A working group, put in place by the Securities and Exchange Board of India (SEBI) in November 2019, has proposed significant changes to strengthen the regulatory framework for related-party transactions that have been the subject of many corporate governance matters.
Recommendations made:
Broaden the definition of RPTs (related-party transactions) to include transactions which are undertaken, whether directly or indirectly, with the intention of benefitting related parties.
An audit committee approval must be made mandatory for transactions between a listed entity or its subsidiary with its related party.
Any entity related to the promoter or promoter group should be considered a related party. Further, any entity holding — directly or indirectly along with their relatives — 20% or more stake in the company should also be considered a related party.
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