Common director or manager

Learning objectives

• Distinguish a common director, which does not by itself make the entities related, from cases in which another connection exists.L1, L2, L3

Normative references

• IAS 24 §11The following are not related parties in themselves: two entities simply because they have a director or other member of key management personnel in common, or because a member of key management personnel of one entity has significant influence over the other; two joint venturers simply because they share joint control of a joint venture; providers of finance, trade unions, public utilities, and departments and agencies of a government that does not control, jointly control or significantly influence the entity, simply by virtue of their normal dealings with the entity (even though they may affect its freedom of action or participate in its decision-making); a customer, supplier, franchisor, distributor or general agent with whom the entity transacts a significant volume of business, simply by virtue of the resulting economic dependence.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• Two entities are related parties of each other as soon as they have a director in common.L1
• Hélène Noël sits on the board of directors of both Pavot SA and Quartz SA. She holds no shares in either company and exercises neither control nor significant influence over them as a shareholder. Pavot prepares financial statements. Is Quartz a related party of Pavot merely because of this common director?L2