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INTRODUCTION
“Everything is worth what its purchaser will pay for it” - Publilus Syrus’ Maxim No. 847
One of the most important roles of the Board of Directors of a listed company and its Audit Committee is the review and approval of Related Party Transactions (RPTs). Related Party Transactions are prescribed under s.188 of the Companies Act, 2013 (“Act”) as well as the SEBI (Listing Obligations and Disclosure Requirements)Regulations, 2015 (“SEBI LODR”). The most crucial element in approving an RPT is determining whether the transaction is on an arms’ length pricing (ALP)? Let us examine some key facets in this respect.
STATUTORY FRAMEWORK
Regulation 2(zc) of the SEBI LODR defines a related party transaction to mean a transaction involving a transfer of resources, services or obligations between a listed entity on one hand and a related party of the listed entity on the other hand, regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract.
Under Regulation 23(2) of the SEBI LODR, all related party transactions and subsequent material
