ASIC's new stand on related party transactions and experts' reports

Following a review of related party transactions, ASIC has issued a new policy.

It has also revised its existing policies on independent experts' reports. This includes new material on the "fair and reasonable" test.

Shareholder approval

In general terms, a company's related parties are its directors and the entity (if any) which controls it. The Corporations Act says that a public company must get shareholder approval before giving a financial benefit to a related party unless the deal is on arm's length terms.

Similarly, a registered scheme must get member approval before giving a financial benefit out of scheme property to the responsible entity or a related party unless the deal is on arm's length terms. (This doesn't stop the responsible entity's paying itself fees or exercising rights to an indemnity provided for in the scheme constitution.)