CopiedMAR “Persons Closely Associated” vs IAS 24 “Related Parties” – Definitions and Differences

MAR stipulates a general requirement to keep lists concerning insiders, whereas there is no similar requirement for lists under IAS 24. Even so, certain EU countries, such as Finland, have implemented requirements that effectively translate into list-keeping. Logwise often receives questions from clients related to these definitions and differences.

MAR outlines important obligations related to insider lists, disclosures, and more for issuers, Persons Discharging Managerial Responsibilities (PDMRs), and their Persons Closely Associated (PCAs). PCAs can be either individuals or legal entities. Logwise has elaborated on the PCA entity scope in a separate article.

IAS 24:9 similarly defines certain disclosures concerning transactions with an issuer’s related parties. The standard distinguishes between two categories:

• (a) A person or a “close member” of that person’s family related to the issuer.
• (b) An entity related to the issuer.

The IAS 24 “entity related” definition is complex and often requires further interpretation.

Differences Between MAR and IAS 24 Copied

MAR PDMRs should count as IAS 24 “related parties,” but the definitions extend differently. A PDMR under MAR is essentially a management person, while an IAS 24 “related party” also includes controllers and significant influencers of the entity.

MAR PDMR Definition (Art. 3:25) Copied

• (a) A member of the entity’s administrative, management, or supervisory body.
• (b) A senior executive with regular access to inside information and power to make managerial decisions affecting future developments and business prospects.

IAS 24:9 Related Party Definition Copied

A person or a close family member is related if that person:

• (i) Has control or joint control over the reporting entity.
• (ii) Has significant influence over the reporting entity.
• (iii) Is a member of the key management personnel of the reporting entity or its parent.

MAR PCAs vs. IAS 24 “Close Members” Copied

MAR categorizes PCAs as follows:

1. Spouse or Partner: A spouse or partner equivalent to a spouse under national law, including registered partnerships or civil unions.
2. Dependent Child: Defined according to national law.
3. Relative Sharing Household: A relative who has shared the same household for at least one year on the transaction date.

IAS 24:9 “close members” are defined as:

• Family members expected to influence or be influenced by the person in their dealings with the entity, including:
  • (a) The person’s children and spouse or domestic partner.
  • (b) Children of the spouse or partner.
  • (c) Dependents of the person or their spouse or partner.

While IAS 24 definitions are generally broader, they do not explicitly include the MAR PCA category 3 (relative sharing household). However, individuals in similar circumstances may occasionally be deemed IAS 24:9 “close members.”

Relationship Between Legal Entity Scope: MAR PCA vs IAS 24 Related Entities Copied

MAR PCA Entity Scope (Art. 3(1)(26)(d)) Copied

A PCA entity exists when the issuer’s PDMR (or a natural person PCA to the PDMR):

• (A) Directly or indirectly controls the entity.
• (B) Has had the entity set up for their benefit.
• (C) Has substantially equivalent economic interests to the entity.
• (D) Takes part in or influences the entity to transact in the issuer’s instruments.

IAS 24 Related Entities Copied

The IAS 24:9 related entities definition is more extensive:

• The first part (i-v) pertains to entity vs. entity relations.
• The second part (vi-viii) relates to related natural persons in IAS 24:9(a). It focuses on situations where the related entity provides key management personnel services to the issuer or its parent.

MAR requisite A generally aligns with IAS 24 classifications, but differences arise with MAR requisites B (set up for benefit) and C (economic interests). MAR also includes requisite D, which aims at scenarios where a PDMR or natural person PCA influences transactions in issuer instruments, which is not explicitly addressed in IAS 24.

Conclusion Copied

The bottom line is that MAR PCAs do not always equate to IAS 24 related parties and professional legal assessments are necessary in cases of doubt. While there is overlap, each framework has unique distinctions that require careful interpretation to ensure proper compliance.

Understand MAR definitions better—book a demo today and ensure compliance with Logwise.