The Changed Map
A scheme can make the transferor’s promoters, directors, and group entities the transferee’s related parties. The transferee must refresh its related-party map as on the effective date and identify the transactions that will continue or commence after the merger. The LODR definition of related party is broader than the Companies Act definition, and the transferee should apply the broader definition.
The Regulation 23 Approval
Regulation 23 of LODR requires the transferee’s audit committee to approve every related-party transaction and, where the transaction is material, the shareholders’ approval by resolution. A transaction is material if it exceeds ₹1,000 crore or ten per cent of the annual consolidated turnover, whichever is lower. The scheme’s post-merger transactions must be tested against this threshold.
The Omnibus Approval
The audit committee may grant omnibus approval for repetitive transactions, subject to the conditions in Regulation 23(4): the transactions must be repetitive, the committee must lay down the criteria, and the approval must specify the maximum value per transaction and the maximum aggregate value for the year. The scheme should identify the transactions that can be covered by the omnibus route.
The Disclosure
The transferee must disclose the related-party transactions in its financial statements under Ind AS 24 and in the corporate governance report. The disclosure must reconcile with the audit committee’s approvals, and any inconsistency should be resolved before the financial statements are signed.
Call to Action: For post-scheme LODR RPT mapping, Regulation 23 approval strategy, or audit committee omnibus framework, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.