Recent Amendments In SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 (LODR Regulations) Relating To Related Party Transactions
The SEBI in its Board meeting held on September 28, 2021 had approved the amendments in RPT (“Related party Transaction”) framework that were proposed by the Working Group (‘WG’) in January, 2020. All amendments in RPT will come into force from April 1, 2022 and rest of the part which are specified in the article are applicable from April 1, 2023.
1. Definition of Related Party widened {Regulation 2(1)(z)(b)}
| Earlier Provision | New Provision |
| Any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party | a) All persons or entity belonging to the promoter or promoter group will be regarded as related party, irrespective of its shareholding in the listed entity or
b) Any person or entity holding, directly or through beneficial interest, 20% or more of the equity shareholding in the listed entity will be regarded as a related party w.e.f. April 1, 2022 c) Any person or entity holding, directly or through beneficial interest, 10% or more of the equity shareholding in the listed entity will be regarded as a related party w.e.f. April 1, 2023 Holding acquired by person or entity at any time during the immediate preceding financial year. |
2. Definition of Related Party Transaction Regulation 2(1)(z)(c)}
| Earlier Provision | New Provision |
| “Related party transaction” means a transfer of resources, services or obligations between a listed entity and a related party, regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract: | “Related party transaction” means a transaction entered between
Transaction involving a transfer of resources, services or obligations, regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract The following transactions shall be excluded (a) the issue of specified securities on a preferential basis, subject to compliance of the requirements under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (b) the following corporate actions by the listed entity which are uniformly applicable/offered to all shareholders in proportion to their shareholding: i. payment of dividend; ii. subdivision or consolidation of securities; iii. issuance of securities by way of a rights issue or a bonus issue; and iv. buy-back of securities. (c) acceptance of fixed deposits by banks/Non-Banking Finance Companies at the terms uniformly applicable/offered to all shareholders/public, subject to disclosure of the same along with the disclosure of related party transactions every six months to the stock exchange(s), in the format as specified by the Board: |
3. Related Party Transaction (Regulation 23)
| Material RPT {First Proviso of Regulation 23 (1)} | |
| Earlier Provision | New Provision |
| A transaction with a related party shall be considered material if the transaction to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity | Transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds
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. |
| Prior approval of Audit Committee of Listed entity {Regulation 23(2)} | |
| All related party transactions shall require prior approval of the audit committee | i. Prior approval of Audit Committee of Listed entity requires if transaction executed between subsidiary of Listed entity & RP of Listed entity & RP of subsidiary.
* if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year exceeds 10% of the annual consolidated /standalone turnover, as per the last audited financial statements of the listed entity (X Ltd) Note: a) 10% of the annual consolidated turnover, as per the last audited financial statements of the listed entity (w.e.f April 01, 2022) b) 10% of the annual Standalone turnover, as per the last audited financial statements of the listed entity (w.e.f April 01, 2023) ii) Prior approval of Listed entity require, if Subsidiary Company is unlisted. iii) Prior approval of Listed entity does not require, if subsidiary Company is Listed and regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. iv) Further, all RPT and subsequent material modifications in RPT as define by Audit Committee in its policy on materiality of related party transactions and on dealing with related party transactions shall require prior approval of Listed entity. |
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| Prior approval of Shareholder {Regulation 23(4)} | |
| All material related party transactions shall require approval of the shareholders through resolution | Prior approval of Shareholders of Listed entity is required in the following case:
(i) All material related party transactions and subsequent material modifications as defined by the audit committee in the policies. (ii) If the transaction in which the unlisted subsidiary is a party but the listed entity is not a party. Prior approval of Shareholders of Listed entity is not required in the following case: (i) If the transaction in which the Listed subsidiary is a party but the listed entity is not a party & regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. (ii) If resolution plan approved under section 31 of the Insolvency Code, subject to the event being disclosed to the recognized stock exchanges within one day of the resolution plan being approved; Note: No related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not. |
| Provision of Regulation 23(2), (3) and (4) shall not be applicable | |
| The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases:
(a) transactions entered into between two government companies; (b) transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. |
Transactions entered into between two wholly-owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.
In the give case A Ltd is Listed Holding Company Whose account are consolidated & B Ltd & C Ltd are Wholly Owned Subsidiaries (WOS). Regulation 23(2), (3) and (4) shall not be applicable If RPT executed between B Ltd & C Ltd |
| Reporting Requirements {Regulation 23(9)} | |
| The listed entity shall submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges and publish the same on its website. | The listed entity shall submit to the stock exchanges disclosures of related party transactions in the format as specified by the SEBI from time to time, and publish the same on its website in every 6 months within 15 days from the date of publication of its standalone and consolidated financial results
Provided that a ‘high value debt listed entity’ shall submit such disclosures along with its standalone financial results for the half year: Provided further that the listed entity shall make such disclosures every 6 months on the date of publication of its standalone and consolidated financial results with effect from April 1, 2023. |
Prepared by
ACS Lakshay Dudeja
(CS, LLB, B.com)
Author Bio
LODR is applicable to company having non convertible debt listed on stock exchange??