Question

Which of the individuals or entities listed below would be considered a related party to G. Assume G and all parties listed below own stock in ABC Corporation. Place a check mark next to all related parties in determining G’s ownership interest in ABC Corporation.

____A. G’s child ____E. G’s cousin

____B. G’s grandchild ____F. G’s neighbor

____C. G’s sister ____G. G’s business partner in a separate

____D. G’s spouse partnership

___H. XYZ Corp. in which G owns 70% of the stock

What type of transactions are covered by the related party rules covered in Chapter 7?

Give a brief general description of each type.

Answer 1

“related party”, with reference to a company, means—

(i) a director or his relative;

(ii) a key managerial personnel or his relative;

(iii) a firm, in which a director, manager or his relative is a partner;

(iv) a private company in which a director or manager or his relative is a member or director;

(v) a public company in which a director or manager is a director or and holds along with his relatives, more than two per cent of its paid-up share capital;

(vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;

(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;