Description

SEBI provides relaxation in minimum information requirements for RPT approvals, introducing threshold-based exemptions for transactions below specified limits.

Summary

SEBI has modified the requirements for minimum information to be provided to Audit Committees and shareholders for approval of Related Party Transactions (RPTs). The circular introduces threshold-based relaxations, exempting certain transactions from detailed disclosure requirements based on transaction value. Transactions not exceeding 1% of annual consolidated turnover or Rs. 10 crore (whichever is lower) will have simplified disclosure requirements, while transactions below Rs. 1 crore are completely exempted from these requirements.

Key Points

  • SEBI Board approved the proposal for relaxation in minimum information requirements for RPT approvals in its 211th meeting held on September 12, 2025
  • Modifications apply to Section III-B of the Master Circular and Para 7 of SEBI Circular dated June 26, 2025
  • Industry Standards Forum (ISF) had requested relaxation from applicability of RPT Industry Standards
  • The proposal was discussed with SEBI’s Advisory Committee on Listing Obligations and Disclosures (ACLOD)
  • A Consultation Paper was issued on August 04, 2025 seeking public feedback before finalizing the changes
  • Changes aim to facilitate ease of doing business for listed entities

Regulatory Changes

Part A - Audit Committee Information Requirements:

Listed entities must provide audit committees with information as per Industry Standards on RPT approvals. However:

  1. Threshold Exemption 1: If a transaction (individually or taken together with previous transactions during a financial year, including ratifications) does not exceed:

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

    Then simplified disclosure as per Annexure-13A applies

  2. Threshold Exemption 2: Transactions not exceeding Rs. 1 crore (individually or taken together with previous transactions during a financial year, including ratifications) are completely exempted from these requirements

Part B - Shareholder Information Requirements:

Notices to shareholders seeking RPT approval must include information as per Industry Standards in the explanatory statement, in addition to Companies Act, 2013 requirements. The same threshold exemptions apply.

Compliance Requirements

  • Listed entities must assess transaction values against specified thresholds to determine applicable disclosure requirements
  • For transactions above Rs. 1 crore but within the 1%/Rs. 10 crore threshold, use simplified Annexure-13A format
  • For transactions exceeding the thresholds, full Industry Standards disclosure requirements apply
  • Threshold calculations must include previous transactions during the financial year, including those approved by ratification
  • Listed entities must continue to comply with Companies Act, 2013 requirements for shareholder approvals

Important Dates

  • September 12, 2025: SEBI Board approved the proposal in its 211th meeting
  • October 13, 2025: Circular issued
  • Effective Date: Not explicitly stated; modifications to Master Circular and previous circular are effective immediately unless otherwise specified

Impact Assessment

Positive Impacts:

  • Reduces compliance burden for listed entities, particularly for smaller RPTs
  • Streamlines approval processes for routine, low-value related party transactions
  • Aligns with ease of doing business objectives
  • Maintains robust oversight for material transactions while simplifying requirements for immaterial ones

Operational Impact:

  • Listed entities need to update internal processes for RPT approvals to incorporate threshold-based exemptions
  • Audit committees will receive simplified information for smaller transactions, potentially improving efficiency
  • Legal and compliance teams must understand and implement the new threshold calculations
  • Board and audit committee policies may need revision to reflect the new framework

Market Impact:

  • Expected to reduce administrative costs for listed entities
  • May improve efficiency of corporate governance processes
  • Maintains investor protection for material transactions while reducing regulatory burden for immaterial ones

Impact Justification

Provides regulatory relief for listed entities by introducing threshold-based exemptions for RPT disclosure requirements, reducing compliance burden for smaller transactions while maintaining oversight for material transactions