Related Party Transactions: Documentation Directors Should Maintain

Related party transactions are common in many Singapore businesses, especially owner-managed companies, family-owned groups and entities with multiple companies under common control.

These transactions are not problematic in themselves — but they attract extra attention from auditors, regulators, lenders and other stakeholders because they may not always be at arm’s length.

Good documentation and transparency are key. This article sets out practical guidance on what directors should maintain to support related party transactions, disclosures and assurance work.

Note: “Related parties” and “related party transactions” are defined in accounting standards (e.g. FRS 24 / SFRS(I) 1-24) and may also be addressed in governance codes and sector-specific regulations.

1. What is a related party transaction?

A related party transaction is a transfer of resources, services or obligations between:

• the entity, and
• a related party

regardless of whether a price is charged.

Related parties typically include:

• Directors and key management personnel
• Major shareholders and their close family members
• Entities under common control or significant influence, such as:
  • subsidiaries
  • fellow subsidiaries
  • holding companies
  • associates or joint ventures
  • companies controlled by directors or their family members

Examples of related party transactions:

• Sales or purchases of goods/services between group companies
• Rental of property owned by a director or related company
• Loans, guarantees or advances to/from directors or related companies
• Management fees, service fees or cost-sharing arrangements
• Use of company assets for personal purposes (e.g. vehicles, properties)

2. Why documentation matters

Good documentation supports:

Poor or missing documentation can lead to:

• audit delays and additional queries,
• disagreements over whether transactions are appropriate, and
• questions from lenders, investors or regulators about governance.

3. Maintain a clear related party register

A good starting point is to maintain an up-to-date related party register. This should capture:

For each related party, note:

• nature of relationship (e.g. “Director”, “Company controlled by Director A”, “Subsidiary”)
• period of relationship (e.g. date appointed or acquired, date resigned or disposed)

This register should be reviewed at least annually, and whenever there are major changes such as new investments, restructurings, or director appointments/resignations.

4. Written agreements for material transactions

Where transactions with related parties are recurring or significant, directors should ensure there is written documentation setting out key terms, such as:

Even simple agreements or board-approved term sheets are better than purely informal arrangements, especially where amounts are material.

5. Board and shareholder approvals

For governance and transparency, significant related party transactions should be brought to the board (and, where appropriate, shareholders) for review and approval.

Documentation may include:

• Board minutes recording:
  • nature of the transaction
  • relationship of the parties
  • key commercial terms
  • whether any directors with conflicts abstained from voting
• Shareholder resolutions where required under the company’s constitution or shareholders’ agreement, particularly for:
  • major transactions
  • long-term commitments
  • changes in capital structure or guarantees

This helps demonstrate that the transaction was considered and approved through proper governance channels.

6. Pricing support and arm’s length considerations

Where amounts are significant, directors should consider whether the pricing of related party transactions is reasonable and supportable, especially for:

• management and service fees,
• rentals and leases,
• sales/purchases of goods or services, and
• interest rates on loans.

Useful documentation may include:

• Market comparisons – quotations from unrelated parties or reference to similar market rates.
• Cost-plus calculations – where fees are based on cost plus a mark-up; keep workings showing the basis.
• Valuation or appraisal reports – where applicable for property or asset transfers.

Even if exact arm’s length pricing cannot be proven, having a documented rationale significantly strengthens the position if questioned by auditors, IRAS or regulators.

7. Schedules of related party transactions and balances

For year-end financial reporting and audit purposes, directors should ensure that finance teams maintain clear schedules of:

• Related party transactions during the year
  • broken down by related party and nature (sales, purchases, fees, interest, rental, etc.)
• Related party balances at year-end
  • receivables and payables
  • loans and advances
  • accrued fees or interest not yet billed/paid

These schedules should reconcile to the general ledger and trial balance, and be aligned with the related party register.

This information forms the basis for note disclosures in the financial statements and supports audit testing.

8. Director’s current account and expense reimbursements

A frequent issue in owner-managed companies is the director’s current account, where personal expenses, reimbursements, drawings and settlements are mixed.

Good documentation practices:

• Use clear coding and descriptions when posting director-related transactions.
• Distinguish between:
  • legitimate business expenses paid personally and reimbursed;
  • drawings or advances for personal use;
  • loans to or from directors.
• Maintain summaries showing movement in each director’s current account during the year, with explanations for major items.

This helps avoid confusion during audits and supports accurate disclosure of director-related balances.

9. Conflict of interest declarations

Directors should make regular declarations of interests, including:

• directorships and shareholdings in other entities,
• any existing or proposed transactions between the company and entities they are connected to, and
• other situations where conflicts of interest may arise.

Documentation may include:

• annual conflict of interest declarations,
• updates when new directorships or investments arise, and
• board minutes noting any abstentions from discussions or votes.

These records support both governance and accounting disclosures relating to key management compensation and related party relationships.

10. Sector-specific and NPO considerations (where applicable)

For charities, NPOs and CLGs, related party documentation is often under additional scrutiny because:

• public funds and donations are involved,
• governance codes emphasise transparency, and
• regulators may expect higher standards of disclosure.

Boards in these sectors should pay particular attention to:

• documenting approvals for transactions involving board members,
• disclosing remuneration and benefits to key management, and
• ensuring that any related party arrangements clearly serve the organisation’s charitable or organisational purposes.

11. How Ascern can help with related party documentation

At Ascern, we assist companies, NPOs and groups to:

• identify and map their related parties and relationships,
• design simple templates for related party registers, transaction schedules and disclosures,
• review existing related party arrangements and documentation gaps, and
• prepare financial statement note disclosures that are clear, compliant and aligned with governance practices.

We also work with directors and finance teams to ensure that related party transactions are appropriately documented, approved and communicated, reducing friction during audits and regulatory reviews.

If you would like to review your current related party documentation or disclosures, we would be pleased to assist.