Page 456 - MANUAL OF SOP

GENERAL ISSUES CHAPTER 19

RELATED PARTY TRANSACTIONS

INTRODUCTION

19.1. A related-party transaction is a business deal or arrangement
between two parties, who are joined by a special relationship prior to
the deal. Related-party transactions are a common occurrence in the
business marketplace. These transactions can have significant influence
over any financial decision and consequential impact on profit or loss
thus impacting financial position of an entity. However, a number of
regulatory procedures are in place in the country to ensure that related-
party transactions are conflict-free and do not negatively affect value for
shareholders. Since the definitions are not very specific, and no separate
record for related party transactions is generally available, it is sometimes
difficult for the investigation team to verify the accuracy of information
furnished by the DI regarding related party transactions. Therefore, it was
considered appropriate to provide guidance to the team which can result
in uniform practices for the investigations.

LEGAL PROVISIONS
The Rules

19.2. A “related” party is defined in the explanation to Rule 2(b) of the
Rules as under:

Explanation. - For the purposes of this clause, -
(i) producers shall be deemed to be related to exporters or
importers only if, -

(a) one of them directly or indirectly controls the other;
or

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