Definition
Related Party Transaction Disclosure
Related party transaction disclosure is the mandatory reporting of dealings between a company and its promoters, subsidiaries, directors or other connected entities.
Under Ind AS 24 and SEBI's listing regulations, companies must disclose transactions with related parties, such as sales, loans, guarantees and purchases, in the notes to accounts, and material ones need audit-committee and shareholder approval.
Related-party transactions are a major governance focus because they can be used to siphon value from minority shareholders, for instance through over-priced purchases from a promoter entity. Unusual or growing related-party dealings are a classic red flag analysts probe in Indian corporate accounts.
Related terms
- 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.
- Corporate GovernanceCorporate governance is the system of rules, practices and controls by which a company is directed, overseen and held accountable to its stakeholders.
- Notes to AccountsNotes to accounts are the detailed disclosures accompanying financial statements that explain accounting policies, breakdowns and items not visible on the face of the statements.
- PromoterA promoter is the founder or controlling person or group named as such in a company's filings, who effectively controls the company directly or whose advice the board is accustomed to follow.
Plain-English explainer from Investdesk Investors Encyclopedia. General information, not financial advice.