Related party transactions are transactions between related parties of an enterprise. According to the Accounting Standards for Business Enterprises-Disclosure of Related Party Relations and Transactions promulgated by the Ministry of Finance 1997 on May 22nd, if one party has the ability to directly or indirectly control, * * control or exert significant influence on the other party, it is regarded as a related party.

If two or more parties are controlled by the same party, they are also regarded as related parties. The right of control here refers to the right to decide the financial and business policies of an enterprise and obtain benefits from its business activities accordingly. The so-called significant influence refers to the power to participate in the decision-making of enterprise financial and operating policies, but it does not determine these policies.

The ways to participate in decision-making mainly include sending representatives to the board of directors or similar authority, participating in the decision-making process, and exchanging management personnel with each other. Any transfer of resources or obligations between the above related parties, regardless of whether the price is charged, is regarded as a related party transaction.

Extended data:

Legal characteristics

1. Correlation between business entities

Related party transactions must occur between commercial entities with rights and interests and mutual influence, that is, related parties.

2. Conflict of interest and transfer of rights and interests

In any specific related party transaction, there are conflicts of interest between related parties or between related parties and their rights and interests representatives, and there are rights and interests transfer between related parties.

3. There is a potential unfair tendency.

Not all related party transactions are fair, but this form of related party transactions contains a potential trend of unfair results. Once the subjective and objective conditions are met, especially without effective legal regulation, a particular related party transaction will often slide to the edge of unfairness.

4. The alienation of transaction form to substantive fairness

The biggest feature of related party transactions and the difficulty of legal regulation is that related party transactions cover up substantive inequality with formal equality; The formal parties' free disposal of their own rights and interests covers up the substantive compulsory damage to one party's rights and interests.

Reference source: Baidu Encyclopedia-Related Party Transactions