Do transactions between Promoters (holding more than 50% of the shareholding of an unlisted company) and the unlisted company, be considered as Related Party Transactions?

The answer is Yes and No. Let's find out why??

Firstly let us know, who are related parties for an unlisted company, according to 2(76) of the Companies Act,2013

“related party”, with reference to a company, means-

(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager or his relative is a member or director;
(v) a public company in which a director or manager is a director and holds along with his relatives, more than two per cent. of its paid-up share capital;
(vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:
(viii) any body corporate which is—
(A) a holding, subsidiary or an associate company of such company;
(B) a subsidiary of a holding company to which it is also a subsidiary;
or
(C) an investing company or the venturer of the company;

Explanation.—For the purpose of this clause, “the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.]

For the purposes of sub-clause (ix) of clause (76) of section 2 of the Act, a director ¹[other than an independent director] or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party. 

ANALYSIS:
If we clearly read this point by point, we can see nowhere the term " Promoter" is specially mentioned. One may interpret the point (vii) of this is similar to definition of a promoter. But leaving that aside, what if a promoter doesn't advise, but has control over the affairs of the company and is mentioned in the Annual Return, such a Promoter is not a related party as per the definition.

But if such promoter is a Company and has more than 50% of the Shareholding in the unlisted company, the unlisted company becomes an subsidiary to that Company and hence becomes a related party.

Conclusion: 
Hence transactions between Promoters (holding more than 50% of shareholding in an unlisted company) and the unlisted company is not a Related Party Transaction, with a Promoter who is an Individual and will be considered as a Related Party Transaction if it is with a Promoter who is a Company.

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From the desk of CS Sharath