Definition
Related Party Transaction (RPT)
An RPT is a deal between a company and parties connected to it, like promoters or group firms, which can be a governance red flag if abused.
Related party transactions, sales, loans, or purchases between the company and its promoters, directors, or group entities, are legitimate when at arm's length, but can be used to siphon value from minority shareholders if priced unfairly.
Under SEBI LODR, material RPTs require audit-committee and shareholder approval (with related parties barred from voting) and detailed disclosure. Investors scrutinise RPTs as a key corporate governance signal; heavy or opaque related-party dealings are a warning sign.
Related terms
- SEBI LODRSEBI LODR (Listing Obligations and Disclosure Requirements) are the regulations governing what listed companies must disclose to shareholders and exchanges.
- PromoterA promoter is the founder or controlling shareholder group that establishes and effectively controls a company.
- Corporate GovernanceCorporate governance is the system of rules, practices and controls by which a company is directed, overseen and held accountable to its stakeholders.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.