Guarding the corporate purse against related party deals

Résumé détaillé

In financial markets, trust is the primary currency. When everyday citizens invest their savings in a listed company, they trust the money will be used to grow the business and…

In financial markets, trust is the primary currency. When everyday citizens invest their savings in a listed company, they trust the money will be used to grow the business and generate fair returns. Historically, however, corporate funds have rarely been siphoned off through midnight theft. Instead, money most often leaves companies in broad daylight through seemingly normal arrangements known as related party transactions (RPTs).

An RPT occurs whenever a company does business with its directors, major shareholders or their families, such as buying from a sister concern or lending to an affiliate. Many are genuine, but all carry a conflict of interest. Unchecked, assets can be bought at inflated prices or sold too cheaply, moving wealth into private hands while public shareholders bear the loss. Recognising this risk, the Bangladesh Securities and Exchange Commission (BSEC) has made RPT oversight central to its draft Corporate Governance Rules, 2026. This welcome, proactive initiative invites public suggestions to make the safeguards watertight.

Rule 21 proposes a three-step review: the audit committee recommends, the board approves, and shareholders decide at a general meeting if most directors are interested. This creates clear accountability, but several details need strengthening to close loopholes. First, approval should come before the deal.

Rule 21 asks companies to place RPTs “periodically before the audit committee”, usually months after a contract is executed and paid. Review after the fact turns oversight into a post-mortem. The rules should require prior audit committee and board approval, with annual “omnibus approvals” for routine supplies.

Second, the rules need clear thresholds. A material RPT should be defined as exceeding 1 percent of tangible assets or 10 percent of turnover, with all contracts with one entity aggregated. Otherwise, a Tk 100 crore contract could be split into ten Tk 10 crore deals to bypass oversight.

Third, funds go to…

Fourth…

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