The Securities and Exchange Commission yesterday tightened the rules on related party transactions by introducing a detailed best practices code with effect from January 1, 2014, aiming to safeguard minority shareholders and put in place an internal control mechanism in listed firms.
However, the adoption of the best practices code would be on voluntary basis during the first two years of the introduction. But from 2016, the adoption of the best practices code becomes mandatory for all listed firms.
The companies which will adopt the best practices code from January 2014 on a voluntary basis for an initial period of two years will be exempted from complying with the disclosure requirements stipulated in Listing Rule 7.6 (XVI) and item 29 of Appendix 8A, which will be repealed in 2016.
However, the provisions in the best practices code appear to be more detailed and demanding compared to disclosure provisions in the Listing Rule 7.6 (XVI).
For instance, the best practices code proposes to set up a Related Party Transaction Review Committee within the firm to confirm that a related party transaction is not against the company’s interest and mention whether the review committee obtained an opinion from an independent expert before forming its view.
Further shareholder approval by a way of a special resolution is required under the new best practices code if a listed entity or its subsidiary buys or disposes 1/3 of the total assets of either of them to a related party.
Add commentComments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.
Advent of the digital economy has helped improve access to services and information where tr
Returning to being a specialist Life Insurance company, leading Sri Lankan insurer Janashakthi Insur
Six young talented Sri Lankan football players stand the chance to win an opportunity of a lifetime;