Major Transactions and Related-Party Deals: Regulatory Challenges

All lawyers are familiar with the institution of major transactions and related-party transactions. The fate of companies depends on the proper application of the rules on qualifying such transactions and the procedure for executing them. The price for a simple error may be the invalidation of the transaction with the ensuing consequences. Established legislative and regulatory enforcement practices could help with a possible revision of existing regulation. There are currently limitations on the application of the institution of major transactions to non-profit organizations that differ from the regulation established for business entities. However, mechanisms are needed to prevent abuse and ensure the transparent use of funds when non-profit organizations engage in socially significant activities. Do business entities have to comply with the quantitative criterion of a major transaction? What role is played by the institution of company charters establishing a limitation on a director’s powers to conclude transactions? Do the rules on major transactions and related-party transactions at commercial and non-profit organizations need to be unified?