The Companies Act 2013 aims to promote good corporate governance practices, including self-regulation around related party transactions. It shifts responsibility to companies to ensure fair treatment of stakeholders. Unlike the previous Companies Act of 1956, the new law specifically defines "related party" to more clearly identify transactions that fall under related party transactions. This addresses situations where existing provisions have proved insufficient by bringing related party transactions into clearer focus.
1. Related Party Transactions- Be careful
The Companies Act 2013 is aimed at making companies proactive in adopting good Corporate
Governance practices and this rationale is reflected in many a provision contained in the Act .
One such domain on which the lawmakers have paid special attention in shifting the onus to
the Company by creating a self regulated culture for ensuring fair treatment to the stake
holders, is that of the Related Party Transactions.
Over the years as the law has matured and the corporate world has witnessed situations where
the existing provisions have proved to be insufficient, Related Party Transactions have received
the right amount of limelight in the proposed law. The Act has specifically defined the term
“Related Party” unlike the Companies Act, 1956 , which shall now make it easier to specifically
identify as to which transactions shall fall within the ambit of Related Party Transactions. In the
Companies Act, 1956, there is no special definition for transactions entered into by a company
and entities related to it in some way or the other, transactions which usually appear to have a
tinge of prejudice towards other stake holders.
To read more, please visit website : www.companiesact.in