SEBI’s 2025 reforms on Related Party Transactions have moved the regime decisively from form to substance, combining graded materiality thresholds with a three-tier disclosure framework that calibrates requirements to the size and risk of each transaction. For listed entities and governance professionals, this means rethinking RPT governance around clear value-based triggers, standardised information formats (ISN and Annexure-13A), and stronger Audit Committee and shareholder oversight without losing sight of ease of doing business.
Latest SEBI changes on Related Party Transactions (RPTs) have materially altered (a) how “material” RPTs are determined and (b) the minimum information that must go to the Audit Committee and shareholders for approvals.
Graded Materiality Framework for RPTs
SEBI’s Fifth Amendment to the LODR Regulations, notified on November 18, 2025, replaces the earlier flat 10% consolidated turnover benchmark for material related party transactions with a graded, turnover-linked framework. The change is designed to ensure that very large listed entities are not compelled to seek shareholder approval for relatively modest intragroup transactions, while smaller and mid-sized entities continue to subject high-impact dealings to shareholder scrutiny.
Under the revised regime, a transaction with a related party is classified as material if, during a financial year, it individually or together with previous transactions with that related party crosses specified thresholds determined with reference to the listed entity’s latest annual consolidated turnover. These slabs now apply in three bands—up to ₹20,000 crore, between ₹20,000–₹40,000 crore, and above ₹40,000 crore—with a mix of percentage-based tests and absolute rupee caps, thereby aligning materiality more closely with the scale of the entity’s operations.
| Consolidated turnover of listed entity | Materiality threshold for RPTs | Explanation |
| Up to ₹20,000 crore | 10% of annual consolidated turnover | Traditional 10% test for smaller balance sheets. |
| > ₹20,000 crore to ≤ ₹40,000 crore | Higher of ₹2,000 crore or 5% of turnover above ₹20,000 crore | Introduces an absolute rupee floor with a reduced marginal percentage. |
| Above ₹40,000 crore | Lower of ₹3,000 crore or 2.5% of turnover above ₹40,000 crore, subject to upper cap of ₹5,000 crore | Caps the absolute materiality for very large issuers. |
- These calibrated thresholds seek to avoid an unduly onerous shareholder approval regime for very large listed entities, while retaining meaningful scrutiny for mid‑sized issuers.
Evolution of the ISN-Based RPT Disclosure Framework
Regulation 23 of SEBI LODR continues to anchor the legal framework for related party and related party transactions, prescribing approval requirements, exemptions and the overarching governance philosophy around conflicts and connected parties. Building on this substantive base, SEBI has progressively relied on soft-law instruments—master circulars, industry standards and format-based disclosures—to standardise the quality and comparability of information that Audit Committees and shareholders receive before approving RPTs.
The Industry Standards Forum (ISF), comprising ASSOCHAM, CII and FICCI under the aegis of stock exchanges, was tasked with operationalising this vision by designing a three-part RPT Industry Standards note (Part A/B/C) that specifies granular, transaction-type-wise minimum information for RPT proposals. Initially mandated by SEBI through the February 2025 circular and made effective from April 1, 2025 (subsequently deferred), these Standards were then comprehensively revised on June 26, 2025 and further relaxed on October 13, 2025 through the introduction of Annexure‑13A and value-based thresholds, aligning the disclosure burden more closely with transaction size and risk.
Regulatory Evolution Timeline
Applicability and exemptions
Under the revised framework, Audit Committee oversight remains the primary gatekeeper for all related party transactions, with every RPT (including those taken up for ratification) requiring prior approval, except where a specific carve‑out is available under Regulation 23(5) of the LODR Regulations or under the express exemptions built into the RPT Industry Standards. Shareholder approval is layered on top of this, but only for RPTs that meet the revised materiality thresholds under Regulation 23, so that non‑material transactions continue to be dealt with at the Audit Committee and Board level without being escalated to the general meeting.
The detailed RPT Industry Standards (ISN) formats do not apply to the following categories of transactions:
- Transactions that are exempt under Regulation 23(5) of the SEBI LODR Regulations.
- The quarterly omnibus review of RPTs by the Audit Committee under Regulation 23(3)(d).
- Low‑value RPTs with a related party which, individually or taken together with previous transactions during a financial year (including ratifications), do not exceed ₹1 crore.
Industry Standards – three‑part disclosure architecture
The June 26, 2025 circular replaces Section III‑B of the Master Circular with a three‑part disclosure architecture that standardises how information on RPTs is presented for approval. Part A sets out the minimum information to be provided for all RPTs, covering core details of the related party, past dealings, the size of the proposed transaction in relation to the listed entity, its subsidiaries and the counterparty, and key terms and justification of the proposed arrangement. Part B builds on this and is triggered only where the transaction falls into one of seven specified categories (goods/services and trade advances, loans, investments, guarantees, borrowings, asset/share disposals, and royalty), requiring additional, transaction‑type‑specific disclosures. Part C applies only to material RPTs in higher‑risk categories (primarily funding, guarantees, disposals and royalty), and calls for deeper analytical information such as risk profile, financial impact and peer/market benchmarks to support a more intensive review by the Audit Committee and shareholders.
SEBI’s October 13, 2025 circular then overlays a tiered regime for small‑value RPTs within this structure to ease compliance.
- Where the aggregate value of transactions with a related party in a financial year (including ratifications) does not exceed ₹1 crore, both Annexure‑13A and the RPT Industry Standards are inapplicable from a disclosure‑format perspective.
- For transactions above ₹1 crore but not breaching the lower of 1% of the listed entity’s annual consolidated turnover (as per the last audited financial statements) or ₹10 crore, the entity is permitted to use only the concise Annexure‑13A format for Audit Committee and, where material, shareholder approvals.
- Once the cumulative exposure to that related party goes beyond this 1%/₹10 crore threshold (and subject to the revised materiality criteria), the full RPT Industry Standards (Part A/B/C, as relevant) must be used, restoring the more detailed disclosure regime for significant transactions.
The October 13, 2025 circular (modifying SEBI Master Circular Section III-B) establishes a clear three-tier system based on aggregate transactions with a specific related party in a FY (including prior approvals + proposed + ratifications).
| Tier | Threshold | Disclosure Requirement |
| 1. Small value RPTs | Up to ₹1 crore in aggregate for an RP, including ratification | Exempted from all minimum information (Annexure-13A or RPT ISN). Subject only to Reg. 23(5) exemptions. |
| 2. Moderate value RPTs | Does not exceed 1% of Annual Consolidated Turnover (as per last audited financial statements) or ₹10 Crore, whichever lower | Annexure-13A (Oct 13, 2025 circular): – Audit Committee: Part A minimum information. – Shareholders (if material): Part B in explanatory statement. |
| 3. Significant RPTs (RPTs other than (1) & (2) above) |
All nature of RPT | Minimum information of the proposed RPT as specified in Para A1 to A5:
A(1): Basic details of the related party A(2): Relationship and ownership of the related party A(3): Details of previous transactions with the related party A(4): Amount of the proposed transaction(s) A(5): Basic details of the proposed transaction |
| Information to be provided only if a specific type of RPT as mentioned below is proposed to be undertaken and is in addition to Part A, | B(1): Sale, purchase or supply of goods or services or any other similar business transaction and trade advances
B(2): Loans and advances (other than trade advances) or inter-corporate deposits given by the listed entity or its subsidiary B(3): Investment made by the listed entity or its subsidiary B(4): Guarantee (including performance guarantee in nature of security/contractual commitment or which could have an impact in monetary terms on the issuer of such guarantee) ), surety, indemnity or comfort letter, by whatever name called, made or given by the listed entity or its subsidiary. B(5): Borrowings by the listed entity or its subsidiary B(6): Sale, lease or disposal of assets of subsidiary or of unit, division or undertaking of the listed entity or disposal of shares of subsidiary or associate1. B(7): Transactions relating to payment of royalty |
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| Information to be provided only if a specific type of RPT mentioned below proposed to be undertaken is a material RPT, in addition to Part A and B | C(1): Transactions relating to any loans and advances (other than trade advance) or inter-corporate
deposits given by the listed entity or its subsidiary. C(2): Investment made by the listed entity or its subsidiary. C(3): Guarantee (including performance guarantee in nature of security/contractual commitment or which could have an impact in monetary terms on the issuer of such guarantee), surety, indemnity or comfort letter, by whatever name called, made or given by the listed entity or its subsidiary. C(4): Borrowings by the listed entity or its subsidiary. C(5): Sale, lease or disposal of assets of subsidiary or of unit, division or undertaking of the listed entity or disposal of shares of subsidiary or associate. C(6): Transactions relating to payment of royalty. |
Practical implications for listed entities and Company Secretaries
- Refinement of approval matrices: Entities must now calibrate internal approval and monitoring matrices along three axes—₹1 crore exemption, 1%/₹10 crore simplified regime, and revised materiality slabs for shareholder approval.
- Granularity vs. proportionality: Large, high‑impact RPTs will be subject to deep, ISF‑aligned disclosures (especially loans, guarantees, disposals and royalty), whereas genuinely small transactions now enjoy significant compliance relaxation.
- Documentation discipline: The requirement for CEO/CFO certifications, optional valuation reports, multi‑year track record and peer benchmarks (for royalty) demands early involvement of finance, treasury and business teams in RPT planning.
- Template‑driven governance: Annexure‑13A and the Part A/B/C tables can be converted into internal checklists and standard notes for Board/Audit Committee packs, enabling consistent, defendable governance practice.
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