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ARTICLE · 08 AUGUST 2019

Law On Related Party Transactions– Need For Reform?

Shardul Amarchand Mangaldas & Co
Shardul Amarchand Mangaldas & Co
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Shardul Amarchand Mangaldas & Co

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Section 188 of the 2013 Act expressly bars any RPTs on the matters contained therein, except with the approval of the Board of Directors and in certain cases with the approval of the company by a resolution.

IndiaCorporate/Commercial Law
Ajit Warrier
Ajit Warrier
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INTRODUCTION

In recent months, the topic of 'related party transactions' (RPTs) has been the subject of intense media interest and discussions.

This article proposes to analyze the provisions in the Companies Act, 2013 ("the 2013 Act") pertaining to RPTs in brief and explore whether the law, as it stands, requires further modifications to adequately address the concerns voiced from within the industry and without.

WHAT ARE RELATED PARTY TRANSACTIONS (RPTs)?

In layman's language, RPT means an act of a company of entering into a contract or arrangement with a 'related party' on favourable or more advantageous commercial terms as compared to an 'unrelated party'.

WHO IS A 'RELATED PARTY'?

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