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.{{cite book|last1=Hillier|first1=David|last2=Ross|first2=Stephen|last3=Westerfield|first3=Randolph|last4=Jaffe|first4=Jeffrey|last5=Jordan|first5=Bradford|title=Corporate Finance|date=2013|publisher=McGraw-Hill Education|location=Berkshire|isbn=9780077139148|pages=34–35|edition=2nd European}} 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.[http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s601la.html Corporations Act 2001 (Cth), Part 2E]
International Financial Reporting Standard IAS 24 requires companies to disclose related-party transactions in their financial statements.{{cite web|title= Related Party Disclosures (IAS 24)|url= https://ifrscommunity.com/knowledge-base/ias-24-related-party-disclosures/|publisher=IFRScommunity.com|date=26 February 2020|accessdate=2020-08-07}}
Academies (England)
In England, there are restrictions and notification requirements in place regarding related-party transactions entered into by Academy Trusts.Education and Skills Funding Agency, [https://www.gov.uk/government/publications/related-party-transactions-information-for-academy-trusts/declare-or-seek-approval-for-related-party-transactions-summary-guidance Declare or seek approval for related-party transactions: summary guidance], updated 26 September 2019, accessed 27 December 2020 An online reporting process for declaring or seeking approval is in place.Education and Skills Funding Agency, [https://onlinecollections.des.fasst.org.uk/onlinecollections/ Academy trust financial returns], accessed 27 December 2020 Academies must seek approval from the Education and Skills Funding Agency (ESFA) before they undertake any related-party transactions valued over £20,000.Education and Skills Funding Agency, [https://www.gov.uk/government/news/esfa-introduces-new-arrangements-for-related-party-transactions ESFA introduces new arrangements for related party transactions], updated 4 April 2019, accessed 31 July 2022 A review of related-party transactions for the 2012–2013 academic year identified 1,350 related party transactions involving 976 trusts. The vast majority of these were compliant with relevant guidance protecting public funds (the Academies Accounts Direction),Education and Skills Funding Agency, [https://www.gov.uk/guidance/academies-accounts-direction Academies Accounts Direction], accessed 31 July 2022 but transactions at 17 trusts were found to be irregular or improper.Education Funding Agency, [https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/390210/EFA_review_of_related_party_transactions.pdf Review of related-party transactions in academies, November 2014], accessed 31 July 2022
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