Discuss the various impacts related to SEBI’s recently approved key changes with respect to related party transactions. (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· Related party transactions (RPTs) often are the route taken by Indian companies for easy access to capital, managing contract delays, mitigating supply constraints, curtailing costs, etc.
· Research by TARI shows over 51% of the financial fraud between 2012 to 2018—investigated by regulators and resulting in indictment—have used RPTs as the favoured mechanism.
· A key change is including “promoter” within the definition of a related party, and including any person/entity holding equity shares either directly or on a beneficial interest basis, amounting to 20% or more with effect from April this year, and 10% or more from April 2023.
· Another key change is revising the materiality threshold for obtaining shareholder approval to cover transactions that exceed Rs 1,000 crore or 10% of the annual consolidated turnover, whichever is lower.
· Accordingly, large transactions, even in the ordinary course of business, can be undertaken only pursuant to shareholders’ approval.
· Unlike the Companies Act, 2013, SEBI has not chosen to provide any exemption to transactions done in the ordinary course of business and on an arm’s length basis.
· SEBI’s recent amendments hold the risk of a policy overkill and could adversely impact the business climate in India.
Shivaani Jayaraman 3 years
Please Review
IAS Parliament 3 years
Good attempt. Keep Writing.
Ajmi B 3 years
Please review????
IAS Parliament 3 years
Key changes not required, focus more on impacts andbring coherence in the answer. Keep Writing
