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HomeCorporate LawRegulation of Related Party Transactions: Preventing Abuse in Closely Held Companies

Regulation of Related Party Transactions: Preventing Abuse in Closely Held Companies

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Closely held companies me promoters akshar related party transactions ke through value shift kar sakte hain – jaise apni doosri company ko over-priced contracts dena, family members ko inflated salary, ya assets cheap mein bech dena. Is abuse ko rokne ke liye corporate law related-party deals pe special spotlight rakhta hai.

Rules often demand:

  • Clear definition of “related party” (relatives, group entities, key managerial persons, etc.),
  • Board/ shareholder approvals before executing certain transactions,
  • Interested directors ka abstain karna from voting,
  • Disclosures in financial statements and reports,
  • Arms-length basis aur fairness ka evaluation.

Independent directors, audit committees, and external valuers yaha important role play karte hain. Minority shareholders ke liye yeh mechanisms lifeline hain, kyunki unhe day-to-day control nahi hota.

Agar related-party transactions obvious siphoning ya oppression ka pattern dikhayein, to regulators, tribunals ya courts intervention kar sakte hain – including transaction reversal, penalties, ya management change.

Message promoters ke liye seedha hai: family-business aur company-business ke boundaries mix karoge, to law eventually line kheech dega.