Once these contracts/agreements have been approved by the Audit Committee, the resulting transactions will not be evaluated at the time of execution. The process is continuously monitored by the CFO. 3 Padmini Srinivasan, «An Analysis of Related Party Transactions in India,» IIM-Bangalore, Working Paper No. 402, 2013, p. 3(iii) in the case of a Crown corporation, no shareholder approval is required, even if it exceeds the limits: The process for approving TORs under the Companies Act (with the exception of transactions with wholly-owned subsidiaries)18 is as follows: Associated with this phrase «related party transaction» will further obscure our minds and we hope to find a way to have a unique solution to calm our confused minds. 10 Khushboo Narayan, «Cox & Kings Set Up 15 Fake Companies to Dress Up Books, Divert Funds», available online at indianexpress.com/article/business/companies/economic-offences-wing-cox-kings-set-up-15-fake-cos-to-dress-up-books-divert-funds-7730663/; Paranjoy Guha Thakurta, Sourodipto Sanyal and Jyotindra, `Who Led Cox & Kings Into a Deep Pit?`, available online at www.theleaflet.in/who-led-cox-kings-into-a-deep-pit/, last accessed February 6, 2022 In an effort to review and strengthen regulatory standards for TORs carried out by listed companies in India, the changes to the listing regulations are a welcome step towards strengthening corporate governance. The regulatory amendments would increase transparency in the interests of minority shareholders and further protect their interests in large corporations. By introducing a broader meaning into «related parties» and TORs, SEBI has expanded the scope of its radar to keep an eye on many persons/entities and transactions of listed companies as well as their unlisted subsidiaries. As a result, listed companies, as well as their subsidiaries, need to be more transparent in their dealings with parties who can be considered related parties. What remains to be seen, however, is the modification of the current regulatory framework for unlisted companies, which the legislator can introduce to harmonize the framework under the Registration Regulation and the Companies Act.

(ii) in a corporation where 90% or more of its members are relatives of project proponents or related parties. [3. Reservation to § 188 para. 1] Identifying the related party and determining the normal course of business is still a difficult task for many companies, and the ambiguous process of pricing arm`s length transactions has increasingly led companies to take advantage of loopholes. The reasons for the conclusion of related party transactions and prices have not yet been determined. 8 Samie Modak, `Sun Pharma, 7 executives dispute with SEBI Pay Rs. 2.92 Cr.`, available online at www.business-standard.com/article/companies/sun-pharma-7-executives-settle-dispute-with-sebi-pay-rs-2-92-cr-121021101380_1.html#:~:text=Budget%202022,Sun%20Pharma%2C%207%20executives%20settle%20dispute,Sebi %3B%20pay%20Rs%202.92%20cr&text=Sun%20Pharma%20has%20agree%20to,lakh%20and%20Rs%2037.4%20l akh, last accessed 07. February 2022 It should also be noted that a shareholder who holds more than 20% of the shares of the listed company is a related party within the meaning of the listing rules cannot be considered a related party within the meaning of the Companies Act, unless: (i) that shareholder is a director or manager of the listed company; or (ii) a director or manager of the publicly traded company has a habit of responding to the advice, instructions or instructions of that shareholder. It should be noted that the approval of the audit committee is not required for transactions between a holding company and its wholly-owned subsidiary, with the exception of transactions referred to in Article 188. If an entity has an audit committee, that entity requires approval for related party transactions within the meaning of section 177(4)(iv) of the Act in conjunction with Rule 6A of the Companies Rules, 2014 (meetings of the board of directors and its powers).

By including a «promoter or members of a group of promoters» in the definition of a related party under the Registration Regulations, the WG report corrected a gap in the previous definition by ensuring that transactions between the listed company and its promoters comply with the disclosure requirements of the regulatory framework. From a practical point of view, however, this involvement can pose administrative and governance challenges to the day-to-day operations of a listed company, as it is difficult to track and identify all transactions made by project promoters or members of a group of promoters of a listed company and to obtain the approval of the audit committee to carry out such transactions. On January 22, 2020, seBI released a report of the OPR Working Group (the «WG Report») proposing a combination of substantive and procedural changes to the TOR review process under the registration rules. Subsequently, on November 9, 2021, SEBI published a Notice of Implementation of the Sixth Amendment to the Registration Regulations (the «Sixth Amendment»), which contains the amendments proposed in the WG Report, which are scheduled to come into force from April 2022 and April 2023. 5 Shrimi Choudhary, «SEBI Probe Finds Violation of Listing and Disclosure Standards by Sun Pharma,» available online at www.business-standard.com/article/companies/sebi-probe-finds-violation-of-listing-and-disclosure-norms-by-sun-pharma-120022101264_1.html, last accessed February 7, 2022 IntroductionIn accordance with related party transactions and non-personal and ordinary business comparison principlesExceptionsComment Section 2(76) of the Companies Act, 2013 provides that a party related to a corporation is defined as follows: The Act uses the term «ordinary course of business» in various places, but does not provide a definition or explanation. According to the dictionary, the term defines transactions that are part of the regular business activity based on the customs or customs of the respective sector/industry. (i) If the TOR has been received by a director or other employee without obtaining the necessary approval, this TOR must be ratified by the board of directors or shareholders within 3 months, otherwise they must bear the following consequences: The policy is not only in the best interest of its stakeholders, but also in accordance with the requirements of the Companies Act, 2013 and the Registration Regulations. Article 23 of the Registration Regulations requires the formulation of a directive dealing with related party transactions, including the formulation of a directive on the materiality of related party transactions. This Directive therefore establishes the mechanism for processing transactions between related parties. «Related Party» is a party within the meaning of section 2 (76) of the Companies Act, 2013 in conjunction with its rules and its clause (for example) in section 2 of the Registration Regulations. [Communication MCA of 5 June 2015] Contracts between related parties shall be indicated in the report of the Board of Directors and a register of such contracts shall be drawn up. Analysis: The definition of ATO in the listing rules has a broader meaning than the definition in the Companies Act, in particular because of the inclusion of transactions that directly or indirectly benefit the listed company.

This concept was introduced to combat the use of complex structures to transfer resources from listed companies to apparently independent parties to the listed company or its related parties16. The changes introduced in the Sixth Amendment include, inter alia, the extension of the definition of related parties, the revision of the materiality thresholds for TOR and the inclusion of transactions between unlisted subsidiaries and all related parties of the listed company. These changes are explained in more detail in the following sections. In the case of renting properties that directly cover 10% or more of the turnover OR a hundred crores (whichever is lower). Article 49 of the SEBI also sets out certain regulatory requirements for related party transactions. It defines a related party transaction as a transaction involving the transfer of resources, services/obligations. Its scope is broader than the Companies Act 2013. It includes close family members of directors or officers in key positions, private companies where directors or officers in key positions, as well as their relatives, have significant control or influence. Any related party transaction that is material must be approved by shareholders by special resolution and not all related parties can vote on such resolutions. Analysis: A significant difference in the threshold requirements of the two pieces of legislation is the basis for a transaction to be carried out under market conditions and in the ordinary course of a company`s business.