Related party transaction
In business, a related party transaction is a transaction that takes place between two parties who hold a pre-existing connection prior to the transaction. An example is how a dominant shareholder may benefit from making one of their companies trade to the other at advantageous prices. Related party transactions can be a reason for a Type II agency relationship, as it is not necessarily in the best interest of minority share owners.
In commercial law, special regulations may apply restricting related party transactions, such as Part 2E of the Australian Corporations Act 2001, which requires companies to seek approval from its members for such a transaction to take place.
