Related party transactions between companies are not illegal if they involve matters within the normal business scope. The requirements for voting procedures and information disclosure are legal and compliant. On the contrary, unfair related party traders have to bear certain legal responsibilities. Unfair related party transaction refers to the substantive content of a specific related party transaction, mainly because the transaction result is unfair in essence, which is harmful to the relevant stakeholders of the transaction, especially the rights and interests of non-related parties involved in the transaction.
The adverse effects of related party transactions on the company are as follows:
1. Related party transactions may increase the company's business risks, make the company fall into financial difficulties, and may lead to bad debt risks: if the major shareholder provides guarantees, funds or the major shareholder occupies the company's funds in other ways, it will bring potential financial risks to the company; If unfair transactions are made with major shareholders and related personnel, the company's profits will be reduced.
2. Affect the company's ability to operate independently and reduce its ability to resist external risks. Too many related party transactions will reduce the competitiveness and independence of the company and make the company rely too much on related parties, especially the major shareholders. For example, the main targets of some companies' raw material procurement and product sales are related parties, and their operational autonomy is subject to many restrictions. Due to the poor independence of the company and strong dependence on related parties, the market competitiveness has declined. If it is difficult for related parties to protect themselves, the company may enter a trough.
According to the provisions of the tax law, related party transactions mainly include:
1. Transfer of the right to use or ownership of tangible assets.
Tangible assets include commodities, products, houses and buildings, vehicles, machinery and equipment, tools and appliances.
2. Transfer of financial assets.
Financial assets include accounts receivable, bills receivable, other accounts receivable, equity investment, debt investment and assets formed by derivative financial instruments.
3. Transfer of the right to use or ownership of intangible assets.
Intangible assets include patents, non-patented technologies, trade secrets, trademarks, brands, customer lists, sales channels, franchise rights, government licenses, copyrights, etc.
4. financing.
The funds include all kinds of long-term and short-term borrowing funds (including the group fund pool), guarantee fees, all kinds of interest-bearing prepayments and deferred payments.
5. Labor transaction.
Labor services include market research, marketing planning, agency, design, consulting, administration, technical services, contract research and development, maintenance, legal services, financial management, auditing, recruitment, training, centralized procurement, etc.
To sum up, it is illegal to use the relationship to harm the interests of the company at the same time. Related party transactions between companies are not illegal if they involve matters within the normal business scope.
Legal basis:
Article 21 of the Company Law of People's Republic of China (PRC)
The controlling shareholder, actual controller, directors, supervisors and senior managers of the company shall not use their relationship to harm the interests of the company.
Anyone who violates the provisions of the preceding paragraph and causes losses to the company shall be liable for compensation.