The Securities and Exchange Board of India (SEBI) issued a circular on 14 February 2025 (RPT Circular) to standardize industry standards to be effective from 1 April 2025, for the minimum information required for Related Party Transaction(s) (RPTs) to be provided to the Audit Committee and Shareholders of all listed entities as per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
The aforesaid industry standards for minimum information have been developed by the Industry Standards Forum in collaboration with SEBI and industry associations such as ASSOCHAM, CII, and FICCI (Industry Standards) to ensure uniformity and transparency in RPT disclosures.
All material RPTs, per the LODR Regulations, require approval from both the Audit Committee as well as Shareholders, with comprehensive disclosures covering both balance sheet and P&L items.
Certain non-material RPTs, which involve promoters or entities where promoters have an interest, are subject to a threshold check. If such transactions exceed the lower of 2% (two percent) of turnover, 2% (two percent) of net worth, or 5% (five percent) of the average absolute value of profit or loss after tax, they require Audit Committee approval and full disclosure for both balance sheet and P&L items.
RPTs, which exceed INR 10,000,000 (currently approx. USD 114,686), need Audit Committee approval with full disclosures for both balance sheet and P&L items. If RPTs do not exceed INR 10,000,000 (currently approx. USD 114,686), no approval is required, and only minimum disclosures are needed.
SEBI’s initiative aims to standardize and enhance the disclosures for RPTs, thereby improving corporate governance in listed entities. The prescribed format ensures that Audit Committees and Shareholders have sufficient information to make informed decisions. The uniform application of the Industry Standards will bring greater clarity, comparability, and investor confidence in RPTs.
- The RPT Circular may be accessed at: https://www.sebi.gov.in/legal/circulars/feb-2025/industry-standards-on-minimum-information-to-be-provided-for-review-of-the-audit-committee-and-shareholders-for-approval-of-a-related-party-transaction_91945.html
- The Industry Standards may be accessed at: https://www.assocham.org/uploads/files/Standards%20for%20Minimum%20Information%20to%20be%20provided%20for%20Related%20Party%20Transaction%C2%A0Approval.pdf