Stock Exchange Board of India vide SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021, SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021, dated 9th November, 2021 dated 9th November, 2021 which shall come effect from 1st April, 2022, introduced many substantial amendments which can be easily differenced and explained as follows:

EXPLANATION TO THE AMENDED REGULATION:

SL NO.

REGULATION BEFORE AMENDMENT

AFTER AMENDMENT

1. Reg 2 clause (zb) To be a related party;

1. a person or entity of promoter or promoter group

AND

2. holding 20% or more of shareholding in the listed entity both the criteria has to be followed

Now after amendment the definition has been widened, If any one of the below specified criteria is fulfilled then it is termed as related party, wherein

1. a person or entity of promoter or promoter group

OR

2. any person holding 20% or more (10% or more w.e.f 01.04.2023) of shareholding in the listed entity either directly or on a beneficial interest basis.

2. Reg 2 clause (zc)

 

“related party transaction” previously meant Transfer of resources, services or obligations, between listed entity and related party whether it took place in a single transaction or group, wherein any price charged was not the essence. Now the transaction of related party is widened by including subsidiaries of listed entity, wherein if there is any transfer of resources, services or obligations between:

1.  Listed entity including its subsidiaries,  Plus related party of listed entity including its subsidiary.

2. Transaction between listed entity  its subsidiary  and any other person or entity whose main purpose is to benefit the related party regardless it took place in a single transaction or group, whether price charged.

3. Reg 2 clause (zc) Proviso The following is not regarded as Related Party Transaction:

1.  If units are issued by mutual funds which are listed on a recognised stock exchange.

The proviso is broaden, the proviso which was earlier is still present, apart from that the following shall also be included:

1. issue of securities on preferential basis

2.  payment of dividend;

3. subdivision or consolidation of securities;

4. rights issue or a bonus issue; and

5. buy-back of securities.

6.  acceptance of fixed deposits by banks/NBFC at the terms offered to all shareholder, but the same shall be disclosed along with the disclosure of RPT every six months to the stock exchange.

 

4.

 

Reg 23 (1)

 

 

Related Party Transaction shall be considered material,

If any transaction entered, either individually or with previous transactions during a financial year, is more than 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity

 

 

The earlier explanation has been substituted, wherein

Related Party Transaction shall be considered material,

If any transaction entered, either individually or with previous transactions during a financial year, exceeds Rs. 1000 Cr or 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.

SEBI has taken stringent steps with respect to related parties, the definition of related party has been extremely expanded and same with its transactions. This article tends to explain in brief all about the amendments with respect to related party as per SEBI (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2021.  

Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a piece of professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information

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