The Uday Kotak committee recommendations on corporate governance received a Securities and Exchange Board of India (Sebi) nod a few weeks ago.

One of the recommendations was royalty payments to related parties in excess of 5% of the consolidated turnover.

Uday Kotak committee said if the royalty payment is more than 5 percent of gross revenues, it should be approved by a majority of the minority shareholders.

Discussing the recommendations, JN Gupta, Former ED of Sebi said, “Shareholders do not have any right to approve the payment of royalty. An informed shareholder will not act in an irrational manner.”

“When royalty payments are being proposed or are being considered, we need to look at that how far the company has grown in terms of topline because of this arrangements in terms of technology or brand name,” said Mahavir Lunawat, Group Founder and MD of Pantomath Group.