Related Party Transactions under explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Related Party Transactions (RPTs) are dealings between a company and its related parties. The Companies Act requires disclosure and, in many cases, approval.
What is a related party
- Directors, KMP and their relatives
- Holding, subsidiary and associate companies
- Firms/entities in which a director or relative is a partner or member
Approval and disclosure
- RPTs generally need board approval; larger ones need shareholder approval
- Must be at arm's length and in the ordinary course of business to be exempt
- Disclosed in the board report and financial statements (AOC-2)
Why it matters
RPT rules prevent misuse of company funds for the benefit of insiders and protect minority shareholders.
Frequently Asked Questions
What is a related party transaction?
A transaction between a company and its related parties (directors, KMP, group companies, etc.).
Do RPTs need approval?
Yes — board approval, and shareholder approval for larger transactions.
Where are RPTs disclosed?
In the board report and financial statements (Form AOC-2).
Are arm's length RPTs exempt?
Transactions at arm's length and in the ordinary course have relaxed approval requirements.
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