Royalty Concerns: Why it Matters for Investors
ments merely as an item in the statement of transactions with related parties in the annual report, without providing any details. In some cases, companies approached shareholders for approval without specifying a period for which the payments are to be made, which can be concerning for investors.
Taking blanket approvals for indefinite periods can lead to shareholders not being approached for recurring transactions unless rates are revised upwards. Companies also find ways to bypass regulations by spreading the amount across multiple related parties to exceed the threshold of 5% of consolidated turnover, without requiring shareholder approval. These practices are concerning and highlight the need for better transparency and disclosure standards in the corporate sector.
While companies often talk about corporate governance in public forums, the reality of their practices may not always align with these principles. It is important for shareholders, especially minority shareholders, to pay attention to these details and hold companies accountable. If shareholders are not satisfied with the practices of a company, the best way to respond could be to vote against such practices with their investments.
Overall, the issue of royalty payments and the lack of proper disclosures highlight the importance of transparency and accountability in the corporate world. Making informed decisions based on reliable information is crucial for investors to protect their interests and ensure fair practices in the market. It is encouraging to see regulatory bodies like SEBI taking steps to address these concerns and push for better disclosure standards in the industry. Investors should continue to stay informed and engaged to make well-informed investment decisions.
