The Securities and Exchange Board of India (SEBI), the Indian securities market regulator, notified through a press release (Press Release), amendments to the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 relating to related parties (RP) and related party transactions (RPT) (Amendments).
The Amendments will come into effect as follows:
- with effect from 1 April 2022:
- the definition of an RP would include:
- all persons or entities forming part of promoter or promoter group irrespective of their shareholding; and
- any person/ entity holding equity shares in the listed entity, to the extent of 20% (twenty percent) or more, either directly or on a beneficial interest basis at any time during the immediately preceding financial year;
- the definition of an RPT would include transactions between the listed entity or any of its subsidiaries on the one hand and an RP of the listed entity or any of its subsidiaries on the other hand;
- prior approval of the shareholders of the listed entity would be required for material RPTs having a threshold of INR 10 billion (Rupees ten billion i.e., INR 1,000 crores) or 10% (ten percent) of the consolidated annual turnover of the listed entity, whichever is lower;
- approval of the audit committee of the listed entity would be required for:
- all RPTs and subsequent material modifications to such RPTs, as defined by the audit committee;
- RPTs where a subsidiary is a party, but the listed entity is not a party, subject to the threshold of 10% (ten percent) of the consolidated turnover of the listed entity;
- enhanced disclosure of information regarding RPTs would need to be:
- placed before the audit committee of the listed entity;
- provided in the notice to the shareholders for material RPTs; and
- provided to the stock exchanges every 6 (six) months in the format specified by SEBI, within 15 (fifteen) days from the date of publication of the financials.
- with effect from 1 April 2023:
- the definition of an RP would include any person/ entity holding equity shares in the listed entity, to the extent of 10% (ten percent) or more, either directly or on a beneficial interest basis at any time during the immediately preceding financial year;
- the definition of an RPT would include transactions between the listed entity or any of its subsidiaries on the one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit an RP of the listed entity or any of its subsidiaries;
- approval of the audit committee of the listed entity would be required for RPTs where a subsidiary is a party, but the listed entity is not a party, subject to the threshold of 10% (ten percent) of the standalone turnover of the subsidiary; and
- enhanced disclosure of information regarding RPTs would need to be provided to the stock exchanges every 6 (six) months in the format specified by SEBI, simultaneously with the financials.
The Press Release may be accessed at:
https://www.sebi.gov.in/media/press-releases/sep-2021/sebi-board-meeting_52976.html