According to the Companies Act 2013, related party in a company refers to as –
These transactions need the approval of the Board by passing resolutions in a respective company as per companies act 2013.
There is no need to get approval via a special resolution for the transactions between holding and its subsidiary company.
Securities and Exchange Board of India (SEBI) also states several provisions related to the related parties. It defines the related party transactions as transfer of resources, services or obligations between a company and a related party.
Here are a few important points that you need to consider in case of related party transactions.
There are different provisions which a company needs to follow in order to disclose its related parties.
The Ministry of Corporate Affairs has proposed punishments/penalties in case these provisions are not fulfilled by any company.
In case of a listed company, the director or any other employee shall be punishable with imprisonment of up to 1 year or, a fine of not less than Rs. 25,000 which can be extended up to Rs. 5 lakh or both.
In case of any other company, a fine of not less than Rs. 25,000 which can extend up to Rs. 5 Lakh.