On 2 October 2018, the Securities and Exchange Commission of Pakistan (SECP) has issued SRO 1194(I)/2018 to introduce Companies (Related Party Transactions and Maintenance of Related Records) Regulations, 2018.
These Regulations are applicable on all companies requiring them to maintain records under the registers at their head offices. They shall come into force at once except for regulation 7 “Records to be maintained in which directors are interested”, which shall come into force on 1st January 2019.
The Regulations have been issued as an extension to Section 208 of the Companies Act 2017. Section 208 concerns to the transactions undertaken with related parties and contracts or arrangements in which directors are interested. These Regulations provide guidelines for the identification of related parties and the proper conduct and documentation of all related party transactions.
Under the provisions, a company can enter into an arrangement with a related party only if approved or within a policy approved by the board of directors of the company. These conditions do not apply with respect to related-party transactions if entered into by a company within the ordinary course of its business, on an arm’s length basis.
