Related-party transactions: approvals and where to find them

What is a related-party transaction?

It is a deal between a company and someone closely linked to it. That includes the promoter group, group companies, subsidiaries, directors, key managers and their relatives.[S1][S3]

SEBI's listing rules also treat any shareholder with 10% or more of the company as a related party.[S1] A deal by a subsidiary with such a party counts too.[S1]

Examples are buying raw material from a sister company, renting an office from a director, or paying a parent for its brand. Such deals are legal and common in Indian business groups.

Why can these deals catch investors out?

In a related-party deal, the people on both sides of the table may answer to the same family or parent company. The price may not be what two strangers would agree on.

The rules below exist so that independent people check the price. They also make sure shareholders can see the deals.

Who approves a related-party deal?

Under SEBI's listing rules, every related-party transaction needs the audit committee's approval before it happens. Only the independent directors on that committee may approve it.[S1]

For repeated deals, the committee can give a blanket "omnibus" approval. It must name the party, the type of deal and a maximum amount, and it lasts at most one year.[S1]

When do shareholders have to vote?

A "material" related-party transaction needs shareholders' approval by resolution, before the deal. No related party may vote to approve it.[S1]

A deal is material when it, together with earlier deals with the same party that year, crosses a limit. The limit depends on the listed company's annual consolidated turnover, from its last audited accounts.[S1]

This scale applies from 19 Dec 2025. Before that, the limit was ₹1,000 crore or 10% of turnover, whichever was lower.[S1]

Brand and royalty payments have a separate test. They are material above 5% of annual consolidated turnover in a financial year.[S1]

What does the Companies Act add?

Section 188 of the Companies Act needs board approval for certain kinds of related-party contracts. Above limits set in the Companies rules, shareholders must approve too.[S3]

Section 188 does not apply to deals in the ordinary course of business that are at arm's length. "Arm's length" means on the terms two unrelated parties would agree.[S3]

The board's report in the annual report gives particulars of related-party contracts covered by Section 188.[S3]

Where are related-party deals disclosed?

There are four places to look:

• Half-yearly disclosure: filed with the exchanges on the day of the half-yearly results, in a SEBI format.[S1] The format is part of the "Integrated Filing (Financial)".[S2]
• Annual report notes: the financial statements carry a related-party note listing each party, the type of deal and the amounts.
• Board's report: particulars of contracts covered by Section 188, as above.[S3]
• Meeting notices: before a vote on a material deal, the notice gives shareholders details SEBI requires, such as the value and the reason for the deal.[S2]

The guide to reading an annual report shows where the related-party note sits.

What do real companies disclose?

Many group companies pay a parent for the use of its brand or technology. Hindustan Unilever pays Unilever group companies a royalty and fees for central services.[S4]

TCS pays a brand fee to Tata Sons, its promoter.[S5] Each company explains these payments in its annual report's related-party note.

Cityfort's governance section sums up each company's related-party disclosures in plain words. The first sentence of each summary is below.

Open a company's page and go to "Governance signals" for the full summary, with its sources.