ICSI issued Guidance Note on Related Party Transactions
In the interest of good corporate governance, companies should maintain an arm’s length relationship in all transactions, including Related Party Transactions it requires extra caution to avoid abuse of such transactions. Transactions with related parties need not always be disadvantageous. The concern arises only when there is abuse of a related party transaction on account of conflict of interest and non-arm’s length dealings which Therefore, transparency in such transactions is essential in the interest of stakeholders and good corporate governance.
To develop the legal fabric in respect of RPTs, the necessary provisions are enshrined under the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
In order to understand and appreciate the nuances of RPTs, it is necessary to understand the various provisions of law and the related aspects which needs explanation. Hence, this Guidance Note on Related Party Transactions is formulated by the Secretarial Standards Board of ICSI and aims to explain the procedures, practices and compliances associated with RPTs.
I place on record my sincere thanks to CS Pavan Kumar Vijay, former Chairman-Secretarial Standards Board (SSB) and all Members of the SSB for their tireless efforts and contribution made during the preparation and finalization of this Guidance Note on RPTs.
I also wish to place on record my appreciation for the efforts put in by CS Rakesh Kumar, Assistant Director under the leadership of CS Banu Dandona, Joint Director, Directorate of Corporate Laws & Governance and under the overall guidance of CS Ashok Dixit, officiating secretary of the ICSI in bringing out this guidance Note.
I urge upon the Corporates as well as all my professional colleagues to promote the compliance of applicable laws on RPTs in the light of this Guidance Note issued by the ICSI, so as to promulgate good Corporate Governance.
Improvement is a continuous process and therefore, suggestions of the readers to improve this Guidance Note are most welcome.
Place: New Delhi
Date: 20th March, 2019
CS Ranjeet Pandey