Sebi eases disclosure norms for Related Party Transaction approvals

Sebi eases norms for Related Party Transaction approvals

The Securities and Exchange Board of India (Sebi) on Monday issued a circular relaxing the minimum information requirements for listed companies seeking approval for Related Party Transactions (RPTs) from their audit committees and shareholders. The move aims to facilitate ease of doing business while ensuring transparency.

Under the revised framework, companies need to provide simplified disclosures if the transaction does not exceed 1 percent of annual consolidated turnover or Rs 10 crore, whichever is lower. Transactions below Rs 1 crore are exempted from the minimum information requirement altogether.

The circular specifies that, for approval of a proposed Related Party Transaction (RPT), a listed entity must furnish the Audit Committee with detailed information to ensure informed review. This includes the type, material terms, and particulars of the transaction, along with the name of the related party, its relationship with the entity or its subsidiary, and the nature of its interest, financial or otherwise. The tenure and value of the transaction, as well as the percentage of the entity’s annual consolidated turnover it represents, must be specified, with a subsidiary’s standalone turnover percentage provided if relevant.

For transactions involving loans, inter-corporate deposits, advances, or investments, details of the source of funds, any financial indebtedness incurred — including nature, cost, and tenure — and applicable terms such as covenants, interest rate, repayment schedule, and security must be disclosed, along with the purpose for which funds will be used. Exemptions apply to banks, NBFCs, insurance, and housing finance companies. Additionally, justification for the transaction, any valuation or external reports relied upon, the counterparty’s turnover percentage on a voluntary basis, and other relevant information must be provided to facilitate proper Audit Committee approval.

When seeking shareholder approval for a proposed RPT, the notice sent to shareholders must, in addition to the requirements under the Companies Act, 2013, include specific information in the explanatory statement. This should comprise a summary of the information provided by management to the Audit Committee, justification for why the proposed transaction is in the interest of the listed entity, and, where applicable, details relating to loans, inter-corporate deposits, advances, or investments as specified for Audit Committee review.

The notice must also state that any valuation or external report relied upon for the transaction will be made available to shareholders via their registered email addresses. Additionally, it may include, on a voluntary basis, the percentage of the counterparty’s annual consolidated turnover represented by the transaction, and any other information relevant for enabling shareholders to make an informed decision.

Sebi’s move follows representations from the Industry Standards Forum (ISF) and recommendations from its Advisory Committee on Listing Obligations and Disclosure Requirements (ACLOD), reflecting the regulator’s effort to balance regulatory oversight with ease of compliance for listed entities. The circular is effective immediately. Sebi’s board had approved the relaxation on September 12, 2025, for reducing the minimum information required to be provided to the Audit Committee and shareholders for approval of RPTs.