If you are a director trying to work out whether a dealing is a related party transaction, the practical question is narrower than it first appears: can you later produce a record showing the dealing was identified, priced, approved and disclosed on its merits? ASIC's Regulatory Guide 76 (RG 76: Related party transactions) sets out ASIC's guidance on the legal framework for these transactions and on disclosure about them, and ASIC's managing conflicts guidance explains why controls exist at all — to manage the risk that a director's own interests, or those of a related party, influence decision-making to the detriment of members of the entity as a whole.
The Department of Finance's related party disclosures guidance (RMG-125) is written for Australian Government-controlled entities preparing financial statements, so check which regime applies to you before lifting its steps whole. Even so, its core discipline is useful to any board: transactions, contracts, services and obligations with key management personnel (KMPs) or their close family members should be appropriately recorded in, and identifiable from, the entity's own systems.
This guide gives you a framework for the recording side: identifying the dealing, documenting its terms, and keeping evidence that the decision was made properly.
Who counts as a related party
Start with people, not paperwork. A related party relationship generally arises through the people who direct or influence the entity — directors and other KMPs — and then extends outward to their close family members and to entities those people control or significantly influence.
The Finance guidance treats the KMP-and-close-family perimeter as the working test, and points to example transactions where related party disclosures are likely to be required. Practically, that means the question you ask at the start of every dealing is: is the counterparty a KMP, a close family member of a KMP, or an entity one of them controls or influences?
Common dealing types that fall into this net include:
- goods or services bought from, or sold to, a director-related business
- loans, advances, guarantees or security given to or received from a director or their family
- property leased to or from a director-related entity
- consulting, management or contractor fees paid to a director or their related entity
- outstanding balances left sitting at reporting date
One boundary worth respecting: the Finance guidance notes that entities should not collect further information from their Ministers, and should instead rely on what is already recorded. The same restraint is sensible in a private company — capture what you need to identify the relationship and assess the deal, and do not build a file of personal information you cannot justify.
Approval and disclosure are two separate jobs
Directors often treat these as one step. They are not.
Approval is the governance decision: was this dealing assessed and authorised properly? RG 76 covers the legal framework for related party transactions and, at RG 76.98, meeting materials seeking member approval — so in some cases member approval is part of the process, and the paperwork for that meeting matters. Whether approval is required, and at what level, depends on the current law and your entity's constitution. Verify it rather than assuming.
Disclosure is the reporting step. The Finance guidance states that where disclosures are required, the nature of the related party relationship and information about the transactions and outstanding balances must be outlined so that financial statement users can understand the potential impacts of the relationship on the financial statements (citing paragraph 18 of AASB 124). Disclosure is not an admission of wrongdoing; it is how users judge whether the relationship affected the numbers.
A dealing can be perfectly proper and still require disclosure. Recording it is not optional because it was approved.
A six-step recording framework
1. Identify the relationship before you transact. Require directors and KMPs to declare interests at appointment, and to update them when something changes. The declaration should name the counterparty and describe the relationship, not just say "declared an interest".
2. Write the commercial terms down as if the party were unrelated. Price or fee, payment terms, interest rate, security, term, volume, who bears what cost, and how the price was set. If the terms differ from what an unrelated party would get, say so in writing and explain why.
3. Capture the decision trail. Record who was present, who declared an interest, whether that person left the room or abstained, what material the board had, what alternatives were considered, and the reasons for the decision. ASIC's conflicts guidance frames these protections as managing influence risk — the record is how you demonstrate the protection actually operated.
4. Keep the source documents together. Contract or engagement letter, invoice, valuation or benchmarking evidence, director's declaration, board minute, and any member approval materials (RG 76.98 refers to meeting materials for member approval).
5. Make the dealing findable in your systems. The Finance guidance is explicit that these transactions should be identifiable from the entity's own systems. Tag the counterparty in the accounting system, flag it in the contract register, and reconcile outstanding balances at reporting date. If the only record is someone's memory, it will not be found at year end.
6. Report it. Prepare the disclosure: the nature of the relationship, the transactions during the period, and outstanding balances, in line with the applicable accounting standard.
| Record | What it should show | Why it matters |
|---|---|---|
| Interest declaration | Counterparty name and nature of relationship | Establishes the dealing was identified, not hidden |
| Terms file | Price, payment terms, term, security, basis for pricing | Shows the deal was assessed on commercial footing |
| Board minute | Attendees, declarations, abstentions, material considered, reasons | Evidence of a properly made decision |
| Approval material | Any member approval sought and the meeting materials | Required in some cases; refer to RG 76 |
| Ledger flag | Counterparty tagged; balances reconciled | Makes the dealing identifiable from your own systems |
| Disclosure note | Relationship, transactions, outstanding balances | Lets users understand the potential impact |
What to put in the minutes
Minute wording is where most records fail. A line reading "the director declared an interest and left the meeting" tells a reader almost nothing six months later. As a practical matter, aim for:
- the specific interest, naming the counterparty
- the dealing under consideration and its material terms
- the information the board relied on to judge price or value
- how the conflicted director was managed (withdrew, abstained, or did not vote)
- the decision reached and the reasons for it
That is practical interpretation, not a statutory checklist — your company secretary, auditor or lawyer can tell you what your constitution and the current law require.
Where records usually break down
- the interest is declared verbally but never written into the register
- the terms exist only in an email thread, and later change without a paper trail
- the counterparty is a trading name, so nobody links it to the director-related entity
- approval is obtained after the dealing has already started
- the transaction is disclosed but the outstanding balance is not reconciled
- the file is complete except for the reason the board thought the price was fair
Questions you should verify
Before relying on any of this for a live dealing, confirm:
- Which regime applies to your entity — the Finance RMG-125 guidance is directed at Commonwealth entities' financial statements; companies work to the Corporations Act and applicable accounting standards.
- Whether member approval is required for the transaction, and what meeting materials are needed (RG 76 addresses this).
- What your constitution says about related party dealings and conflicted voting.
- What your auditor or accountant expects to see, and in what form, before reporting date.
- Whether the current version of RG 76 and the accounting standards still read as described here.
Next steps
Pull your last four quarters of payments and receipts and test them against your KMP and close-family list. Anything that matches goes into a related party register with the six records above attached. Set a standing board agenda item for declarations so new interests surface before a dealing, not after. Ask your accountant or auditor to review one sample file now rather than discovering the gap at year end. If you need to lodge regulatory documents or transactions, ASIC's Regulatory Portal is the channel ASIC provides for lodging regulatory documents and transactions.
If the dealing involves borrowing — a loan from a director, or a loan to one secured over property — having independent market terms in writing is especially important; you can compare current home loan rates at /money/home-loans/ as one input to that pricing evidence.
This article is general information only. It is not legal, tax, accounting or financial advice, and it is not a substitute for advice from your lawyer, accountant or auditor about your specific circumstances. Requirements change; check the current ASIC regulatory guides, the applicable accounting standards and your constitution before acting.