Corporate Governance

2077-6535 (online)
2077-6527 (print)
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This series of books addresses issues related to corporate governance including such issues as board composition and nomination, the role of institutional investors, board incentives, risk management and  supervision and enforcement.

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Improving Corporate Governance in India

Improving Corporate Governance in India

Related Party Transactions and Minority Shareholder Protection You do not have access to this content

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11 Aug 2014
9789264220652 (PDF) ;9789264220614(print)

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A concern that many markets around the world share in relation to poor corporate governance is the abuse of related party transactions (RPTs). This is particularly true in markets where controlling ownership is predominant. Judging by the frequent reporting of RPTs, this calls for the relevant authorities and companies to be vigilant and have in place an effective oversight framework through which abusive RPTs can be identified, prevented or stopped. This book presents the findings of an OECD policy dialogue with Indian stakeholders on policies to improve the monitoring and prevension of abusive RPTs in India.


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Table of Contents

Abbreviations and acronyms 7
Introduction 9
What are related party transactions and how to prevent abuse  11
OECD reports on related party transactions  13
Related party transactions – India’s perspective  17
Legal framework governing related party transactions in India 19
-The Companies Act 1956 19
-Accounting standards 21
-The Income Tax Act 1961 22
-Equity Listing Agreement 22
-SEBI Circular  23
-Areas to be addressed 23
Suggestions 25
-Defining related party transactions 25
-Approval of major RPTs by a “majority of the minority” 26
-Pre-approval by the audit committee and third-party evaluation of RPTs 27
-Immediate and continuous disclosures rather than periodic ones 27
-Requiring approval by shareholders for divestment of major divisions/subsidiaries  28
-Approval of managerial remuneration by disinterested shareholders  29
-Fiduciary responsibility of controlling shareholders 29
-Improving selection mechanism for independent directors 31
-Clarity on liabilities and on remuneration of independent directors 31
-Providing training to independent directors on the business of the company 32
-Improving investor education for better participation at general meetings 32
-Provision for regulatory support to class action suits 33
-Establishment of specialised courts 33
Conclusions 35
-Bibliography 37
Annex: India Peer Review of Related Party Transactions and Minority Shareholder Rights, OECD, 2012  39
-The ownership and control of Indian listed companies 40
-The approach to protection of minority shareholders 47
-The enforcement record  54
-Assessment and conclusions 56
-Annex notes 59

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