Avoid compliance risks in related party transactions under the Companies Act.
Related Party Transactions (RPTs) are under heavy scrutiny by regulators because they can be used to siphon company resources. Proper approvals and disclosures are critical.
Definition: Related parties include directors, key managerial personnel, their relatives, and entities controlled by them.
Approvals: Board resolution is required. In certain cases, shareholder approval through special resolution is also mandatory.
Arm’s Length Test: Transactions must be at fair market value. Independent valuation reports may be required.
SEBI LODR: Listed companies face stricter norms, including audit committee and shareholder approvals.
RPTs must be handled with complete transparency. Proper documentation and independent reviews are the best safeguards.