Description

SEBI provides relaxation in minimum information requirements for RPT approvals, introducing tiered thresholds based on transaction value and turnover percentage.

Summary

SEBI has issued Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/135 dated October 13, 2025, providing relaxation in the minimum information requirements for approval of Related Party Transactions (RPTs) by Audit Committees and shareholders. The circular modifies Section III-B of the SEBI Master Circular dated November 11, 2024, introducing tiered disclosure requirements based on transaction value thresholds. This follows recommendations from the Industry Standards Forum (ISF) and approval by the SEBI Board in its 211th meeting held on September 12, 2025.

Key Points

  • SEBI Board approved relaxation in minimum information requirements for RPT approvals on September 12, 2025
  • Modification to SEBI Master Circular dated November 11, 2024 and Circular dated June 26, 2025
  • Introduction of tiered disclosure requirements based on transaction thresholds
  • Simplified requirements for smaller value transactions to ease compliance burden
  • Changes apply to information provided to both Audit Committees and shareholders
  • Follows representation from Industry Standards Forum (ISF) seeking relaxation
  • Advisory Committee on Listing Obligations and Disclosures (ACLOD) recommendations incorporated
  • Public consultation paper issued on August 04, 2025 before finalization

Regulatory Changes

For Audit Committee Approvals (Part A - Section III-B):

  1. Standard Requirement: Listed entities must provide information as specified in Industry Standards on “Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions”

  2. Relaxed Requirement - Threshold 1: If transaction value (individually or aggregated with previous transactions during the financial year, including ratifications) does not exceed the lower of:

    • 1% of annual consolidated turnover (as per last audited financial statements), OR
    • Rs. 10 Crore

    Then entities may provide simplified ‘Minimum information’ as specified in Annexure-13A

  3. Exemption - Threshold 2: No minimum information requirements apply if transaction value (individually or aggregated during the financial year, including ratifications) does not exceed Rs. 1 Crore

For Shareholder Approvals (Part B - Section III-B):

Similar tiered structure applies to notices sent to shareholders seeking RPT approval, with information requirements in addition to Companies Act, 2013 provisions:

  • Standard Industry Standards information for larger transactions
  • Simplified requirements for transactions below the 1% turnover/Rs. 10 Crore threshold
  • (Note: The circular text appears truncated but indicates similar provisions apply)

Compliance Requirements

All Listed Entities must:

  1. Assess transaction value thresholds before determining applicable disclosure requirements
  2. Aggregate all transactions with the same related party during the financial year (including ratifications)
  3. For transactions above Rs. 1 Crore but below 1% turnover/Rs. 10 Crore threshold:
    • Use simplified Annexure-13A format for Audit Committee presentations
    • Apply similar simplified requirements for shareholder notices
  4. For transactions exceeding 1% turnover or Rs. 10 Crore:
    • Provide full Industry Standards information to Audit Committee
    • Include comprehensive information in shareholder notices
  5. Ensure compliance with modified requirements in Master Circular Section III-B
  6. Continue meeting all other requirements under Companies Act, 2013 for shareholder approvals

Important Dates

  • October 13, 2025: Circular issued
  • September 12, 2025: SEBI Board approval in 211st meeting
  • August 04, 2025: Consultation Paper issued for public feedback
  • June 26, 2025: Previous SEBI Circular (SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93) referenced
  • November 11, 2024: Original Master Circular on LODR compliance
  • Effective Date: Not explicitly stated; likely immediate implementation upon issuance

Impact Assessment

Positive Impacts:

  1. Ease of Doing Business: Significant reduction in compliance burden for smaller value RPTs, aligning with SEBI’s objective of facilitating business operations

  2. Administrative Efficiency: Simplified disclosure requirements for transactions below materiality thresholds reduce paperwork and processing time for Audit Committees and shareholders

  3. Proportionate Regulation: Tiered approach ensures regulatory rigor is proportionate to transaction size and materiality

  4. Cost Reduction: Lower compliance costs for listed entities, particularly for routine smaller transactions

Considerations:

  1. Aggregation Requirements: Entities must maintain robust systems to track and aggregate all transactions with each related party during the financial year

  2. Threshold Monitoring: Companies need to monitor transaction values against both percentage (1% of turnover) and absolute (Rs. 10 Crore/Rs. 1 Crore) thresholds

  3. Implementation: Listed entities need to update internal processes, Audit Committee procedures, and shareholder communication templates

  4. Annexure-13A: Entities must familiarize themselves with the simplified format specified in Annexure-13A of the Master Circular

Overall Impact: This regulatory relaxation represents a balanced approach to corporate governance, maintaining transparency for material transactions while reducing compliance burden for smaller RPTs. All listed entities across sectors will benefit from simplified procedures for routine related party dealings.

Impact Justification

Significant regulatory relaxation affecting RPT approval processes for all listed entities, modifying Master Circular requirements and introducing materiality thresholds