This series is our attempt to simplify different facets of corporate and commercial law for the benefit of startups.

The first concept covered by us is that of Related Party Transactions (RPTs), which is discussed in extensive detail in various provisions of the Companies Act, 2013 and the Income Tax Act, 1961.

Often, in our experience, we have observed that startups enter into RPTs without being aware (a) that a transaction is considered to be a RPT; and (ii) of the legal formalities and compliance requirements associated with a RPT.

The unintended consequences of structuring RPTs in a manner that is not legally compliant is the following i.e. (i) the startup ends up facing regulatory scrutiny and potential penalties under various provisions of applicable law; and (ii) the valuation of the startup by a potential investor could be pushed downwards on account of such non-compliance surfacing during a legal due diligence exercise.

In this series of videos on RPTs, Shwetha Chandrashekar breaks down the concept into various parts. In Part 1 of this series, she explains “Who is a Related Party?”

Watch This Video to learn more.