The past couple of days, I learned a new term – Related Party Transactions (RPT). It’s part of regulatory bodies exercise on getting companies to practice corporate transparency and proper compliance.
What’s RPT all about?
RPT is a transaction that involves transfer of resources, services or obligations between two related parties. The transaction may involve monies. Related party can mean a major shareholder or a person connected with a director or major shareholder in that company.
Examples of transactions could be:
- purchase or sales of goods
- rendering or receiving services
- transfer of research and development
- settlement of liabilities
The reason why this is regulated is to protect the interest of all shareholders and that the directors maintain their duty of good faith and act in the best interest of the company.