How to deal with related party transactions in unlisted firms?
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Last Updated: Apr 11, 2021, 09:46 AM IST
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Synopsis
For larger economic stability, one cannot undermine the importance of sound governance in unlisted public companies for two reasons.
Recognizing the importance of large unlisted companies, the government recently added Section 129A in the CA, 2013, which requires additional financial disclosures from certain class of unlisted companies.
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Alby Joseph
In the words of Uday Kotak in the Kotak Committee Report, there are broadly two styles of corporate governance in India: the “Raja” (Monarch) model and the “Custodian” model. In the “Raja” model, promoter interest precedes interests of “praja” i.e. other stakeholders. On the other hand, “Custodian” model works on Gandhian principles where the promoters wear the hat of “trustees” and act in the interest of all stakeholders. What is more commonplace is anybody’s guess, however, the burning question is how to correct the existing inequity that exists between the promoter and stakeholder interest.