SEC has asked public comments before October 31, 2012 on a consultation paper that has been made public. (http://www.cse.lk/pdf/cse-banner-bottom.pdf)
Related parties include parent firms, subsidiaries, associates, key management persons, and relations or companies connected to them.
For recurrent transactions in day to day operations it is proposed that a general shareholder approval is sought and renewed every year.
Many Sri Lankan listed business groups have inter-company dealings involving products and services, which are expected to be conducted at around market prices.
SEC has proposed seeking approval of an internal audit committee for related transactions and also other shareholder approvals when the deals are large.
Proposed thresholds are 10 percent of total assets or 20 percent of equity.
Analysts say non-controlling shareholders can be abused either when assets are sold to related parties at lower than market price or when assets are bought from them at inflated prices.
A controversy arose recently when a privatized plantation firm sold its highly profitable marketing unit to a related party amid protests from minority shareholders about its valuations.
There have also been a flurry of other transactions especially in privatized entities after Sri Lanka's elected ruling classes resumed expropriating citizens using powers stemming from a legislative body inherited from former Western European rulers.