Applicability of Related Party Transactions under Companies Act, 2013 and SEBI (LODR) Regulations, 2015

CS Divyanshu Sahni

CS Divyanshu SahniSecurities and Exchange Board of India (SEBI) has notified SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) on 2nd September, 2015 after following the consultation process. SEBI in its Board meeting dated 19th November,2014  the conversion of existing listing agreements into a single comprehensive regulation for various type of listed entities. The Listing Regulations shall come into force on the 90th day from date of publication in the official gazette i.e. 1st December 2015.

This Table contains 17 Points of Applicability of Related Party Transaction under Companies Act, 2013 and SEBI (LODR) Regulation in the Tabular format. This is beneficial for my Younger Member who is Company Secretary of Listed Company and who is newly join a company. Related party is now a very complex issues now a days amongst the Company Secretaries.

Related Party Transactions under Companies Act 2013 and SEBI LODR

Basis Companies Act, 2013 SEBI LODR
Defination of Related Party As defined under Section 2 (76) As defined under Section 2 (76) and AS-18
Scope of


Transactions covered under Section 188 (1) Transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged
Number of


Approval of Audit Committee, Prior approval of Board and Shareholders Prior approval of Audit Committee and Shareholder‟s approval
Carve-out for ordinary course and arm’s length transactions Excluded             from          the        purview of Section 188 (1) No such carve-outs
Materiality As provided under Rule 15 10% of annual consolidated turnover
Exclusions       while computing materiality Transactions    in ordinary course and on arm’s length basis No such exclusion
Need    for prior approval by shareholders Prior approval required for material transactions No such requirement.
Voting  by related parties Related party    who      are parties to the transaction to abstain from voting All related parties to abstain from voting
Applicability    to existing transactions Applicable only to transactions entered into on or after April 1, 2014 All existing material related party contracts or arrangements entered into prior to 2nd September and which may continue beyond such date.
Policy  on Material RPTs No such requirement Regulation 23
Exemption       to government companies From    the       shareholders Resolution From the approval of Audit committee as well as shareholders
Review of transactions under omnibus approval Audit    committee may decide Quarterly
Transactions which cannot be entered into under omnibus approval Audit committee to decide No such requirement.
Selling and disposing of undertaking Cannot grant    omnibus approval No such restriction
Criteria for omnibus approval Prescribed       in Rule 6A of MBP Rules Not prescribed
Validity of omnibus approval One financial year One year
Authority to set criteria for granting omnibus approval Audit Committee subject to approval of Board Audit Committee



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