Related-party transaction

In business, a related-party transaction is a transaction which takes place between two parties who hold a pre-existing connection prior to the transaction. An example is how a dominant shareholder may benefit from making one of their companies trade with another at advantageous prices. Related party transactions can be a reason for a Type II agency relationship (conflicts among controlling and non-controlling shareholders), as they are not necessarily in the best interest of minority shareholders.

In commercial law, special regulations may apply restricting related-party transactions, such as Part 2E of Australia's Corporations Act 2001, which requires companies to seek approval from their members for such a transaction to take place.

International Financial Reporting Standard IAS 24 requires companies to disclose related-party transactions in their financial statements.

This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.