Dear Sir,

This is with reference to the article in the October, 2022 issue of BCAJ on ‘Identification of Related Parties and Significance of Related Party Transactions’. Whilst the article is well thought of, there are certain comments which I would like to offer.

1. The author has raised an issue under the heading ‘Non-Individual KMPs’ (Key Management Personnel) , wherein he has stated that “Given that the definition of KMP does not restrict to individuals; non-individuals, such as another entity, that provides the functions as given in the definition of KMP, is also a related party as KMP for the reporting entity”. He has further substantiated the same with an example of investment funds which have investment managers as KMPs.

2. Ind AS-24 on Related Party Disclosures defines KMPs as those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.

3. The key term used in the definition is that of a person as against the term entity in certain other definitions in the Standard. The common dictionary meaning of the term person refers to a human being; both adult and child as distinguished from an animal or a thing. Accordingly, only individuals can be considered as KMPs. In the example indicated by the author regarding investment funds, it is the individual investment or fund manager who is the KMP since an entity being an artificial juridical person can operate only through individuals.

The author could have articulated the concept with greater clarity in the context of KMPs other than directors.

CA Zubin F. Billimoria