DTR 7.3 Related party transactions

1A reference in this section:

1. (1)

   to a transaction or arrangement by an issuer includes a transaction or arrangement by its subsidiary undertaking; and

2. (2)

   to a transaction is, unless the contrary intention appears, a reference to the entering into of the agreement for the transaction.

[Note: article 9c(7) of the Shareholder Rights Directive]

In DTR, a “related party” has the meaning in UK-adopted IFRS.2

[Note: article 2(h) of the Shareholder Rights Directive]

In DTR, a “related party transaction” means:

1. (1)

   a transaction (other than a transaction in the ordinary course of business and concluded on normal market terms) between an issuer and a related party; or

2. (2)

   an arrangement (other than an arrangement in the ordinary course of business and concluded on normal market terms) pursuant to which an issuer and a related party each invests in, or provides finance to, another undertaking or asset; or

3. (3)

   any other similar transaction or arrangement (other than a transaction or arrangement in the ordinary course of business and concluded on normal market terms) between an issuer and any other person the purpose and effect of which is to benefit a related party.

[Note: article 9c(5) of the Shareholder Rights Directive]

An issuer must establish and maintain adequate procedures, systems and controls to enable it to assess whether a transaction or arrangement with a related party is in the ordinary course of business and has been concluded on normal market terms. An issuer must ensure that the related party and any person who is an associate, director or employee of the related party does not take part in any such assessment.

[Note: article 9c(5) of the Shareholder Rights Directive]

DTR 7.3.8R does not apply to any related party transaction which is:

1. (1)

   a transaction or arrangement between the issuer and its subsidiary undertaking provided that:

   1. (a)

      the subsidiary undertaking is wholly owned; or

   2. (b)

      no other related party of the issuer has an interest in the subsidiary undertaking; or

2. (2)

   a transaction or arrangement regarding remuneration, or certain elements of remuneration, of a director of the issuer, where the remuneration to be awarded or due to the director is in accordance with the issuer’s directors’ remuneration policy as approved by the shareholders of the issuer in accordance with section 439A of the Companies Act 2006 and paid in accordance with section 226B of the Companies Act 2006; or

3. (3)

   a transaction offered to all shareholders of the issuer on the same terms where equal treatment of all shareholders and protection of the interests of the issuer is ensured.

[Note: article 9c(6) of the Shareholder Rights Directive]

In DTR:

1. (1)

   “percentage ratio” means (in relation to a transaction or arrangement) the figure, expressed as a percentage, that results from applying a calculation under a related party test to the transaction or arrangement;

2. (2)

   “related party tests” means the tests set out in DTR 7 Annex 1, which are used to determine whether a transaction or arrangement is a material related party transaction; and

3. (3)

   “material related party transaction” means a related party transaction where any percentage ratio is 5% or more.

[Note: article 9c(1) of the Shareholder Rights Directive]

If an issuer enters into a material related party transaction, the issuer must:

1. (1)

   no later than the time when the terms of the transaction or arrangement are agreed, publish an announcement on a RIS which sets out:

   1. (a)

      the nature of the related party relationship;

   2. (b)

      the name of the related party;

   3. (c)

      the date and the value of the transaction or arrangement; and

   4. (d)

      any other information necessary to assess whether the transaction or arrangement is fair and reasonable from the perspective of the issuer and of the shareholders who are not a related party, including minority shareholders;

2. (2)

   obtain the approval of its board for the transaction or arrangement before it is entered into; and

3. (3)

   ensure that any director who is, or an associate of whom is, the related party, or who is a director of the related party, does not take part in the board’s consideration of the transaction or arrangement and does not vote on the relevant board resolution.

[Note: article 9c(2) and 9c(4) of the Shareholder Rights Directive]

If, after obtaining board approval but before the completion of a material related party transaction, there is a material change to the terms of the transaction or arrangement, the issuer must comply again separately with DTR 7.3.8R in relation to the transaction or arrangement.

1. (1)

   If an issuer enters into transactions or arrangements with the same related party (and any of its associates) in any 12-month period, and the issuer has not been required to comply with DTR 7.3.8R in respect of the transactions or arrangements, the transactions or arrangements must be aggregated.

2. (2)

   If any percentage ratio is 5% or more for the aggregated transactions or arrangements, the issuer must comply with DTR 7.3.8R in respect of each of the aggregated transactions or arrangements.

[Note: article 9c(8) of the Shareholder Rights Directive]