having transactions with the concerned parties is a standard rule of any business. By taking into account the relationship, related [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":7226,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[64],"tags":[785],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7230"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=7230"}],"version-history":[{"count":3,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7230\/revisions"}],"predecessor-version":[{"id":7233,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7230\/revisions\/7233"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/7226"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=7230"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=7230"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=7230"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}