REGULATION THIRD-PARTY TRANSACTIONS OF GROUPS COMPANIES IN SINGAPORE: RECALIBRATING EXISTING APPROACHES

Abstract

The regulation of Related Party Transactions (RPTs) is seen as one of the most important mechanisms to promote good governance globally. The World Bank has on numerous occasions suggested that the effective regulation of RPTs is critically important for good corporate governance, the growth of stock markets, and economic development around the world. In Singapore, RPTs between a parent and subsidiary company are the most pervasive form of RPTs. Given Singapore’s strong corporate governance ranking internationally, it is peculiar that unlike other developed common and civil law jurisdictions, it does not have special legal provisions regulating the duties of the parent and subsidiary boards in company groups. This, at first blush, makes the Singapore law appear ineffective in regulating RPTs. This article critiques Singapore’s current regulatory regime surrounding related party transactions between the parent and subsidiary companies. It also evaluates suggestions from academics on possible improvements to the current regulatory regime and considers whether transplanting legal provisions from overseas jurisdictions would necessarily aid the current regime. It ultimately concludes that Singapore should do more to address the risks posed by such transactions to ensure that Singapore does not fall behind other countries in its corporate governance.