Related party transaction

For the purposes of Chapter 2E of the Corporations Act 2001 (Cth) (CA 2001), a transaction undertaken by a public company that results in a related party receiving a financial benefit is a related party transaction. Unless one of the exceptions in sections 210 to 216 of the CA 2001 apply, a public company must obtain the approval of its members in the manner set out in the CA 2001 and give the financial benefit within 15 months of receiving member approval. The company may not need to obtain member approval if giving the financial benefit falls within an exception in sections 210 to 216 of the CA 2001.

While Chapter 2E does not apply to proprietary limited companies, directors of those companies nonetheless have common law directors' duties that require them to act bona fide for the benefit of the company, not to make a profit at the expense of the company, and to avoid a conflict of duty and personal interest. This means that a proprietary company may also need to obtain member approval for financial benefits given to related parties (R v Towey (1996) 132 FLR 434; 21 ACSR 46). The constitution of a proprietary limited company may also require the company to obtain member approval for related party transactions. For more information on related party transactions, see Practice note, Related party transactions.