Description

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

Summary

SEBI has issued relaxations in the minimum information requirements for Related Party Transactions (RPT) approval by Audit Committees and shareholders. The circular, approved by the SEBI Board on September 12, 2025, introduces threshold-based exemptions following recommendations from the Advisory Committee on Listing Obligations and Disclosures (ACLOD) and consultation with the Industry Standards Forum (ISF). This aims to facilitate ease of doing business for listed entities while maintaining appropriate oversight.

Key Points

  • Modifications to Section III-B of the Master Circular dated November 11, 2024
  • Threshold-based exemptions introduced for RPT information requirements
  • For Audit Committee approval: Reduced information if transaction ≤ 1% of annual consolidated turnover or ₹10 crore (whichever lower)
  • Complete exemption for transactions ≤ ₹1 crore
  • Similar threshold provisions apply for shareholder approval requirements
  • Changes based on ISF representation and ACLOD recommendations
  • Public consultation paper issued on August 04, 2025
  • SEBI Board approval obtained in 211th meeting held on September 12, 2025

Regulatory Changes

Part A - Audit Committee Requirements:

Listed entities must provide information as per Industry Standards on “Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions” when placing RPT proposals.

Exemption 1: If transaction (individually or cumulatively during financial year, including ratifications) does not exceed:

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

Then: Provide only minimum information as specified in Annexure-13A

Exemption 2: Complete exemption from information requirements if transaction (individually or cumulatively during financial year, including ratifications) does not exceed ₹1 crore

Part B - Shareholder Approval 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.

Similar threshold-based exemptions apply for shareholder approval as mentioned above.

Compliance Requirements

For Listed Entities:

  1. Assess each RPT against the prescribed thresholds
  2. Determine cumulative transactions with each related party during the financial year
  3. Include ratified transactions in the cumulative calculation
  4. For transactions above ₹1 crore but below the 1%/₹10 crore threshold: Use Annexure-13A format for Audit Committee
  5. For transactions above thresholds: Provide full Industry Standards information
  6. For shareholder approval: Follow threshold-based information requirements
  7. Continue compliance with Companies Act, 2013 provisions for shareholder notices

Circular Recipients:

  • All listed entities
  • All recognized Stock Exchanges
  • ASSOCHAM, FICCI, and CII

Important Dates

  • November 11, 2024: Master Circular issued
  • June 26, 2025: SEBI Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93 issued
  • August 04, 2025: Consultation Paper issued seeking public feedback
  • September 12, 2025: SEBI Board approval in 211th meeting
  • October 13, 2025: Current circular issued (SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/135)
  • Effective Date: Not explicitly stated; typically immediate unless specified otherwise

Impact Assessment

Positive Impact:

  1. Reduced Compliance Burden: Listed entities with smaller RPTs will have significantly reduced documentation requirements
  2. Ease of Doing Business: Facilitates smoother operations for routine, low-value related party transactions
  3. Resource Optimization: Companies can focus compliance resources on material transactions
  4. Administrative Efficiency: Audit Committees and shareholders receive streamlined information for immaterial transactions

Operational Considerations:

  1. Companies need to implement systems to track cumulative RPTs during the financial year
  2. Threshold calculations based on last audited financial statements require clear internal processes
  3. Distinction between information requirements for different threshold levels must be maintained
  4. Board and Audit Committee processes may need updates to reflect new exemption framework

Market Impact:

  • Low to medium overall market impact
  • Primarily procedural relief without substantive changes to RPT approval requirements
  • Maintains investor protection through continued oversight of material transactions
  • Aligns with government’s ease of doing business initiatives

Risk Mitigation:

The threshold-based approach ensures that material transactions continue to receive full scrutiny while reducing burden for routine, low-value transactions. The ₹1 crore complete exemption and 1%/₹10 crore reduced information thresholds are designed to balance compliance efficiency with governance standards.

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