LR 11.1 Related party transactions

1This chapter applies to a company that has a premium listing3.

A reference in this chapter:

1. (1)

   to a transaction or arrangement by a listed company includes a transaction or arrangement by its subsidiary undertaking; and

2. (2)

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

In LR, a "related party" means:

1. (1)

   a person who is (or was within the 12 months before the date of the transaction or arrangement) a substantial shareholder; or

2. (2)

   a person who is (or was within the 12 months before the date of the transaction or arrangement) a director or shadow director of the listed company or of any other company which is (and, if he has ceased to be such, was while he was a director or shadow director of such other company) its subsidiary undertaking or parent undertaking or a fellow subsidiary undertaking of its parent undertaking; or

3. (3)

   [deleted]2

   2
4. (4)

   a person exercising significant influence; or

5. (5)

   an associate of a related party referred to in paragraph (1), (2) or (4).

   2

In LR, a "related party transaction" means:

1. (1)

   a transaction (other than a transaction of a revenue naturein the ordinary course of business) between a listed company and a related party; or

2. (2)

   an arrangement pursuant to which a listed company 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 of a revenue nature in the ordinary course of business) between a listed company and any other person the purpose and effect of which is to benefit a related party.

LR 11.1.7 R to LR 11.1.10 R do not apply to a related party transaction if it is a transaction or arrangement:

1. (1)

   of a kind referred to in paragraph 1 of LR 11 Annex 1 (a small transaction); or

2. (2)

   of a kind referred to in paragraph 2 to 10 of LR 11 Annex 1 and does not have any unusual features.

Note: If an issuer is proposing to enter into a transaction that could be a related party transaction it is required under LR 8 to obtain the guidance of a sponsor to assess the potential application of LR 11.

If a listed company enters into a related party transaction, the listed company must:

1. (1)

   make a notification in accordance with LR 10.4.1 R (Notification of class 2 transactions) that contains the details required by that rule and also:

   1. (a)

      the name of the related party; and

   2. (b)

      details of the nature and extent of the related party's interest in the transaction or arrangement;

2. (2)

   send a circular to its shareholders containing the information required by LR 13.3 and LR 13.6;

3. (3)

   obtain the approval of its shareholders for the transaction or arrangement either:

   1. (a)

      before it is entered into; or

   2. (b)

      if the transaction or arrangement is expressed to be conditional on that approval, before it is completed; and

4. (4)

   ensure that the related party:

   1. (a)

      does not vote on the relevant resolution; and

   2. (b)

      takes all reasonable steps to ensure that the related party's associates do not vote on the relevant resolution.

1. (1)

   This rule applies to a related party transaction if each of the percentage ratios is less than 5%, but one or more of the percentage ratios exceeds 0.25%.

2. (2)

   Where this rule applies, LR 11.1.7 R does not apply but instead the listed company must before entering into the transaction or arrangement (as the case may be):

   1. (a)

      inform the FSA in writing of the details of the proposed transaction or arrangement;

   2. (b)

      provide the FSA with written confirmation from an independent adviser acceptable to the FSA that the terms of the proposed transaction or arrangement with the related party are fair and reasonable as far as the shareholders of the listed company are concerned; and

   3. (c)

      undertake in writing to the FSA to include details of the transaction or arrangement in the listed company's next published annual accounts, including, if relevant, the identity of the related party, the value of the consideration for the transaction or arrangement and all other relevant circumstances.

1. (1)

   If a listed company enters into transactions or arrangements with the same related party (and any of its associates) in any 12 month period and the transactions or arrangements have not been approved by shareholders the transactions or arrangements

   must be aggregated.

2. (2)

   If any percentage ratio is 5% or more for the aggregated transactions or arrangements, the listed company must comply with LR 11.1.7 R in respect of the latest transaction or arrangement.

Note: LR 13.6.1R (8) requires details of each of the transactions or arrangements being aggregated to be included in the circular.

1. (3)

   If transactions or arrangements that are small transactions under LR 11 Annex 1 paragraph 1 are aggregated under paragraph (1) of this rule and for the aggregated small transactions each of the percentage ratios is less than 5%, but one or more of the percentage ratios exceeds 0.25%, the listed company must comply with:

   1. (a)

      LR 11.1.10R (2)(b) in respect of the latest small transaction; and

   2. (b)

      LR 11.1.10R (2)(a) and LR 11.1.10R (2)(c) in respect of the aggregated small transactions.