Description

SEBI provides relaxation in minimum information requirements for Related Party Transaction approvals, introducing threshold-based disclosure requirements to facilitate ease of doing business.

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, where transactions below certain materiality thresholds (1% of annual consolidated turnover or Rs. 10 Crore, whichever is lower) will have reduced disclosure requirements. Transactions below Rs. 1 Crore are exempt from these requirements entirely. This modification aims to facilitate ease of doing business while maintaining oversight for material RPTs.

Key Points

  • SEBI Board approved relaxations in RPT disclosure requirements in its 211th meeting held on September 12, 2025
  • Industry Standards Forum (ISF) had requested relaxation from RPT Industry Standards applicability
  • Advisory Committee on Listing Obligations and Disclosures (ACLOD) reviewed the representation
  • Public consultation paper was issued on August 04, 2025 before finalizing the changes
  • Modifications apply to Section III-B of the Master Circular and Para 7 of SEBI Circular dated June 26, 2025
  • Threshold-based approach differentiates disclosure requirements based on transaction value

Regulatory Changes

For Audit Committee Approvals (Part A):

  • General 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”

  • Threshold Relaxation: For transactions not exceeding 1% of annual consolidated turnover (as per last audited financial statements) OR Rs. 10 Crore (whichever is lower), simplified information specified in Annexure-13A is sufficient

  • De Minimis Exemption: Transactions not exceeding Rs. 1 Crore are exempt from these information requirements

  • Thresholds apply to transactions individually or taken together with previous transactions during a financial year (including ratifications)

For Shareholder Approvals (Part B):

  • General Requirement: Notices to shareholders seeking RPT approval must include information as specified in Industry Standards as part of explanatory statement, in addition to Companies Act, 2013 requirements

  • Threshold Relaxation: Same thresholds as Audit Committee approvals apply (1% of turnover or Rs. 10 Crore, whichever lower) with simplified Annexure-13A information requirements

  • De Minimis Exemption: Rs. 1 Crore threshold exemption also applies to shareholder approvals

Compliance Requirements

All Listed Entities must:

  1. Assess each RPT against the prescribed thresholds (1% of annual consolidated turnover or Rs. 10 Crore; Rs. 1 Crore for exemption)

  2. For material RPTs (above threshold): Provide full Industry Standards information to Audit Committee and Shareholders

  3. For RPTs between Rs. 1 Crore and threshold: Provide simplified Annexure-13A information

  4. For RPTs below Rs. 1 Crore: No specific information requirements under this circular

  5. Aggregate transactions during financial year including ratifications when calculating thresholds

  6. Continue to comply with Companies Act, 2013 requirements in addition to SEBI requirements

  7. Maintain documentation demonstrating threshold calculations and compliance with appropriate disclosure level

Important Dates

  • October 13, 2025: Circular issued (SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/135)
  • September 12, 2025: SEBI Board approval in 211th 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) issued
  • November 11, 2024: Master Circular issued
  • Effective Date: Immediate (upon circular issuance)

Impact Assessment

Positive Impacts:

  • Reduced Compliance Burden: Significant reduction in documentation and disclosure requirements for smaller RPTs
  • Ease of Doing Business: Streamlined approval process for routine and immaterial related party transactions
  • Resource Optimization: Listed entities can focus compliance efforts on material transactions
  • Practical Approach: Threshold-based system recognizes that disclosure requirements should be proportionate to transaction materiality

Operational Impact:

  • Listed entities need to update internal RPT approval procedures and templates
  • Finance and compliance teams must implement threshold calculation mechanisms
  • Audit Committees will receive differentiated information based on transaction value
  • Board and shareholder meeting documentation will vary based on RPT materiality

Market Impact:

  • Limited direct market impact as changes relate to internal governance processes
  • May improve efficiency of corporate decision-making for routine related party transactions
  • Maintains investor protection for material RPTs while reducing paperwork for immaterial ones

Stakeholder Benefits:

  • Listed Entities: Lower administrative costs and faster approval cycles for smaller RPTs
  • Audit Committees: Can focus attention on material transactions requiring detailed scrutiny
  • Shareholders: Still receive comprehensive information for material RPTs while avoiding information overload
  • Regulators: Achieves balance between investor protection and ease of doing business

Impact Justification

Introduces threshold-based relaxations for RPT disclosure requirements affecting all listed entities, reducing compliance burden for smaller transactions while maintaining oversight for material transactions