“Related Party” with reference to a company includes the following persons and entities:

Direct Relationship

  • Director or his relative
  • Key Managerial Personnel (KMP) or his relative

Entities Connected with Director / KMP

  • Firm in which a director, manager or their relative is a partner
  • Private company in which a director or manager or their relative is a member or director
  • Public company in which a director or manager is a director and holds (with relatives) more than 2% of paid-up share capital

Control / Influence Based Relationship

  • Any body corporate whose Board, MD or manager acts on the advice, directions or instructions of a director or manager

  • Any person on whose advice, directions or instructions a director or manager is accustomed to act

Important Exception

  • Advice, directions or instructions given in professional capacity are not covered

Group / Corporate Structure

  • Holding company
  • Subsidiary company
  • Associate company
  • Subsidiary of a common holding company
  • Investing company or venturer of the company

Other Prescribed Persons

Any other person as may be prescribed under law.

Explanation

Investing company or venturer means a body corporate whose investment results in the company becoming its associate company.

💡 Pro Tip

Always identify related parties before entering into transactions to ensure compliance with Section 188.

Not sure whether a transaction falls under Related Party?

MeraFinanceWala can help you identify, structure and stay compliant under the Companies Act.