Abusive related party transactions – where a party in control of a company enters into a transaction to the detriment of non-controlling shareholders - are one of the biggest corporate governance challenges facing the Asian business landscape. This Guide on Fighting Abusive Related Party Transactions in Asia provides policymakers, enforcement authorities, private institutions, shareholders and other stakeholders with options for monitoring and curbing such abusive related party transactions, focusing on disclosure and the board/shareholders approval system. It also looks into the role of auditors and independent directors. A case study is provided in an Annex, featuring a six-step approach to analysing related party transactions and assessing potential for abuse.
A major contributing factor is that many Asian enterprises are part of a large business group, or owned by a controlling shareholder (e.g. family or state) with a large network of personal interests. In the current global economic environment, effective monitoring and curbing of abusive related party transactions remains high on the agenda of corporate governance reform in Asia.
While much progress has been achieved over the past decade in developing an effective legal and regulatory framework in Asia, remaining challenges to enforcement and inadequate board oversight have facilitated abusive related party transactions. The challenge of fighting abusive related party transactions is as much about implementation and enforcement as the policy framework itself.
This Guide aims to help build consensus among policy-makers and practitioners on the direction of reforms in Asia, cutting across the areas of regulation, implementation and 4
GUIDE ON FIGHTING ABUSIVE RELATED PARTY TRANSACTIONS IN ASIA © OECD 2009 enforcement. This is a lofty challenge, but worth attempting. Looking ahead, the Guide will be widely disseminated. It will also be actively used. OECD will closely follow developments through policy dialogue and exchange of experience among not only Asian Roundtable member jurisdictions but also OECD member countries and other regions. |