Jan. 28, 2020

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. 

Source : The Hindu