Excellence in Corporate Governance has published its quarterly briefing on “Related Party
Transactions”, which has been authored by Professor Vikramaditya Khanna. The
executive summary is as follows:
(RPTs) are a topic of increasing interest around the world, especially as some
of them have been associated with quite well known frauds.
other governance actors can play an important role in preventing value-decreas-
ing RPTs while not dissuading many value-enhancing RPTs.
occur in varying ways, and can have a large impact on financial performance.
regulatory regime focused primarily on disclosure of RPTs (although there were
some explicit limits on RPTs), but did not, by and large, require approval of
RPTs by disinterested or in- dependent parties.
created a new regime that required disinterested or independent approval for
many RPTs bringing India into alignment with global standards.
the Companies Act 2013 – in particular, some RPTs are not covered by the new
law, the selection of independent directors may raise concerns, and enforcement
mechanisms are not very efficacious.
regulation in India may also depend on the degree of shareholder activism in