SEBI proposes to relax Related Party Transaction guidelines
SEBI recently released a consultation paper which suggests an increase in the threshold for transactions that require shareholder approval in Related Party Transactions (RPTs) under Listing Obligations and Disclosure Requirements (LODR) regulations. The threshold, based on annual turnover, could be raised to Rs. 5,000 crore from Rs. 1,000 crore. The transactions below the raised threshold would not require shareholder approval, easing compliance. For RPT below Rs. 15 crore, SEBI proposes to do away with disclosures, reducing burden on smaller transactions. It will enhance accountability of the management for shareholders of the listed entities. The changes by SEBI are aimed at strengthening the corporate governance regime in India.
SEBI requires listed entities to obtain approval from the audit committee and shareholders for RPTs. Earlier in February 2025, it issued a circular on minimum information that must be provided to the audit committee and shareholders to review and approve RPTs. These standards classify RPTs by materiality and prescribe a graded disclosure framework: comprehensive, limited, and minimum disclosures based on thresholds related to turnover, net worth, and profit/loss.
