1. General Permission with Conditions under Section 188 of the Companies Act, 2013

• Yes, related party transactions (RPTs) are allowed in Public Limited Companies, but they are subject to strict approval and disclosure requirements.
  
• RPTs include contracts or arrangements with related parties for activities like sale/purchase of goods, rendering of services, leasing, or appointment to any office or place of profit.
  
• Such transactions must be entered into in the ordinary course of business and on an arm’s length basis to avoid conflict of interest.
  
• If these conditions are not met, board and shareholder approvals may be required.
  

2. Considered Related Parties 

• Related parties include:
  
  • Directors or key managerial personnel and their relatives
    
  • Firms, private companies, or public companies in which such individuals have a significant interest or control
    
  • Subsidiaries, holding companies, and associate companies
    
  • Entities with common directors or shareholders, as defined under Section 2(76)
    
• These relationships are defined to prevent self-dealing and preferential treatment.
  

3. Board and Shareholder Approval Requirements

• All RPTs must first be approved by the Board of Directors through a resolution.
  
• If the transaction exceeds the prescribed monetary thresholds under the Companies (Meetings of Board and its Powers) Rules, 2014, it requires prior approval of shareholders by ordinary resolution.
  
• The related party cannot vote on the resolution in the general meeting.
  
• Transactions beyond a certain threshold also require approval of the Audit Committee (mandatory for listed companies).
  

4. SEBI Regulations for Listed Companies

• Listed Public Limited Companies must comply with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
  
• RPTs must be disclosed in quarterly reports, and material RPTs (transactions >10% of annual consolidated turnover) require mandatory shareholder approval.
  
• The Audit Committee must review and approve all RPTs, regardless of their size.
  
• These transactions must be disclosed to the stock exchange and in the annual report.
  

5. Disclosure and Reporting Obligations

• Companies must maintain a register of contracts with related parties under Section 189.
  
• Details of RPTs must be disclosed in financial statements, the board’s report, and corporate governance filings.
  
• Non-compliance can lead to penalties, disqualification of directors, and reputational damage.
  
• Proper documentation, independent valuation, and legal review help ensure compliance and transparency.