On February 14, 2025, the Securities and Exchange Board of India (SEBI) issued a circular introducing industry standards for the minimum information required for the review and approval of Related Party Transactions (RPTs) by audit committees and shareholders of listed companies. The objective is to enhance transparency, standardization, and regulatory compliance under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
Regulatory Context
Regulation 23(2), (3), and (4) of the LODR Regulations requires:
- Audit committee approval for all RPTs
- Shareholder approval for material RPTs (transactions exceeding regulatory thresholds)
Additionally, SEBI’s Master Circular (November 11, 2024) specified the minimum information required for these approvals. To further streamline the disclosure process, SEBI collaborated with industry associations and stock exchanges to create Industry Standards that define minimum disclosure requirements for RPTs.
Key Provisions of the Circular
- Formation of the Industry Standards Forum (ISF):
- SEBI, along with ASSOCHAM, CII, and FICCI, developed minimum disclosure standards for RPT approvals.
- These standards will be published on the websites of industry associations and stock exchanges.
- Amendments to SEBI’s Master Circular:
- Audit Committee Review (Part A, Section III-B): Listed companies must now provide specific information as per the Industry Standards while presenting RPTs for audit committee approval.
- Shareholder Approval (Part B, Section III-B): Shareholder notices must include additional details specified in the Industry Standards, ensuring greater transparency.
- Effective Date & Compliance Enforcement:
- The new requirements take effect from April 1, 2025.
- Stock exchanges must ensure compliance among listed companies.
Implications
- Uniformity in disclosures for better decision-making by audit committees and shareholders.
- Stronger corporate governance and improved investor confidence in listed entities.
- Enhanced transparency in RPT approvals, reducing potential conflicts of interest.
SEBI’s initiative aims to create a standardized, accountable, and investor-friendly approach to RPT disclosures, ensuring better regulatory compliance in India’s corporate sector.
