Regulation 23 of the SEBI (LODR) Regulations, 2015, forms the cornerstone of corporate governance for listed entities in India. It establishes a robust framework for identifying, approving, reviewing, and disclosing Related Party Transactions (RPTs) to prevent conflicts of interest, protect minority shareholders, and ensure transparency and fairness in dealings with related parties (such as promoters, directors, KMPs, and their relatives or entities).
The regulation aligns with Section 188 of the Companies Act, 2013, but imposes stricter requirements for listed entities. Over the years, SEBI has strengthened it through amendments, with significant updates via the SEBI (LODR) (Fifth Amendment) Regulations, 2025 (notified November 2025, effective December 18, 2025 for RPT provisions). These include scale-based materiality thresholds in the newly inserted Schedule XII, expanded exemptions, clarified subsidiary oversight, omnibus approvals for subsidiaries, and refined ratification processes.
The attached concise summary captures the core provisions. Below is an updated, detailed analysis incorporating the latest changes (as of March 2026), followed by specimen resolutions for practical compliance.
Key Provisions of Regulation 23 (Updated)
Regulation 23(1) – Policy & Materiality: Listed entity must frame a policy on materiality of RPTs and dealing with them (approved by Board on Audit Committee recommendation).
A transaction (individually or cumulatively in a FY) is material if it exceeds thresholds in Schedule XII (scale-based, turnover-linked slabs introduced via Fifth Amendment, effective Dec 18, 2025). This replaces the earlier flat ₹1,000 crore or 10% of annual consolidated turnover (whichever lower). The new framework is proportionate to entity size for fairness. Brand usage/royalty payments retain a stricter 5% of consolidated turnover threshold. Policy must be disclosed on website and reviewed periodically.
Regulation 23(2) – Audit Committee Approval: Prior approval of Audit Committee (only independent directors) for all RPTs and material modifications.
Applies to listed entity and its subsidiaries. For subsidiary RPTs (where listed entity is not a party): Approval required if value exceeds lower of (i) 10% of subsidiary’s annual standalone turnover or (ii) Schedule XII threshold of the listed entity. Omnibus approval now explicitly extends to subsidiary RPTs.
Regulation 23(3) – Omnibus Approval: Audit Committee may grant omnibus approval for repetitive RPTs (with criteria like name of party, nature, period, max value, etc.).
Mandatory quarterly review by Audit Committee. Enhanced information requirements via SEBI’s Industry Standards (revised June 2025, effective Sep 1, 2025) for minimum details to AC/shareholders.
Regulation 23(4) – Shareholder Approval: Material RPTs and material modifications require prior shareholder approval by ordinary resolution.
No related party (or their associates/holdings) can vote on the resolution, irrespective of whether they are parties to the transaction. Explanatory statement must provide detailed information per Industry Standards.
Regulation 23(5) – Exempted Transactions: Certain transactions excluded from RPT provisions.
Expanded exemptions (Fifth Amendment): (i) Corporate actions by subsidiaries uniformly offered to all shareholders; (ii) Bank/NBFC acceptance of deposits/current/savings accounts per RBI; (iii) Retail purchases by directors/employees on uniform terms (no business relationship). Clarification: Exemption for holding company–WOS transactions applies only if the holding company is listed.
Regulation 23(6) – Existing Transactions: Pre-existing material RPTs continuing post-LODR applicability require shareholder approval.
Must be placed before shareholders in the first general meeting after applicability.
Ratification Provision: Post-facto ratification allowed in specific cases.
Independent directors on the Audit Committee may ratify RPTs within 3 months (or next AC meeting) if prior approval missed. Conditions: Value ≤ ₹1 crore in FY; not material; rationale for delay disclosed; details reported in Reg 23(9) disclosures.
Remuneration Exception: Remuneration/sitting fees to directors, KMPs or senior management.
Exempt from Audit Committee approval if the recipient is not from promoter/promoter group and transaction is not material.
23(9) – Disclosure: Periodic disclosure to stock exchanges.
Half-yearly (within 30 days of financial results) in SEBI-prescribed format. Integrated filing introduced for efficiency (effective from Q3 FY 2024-25 onwards).
Recent Updates (Fifth Amendment & Industry Standards – 2025)
- Scale-based materiality via Schedule XII ensures smaller entities are not overburdened while large ones face appropriate scrutiny.
- Stronger subsidiary oversight and omnibus flexibility.
- Broader exemptions reduce compliance burden for routine/low-risk transactions.
- Enhanced transparency through revised Industry Standards on information to be provided to Audit Committee and shareholders (effective September 1, 2025).
Listed entities must update their RPT Policy, materiality thresholds, and internal processes to reflect Schedule XII and these changes. Non-compliance attracts penalties under SEBI regulations and impacts corporate governance ratings.
Draft Specimen Resolutions for Approval of a Material RPT
1. Specimen Audit Committee Resolution (Prior Approval – Ordinary Course / Arm’s Length or Otherwise)
(For insertion in Minutes of Audit Committee Meeting)
“RESOLVED THAT pursuant to Regulation 23(2) read with Regulation 23(1) and other applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended), including Schedule XII, Section 188 of the Companies Act, 2013, and the Company’s Policy on Related Party Transactions, the approval of the Audit Committee be and is hereby accorded for the proposed Related Party Transaction(s) with [Name of Related Party, e.g., ABC Private Limited], a related party within the meaning of Section 2(76) of the Companies Act, 2013 and Regulation 2(1)(zb) of LODR, for [brief nature, e.g., sale/purchase of goods/services/loan/lease/brand royalty] aggregating up to ₹ [Amount] (Rupees … only) during the financial year [FY …], on the terms and conditions as detailed in the explanatory note placed before the Committee.
FURTHER RESOLVED THAT the said transaction(s) is/are in the ordinary course of business and on arm’s length basis [or otherwise, if applicable], and the details thereof comply with the minimum information requirements prescribed under the SEBI Industry Standards.
FURTHER RESOLVED THAT [Name of Authorised Person, e.g., Managing Director/CEO/CFO] be and is hereby authorised to execute all necessary documents, agreements, and filings (including disclosures to stock exchanges) and to do all such acts, deeds, and things as may be necessary to give effect to this resolution.”
2. Specimen Shareholder Resolution (Ordinary Resolution for Material RPT)
(For inclusion in Notice of Annual General Meeting / Extraordinary General Meeting)
“RESOLVED THAT pursuant to Regulation 23(4) read with Regulation 23(1) and other applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended), including Schedule XII, Section 188 of the Companies Act, 2013, and the Company’s Policy on Related Party Transactions, approval of the members be and is hereby accorded for the material Related Party Transaction(s) with [Name of Related Party], a related party, for [brief nature and purpose] aggregating up to ₹ [Amount] (Rupees … only) during the financial year [FY …], on the terms and conditions as set out in the explanatory statement annexed to this Notice.
RESOLVED FURTHER THAT no related party or their associates/holding entities shall vote in favour of this resolution, whether or not they are parties to the transaction.
RESOLVED FURTHER THAT the Board of Directors (or any Committee thereof) be and is hereby authorised to do all such acts, deeds, and things as may be necessary or expedient to give effect to this resolution, including execution of agreements and making necessary disclosures.”
Explanatory Statement (must be attached): Provide full details per Regulation 23(4) and SEBI Industry Standards – name of related party, nature/tenure/value of transaction, justification, arm’s length status, impact on financials, and any other material information.
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