Looking to understand more about Related-Party Transactions

July 28, 2023

by a searcher from Queen's University in Markham, ON, Canada

I am currently in the midst of evaluating a firm that makes heavy use of Related-Party Transactions between a different entity. What kind of incentive would a firm need to do something like this? What should I be aware of in these kinds of cases?

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Reply by a professional
from Lancaster University in London, UK

Hi, there are many reasons a company might do this including creating separate profit centres for tax purposes, dividing assets for security reasons and making returns to shareholders easier. You will need to assess each transaction in turn and to the extent that the RPTs are with entities outside the target group you will need to decide whether assets need to be transferred into the group as part of the transaction, contracts formalised or replacement arrangements found. You will also need to be conscious of the impact these solutions have on the financials of the target company. Your financial and legal advisors will be able to guide you through this process. Happy to have a chat if you want to DM me. Good luck.

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