Explore the comprehensive guide on Related Party Transactions under SEBI (LODR) Regulations. Understand key provisions, approval stages, exemptions, and disclosure obligations. Stay informed to ensure transparency and compliance in corporate governance.
In the world of corporate governance, related party transactions play a significant role in ensuring transparency and fairness. These transactions involve parties that have a close relationship with the listed entity, such as its directors, key managerial personnel, or their relatives. To regulate and monitor such transactions, the Securities and Exchange Board of India (SEBI) introduced Regulation 23 of the SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. This article provides a comprehensive recap of the key provisions and requirements related to related party transactions under Regulation 23. It aims to shed light on the responsibilities, approval stages, exemptions, and disclosure obligations associated with these transactions. This compilation serves as a valuable reference for professionals and entities navigating the intricacies of related party transactions.
A Quick recap on Related Party Transactions under Regulation 23 of SEBI LODR Regulations, 2015
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Reference | Related Party Transactions | Respon-sibility | Approval stage | Exemptions | Disclosure |
| Policy | 23(1) of LODR | The listed entity shall formulate a policy on materiality of related party transactions | Secretarial | – | – | – |
| Policy shall include clear threshold limit and It shall be approved by BOD and shall be reviewed once in every three year | Board (Listed Co.) | – | website | |||
| Materiality | 23(1A) of LODR | If the transaction(s) to be entered into individually or taken together with previous transactions during a financial year. exceeds rupees one thousand crore or ten per cent (five percent with respect to brand usage or royalty) of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity. whichever- is lower. | Secretarial + AC | – | – | – |
| Approval | 23(2) of LODR | All related party transactions and subsequent material modifications (only IDs will approve the transactions) | Prior approval of the audit committee of listed company |
– | – | |
| Define ‘material modifications’ | Secretarial-AC | – | Policy | |||
| When subsidiary is a patty Ian listed entity is not a party and value of transactions during a financial year exceed prescribed limit i.e. 10% of annual standalone turnover as per the last audited financial statements of the subsidiary | Secretarial + AC | Prior approval of the audit committee of listed company |
Listed Subsidiary | – | ||
| Omnibus approval | ||||||
| Omnibus approval | 23(3) of IODR | Transactions proposed to be entered into by the listed entity subject to the following conditions:
a) Criteria for granting the omnibus approval in line with the policy b) Transactions which are repetitive in nature c) Omnibus approval is in the interest of the listed entity Prior d) Omnibus approval shall specify name(s) of the related party, nature, period, maximum amount, indicative base price !current contracted price of transactions and the formula for variation in the price if any e) Such other conditions as the audit committee may deem fit Review the transactions for which omnibus approval has given. at least on a quarterly basis of omnibus approval shall be valid for a period not exceeding one year |
Secretarial – AC | Prior approval of the audit committee of listed company | – | – |
| Material modifications | 23(4) of LODR | All material related party transactions and subsequent material modifications (no related party shall vote to approve) | – | Shareholders approval |
Listed Subsidiary and plan under IBC 2016, if listed entity is not a party |
Stock exchanges within 1 day oldie resolution plan being approved |
| Exemptions | 23(5) of LODR | The provisions of sub-regulations (2), (3) and (4) shall not be applicable | – | – | Two government companies, holding company and its wholly owned subsidiary, two wholly-owned subsidiaries |
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| Disclosure | 23(9) of LODR | Stock exchanges disclosures of related party transactions in the format as specified by the Board) rout II= to time. and publish the smite on its website every six months on the date 01 publication of its standalone and consolidated financial results with effect from April 1, 2023 | Secretarial | – | website and stock exchange |
Conclusion: Related party transactions have a significant impact on the governance and integrity of listed entities. To ensure transparency and protect the interests of all stakeholders, SEBI has laid down comprehensive regulations under Regulation 23 of the LODR Regulations, 2015. This article has provided an informative recap of the key aspects related to related party transactions, including the formulation of policies, approval stages, exemptions, and disclosure requirements. By following these regulations diligently, listed entities can foster a culture of accountability, fairness, and ethical conduct. As the business landscape continues to evolve, it is crucial for entities and professionals to stay updated with the latest regulatory developments in order to maintain compliance and build trust in the market.
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