Related-Party Transactions Governance Framework – The Indian Experience
Saket Mehra of Grant Thornton Bharat, India and Fatema Hunaid, a chartered accountant and related-party transactions governance expert, discuss concerns around related-party transactions (RPTs) that undermine the interests of minority shareholders and lenders. They look at what can be done to ensure compliance and adherence to an RPT regulatory framework, especially in light of the recent rise in shareholder activism.
Fatema Hunaid
Saket Mehra
RPTs play a crucial role in global trade, benefiting multinational businesses by strengthening supply chains and protecting intellectual property rights. However, concerns have arisen regarding questionable RPTs that undermine the interests of minority shareholders/lenders. To tackle these challenges, robust corporate governance frameworks are necessary worldwide.
In India, RPT governance is integrated into the country’s corporate laws. The Securities and Exchange Board of India (SEBI), the regulator for Indian capital markets, has introduced approval and disclosure requirements under the SEBI LODR regulations to enhance RPT governance in listed companies. Initially, the framework relied on government approvals, but it has transitioned to self-monitoring and increased disclosure obligations. The board, audit committee and shareholders now hold more responsibility for monitoring and approving RPTs.
"Effective governance of RPTs is critical."
Effective governance of RPTs is critical, prompting SEBI to continuously update regulations and circulars based on best practices and real-life incidents.
This video explores the strengthened RPT governance framework in India, suggests best practices for companies and shares practical experiences of Indian companies in managing their RPTs.
Grant Thornton Bharat LLP
