Nirma University

Institute of Law

(Semester 8th, B.COM L.L.B)

Continuous Evaluation 1

Subject: Corporate governance

Prepared & Submitted By

Atharv Shanker Dubey 20BBL075

Research Paper on:

Regulation of Related Party Transactions in India.

 Introduction

In the business world, the aim for most companies is to turn a profit and share it among those
involved in the business. However, ensuring that profits are maximized and distributed fairly
can be a complex task, especially when dealing with various levels of management and
stakeholders. Even the slightest hint of self-interest or favoritism can have serious
consequences for the company and its stakeholders. To safeguard against this, regulations are
in place to govern transactions involving potential conflicts of interest, known as "related
party transactions" (RPT).
Related party transactions are essentially deals or arrangements between two or more parties
who have a pre-existing relationship or shared interest. For example, if a company enters a
contract with a majority shareholder's business to provide services like decorating the
company's offices, this would be considered a related party transaction. Such transactions are
regulated by both the Ministry of Corporate Affairs (MCA) and the Securities Exchange
Board of India (SEBI).
Various regulations, such as Regulation 23 of the Listing Regulations and Section 188 of the
Companies Act, along with accounting standards, govern related party transactions. These
regulations require that all transactions with related parties, except those with wholly-owned
subsidiaries, be approved by the company's Board of Directors. If the transaction falls under
Section 188, board approval by resolution is mandatory. The Listing Regulations may require
approval from the Audit Committee in certain cases. Companies are also required to comply
with various other regulatory requirements when engaging in related party transactions.