We are back with our second video of this series where we attempt to break down legal concepts, legal jargon and regulatory compliances for the benefit of startups.
Often, in our experience, we have observed that startups enter into Related Party Transactions (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 Part 1 of the Related Party Transactions (RPTs) series, she explained who a related party is under the provisions of the Companies Act, 2013.
In Part 2 of this series, she elaborates on “Types of Related Party Transactions” under the Companies Act, 2013.
Watch this Video to learn more.