SEBI Proposes Changes to Related Party Transaction Rules

SEBI has issued a consultation paper to propose amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, concerning Related Party Transactions (RPTs). The proposals, based on recommendations from the Advisory Committee on Listing Obligations and Disclosures (ACLOD), aim to ease the burden on listed companies and improve clarity. Key changes include a new scale-based threshold for determining “material” RPTs, replacing the existing flat limit of ₹1,000 crore or 10% of turnover, whichever is lower. The proposed tiered system links materiality to a company’s consolidated annual turnover, with higher turnovers having higher thresholds. This is intended to reduce the number of RPTs requiring shareholder approval by approximately 60% for top listed entities. The paper also seeks to clarify RPT provisions for subsidiaries, proposing new thresholds for both subsidiaries with and without a financial track record. Additionally, SEBI is considering relaxing the information required for smaller RPTs and formalizing the validity period for omnibus approvals granted by shareholders. The public is invited to provide comments and suggestions on these proposals by August 25, 2025.

CONSULTATION PAPER

PROPOSALS FOR EASE OF DOING BUSINESS – AMENDMENTS TO
PROVISIONS RELATING TO RELATED PARTY TRANSACTIONS UNDER SEBI
(LODR) REGULATIONS, 2015 AND CIRCULARS THEREUNDER

SEBI- Aug 04, 2025|  Reports : Reports for Public Comments

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1. Objective

1.1. This consultation paper seeks views / comments / suggestions from public on proposals relating to the following:

1.2. SECTION – I

1.2.1. Threshold for determining material Related Party Transactions (“RPTs”) undertaken by listed entities.

1.2.2. Threshold for determining material RPTs undertaken by subsidiaries of a listed entity.

1.3. SECTION – II

1.3.1. Relaxation in the minimum information to be furnished to the Audit Committee and shareholders for the approval of RPTs.

1.3.2. Inclusion of provision in Regulation with respect to validity of omnibus approval for RPTs granted by the shareholders.

1.3.3. Clarifications pertaining to applicability of RPT provisions.

The proposals in this Consultation Paper are based on the recommendations of the Advisory Committee on Listing Obligations and Disclosures (ACLOD) of SEBI and subsequent internal discussions. The proposals would require amendments to the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations” or “LODR”) and circulars issued thereunder.

SECTION – I

1. Threshold for determining material RPTs undertaken by listed entities

1.1. Background

1.1.1. As per Regulation 23(1) of LODR Regulations, the listed entity shall consider a RPT material if the transaction to be entered into individually or taken together with previous transactions during a financial year, exceeds Rs. 1,000 Crore 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.

1.2. Need for review

1.2.1. SEBI has received representations from the stakeholders with respect to the following issues:

a) The provision requiring shareholder approval for RPTs exceeding Rs. 1,000 Crore or 10% of consolidated turnover of the listed entity, whichever is lower, becomes onerous for listed entities with high turnover.

b) The absolute materiality threshold of Rs. 1000 Crore propagates a “one-size fits all” approach as listed entities are treated alike, irrespective of their turnover, scale of operations and nature of business.

1.3. Proposal and rationale

1.3.1. The current materiality threshold, i.e., Rs. 1,000 Crore or 10% of the annual consolidated turnover, whichever is lower, follows a flat 10% up to turnover of Rs. 10,000 Crore, whereby, the threshold amount changes with changes in turnover (for example, if turnover is Rs. 1,000 Crore then materiality threshold is Rs.100 Crore, if turnover is Rs. 2,000 Crore then materiality threshold is Rs. 200 Crore, and so on till turnover reaches Rs. 10,000 Crore). However, once the turnover of the listed entity exceeds Rs. 10,000 Crore, the absolute materiality threshold of Rs. 1000 Crore kicks in and remains applicable thereafter irrespective of the turnover of the listed entity.

1.3.2. As a result of absolute threshold of Rs. 1000 Crore, RPTs of Rs. 1,000 Crore which may not be substantive in comparison to turnover and scale of operations are also being categorized as material transactions for listed entities with high turnover. The listed entity has to place all such transactions for the approval of shareholders in addition to Audit Committee approval which makes it onerous for the listed entities.

1.3.3. Accordingly, it is felt that there is need to revisit the threshold for material RPT and also to introduce a scale-based threshold mechanism for material RPT based on the turnover of listed entities for ease of doing business. The approach of scale-based threshold would ensure that materiality threshold increases with the increase in the turnover of the company leading to an appropriate number of related party transactions being categorized as material thereby reducing the compliance burden of listed entities.

1.3.4. In this regard, the following scale-based thresholds have been proposed by linking the annual consolidated turnover buckets to different % threshold for consideration of material RPTs:

1.3.5. In order to protect the interest of minority shareholders, an absolute threshold of Rs. 5000 Crore as upper ceiling has also been proposed for the listed entities having turnover above Rs. 40,000 Crore.

1.3.6. The aforesaid proposed threshold was back tested with RPT data for the FYs 2023-24 and 2024-25 of top 100 listed entities on NSE based on turnover. Based on the analysis of data for FYs 2023-24 and 2024-25 after applying the proposed thresholds, it is observed that the number of material RPTs requiring shareholders’ approval have considerably reduced by approx. 60% thereby facilitating ease for the listed entities.

1.3.7. The details of the RPT data are given as under:

FY 2024-25

FY 2023-24

1.3.8. The proposed amendments to Regulation 23(1) of LODR are placed at

Annexure 1.

1.4. Public comments

1.4.1. Public comments / suggestions are invited on the following:

Proposal 1: Do you agree with the scale-based thresholds for material RPTs as proposed above in this Consultation Paper? If not, what is the reason and what is the alternative proposal?

2. Threshold for determining material RPTs undertaken by subsidiaries of a listed entity

2.1. Background

2.1.1. As per second proviso to Regulation 23(2) of LODR, a transaction to which an unlisted subsidiary is a party but listed entity is not a party shall require approval of the audit committee of the listed entity if the amount of such transaction taken together with previous transactions during a financial year exceeds 10% of the standalone turnover of the subsidiary, as per the last audit financial statements of the subsidiary.

2.2. Need for review

2.2.1. SEBI has received representations from the stakeholders with respect to the following issues:

a) Issue 1: There may be instances where a transaction undertaken by the subsidiary of the listed entity exceeds the threshold for material RPTs requiring shareholder approval but does not exceed 10% of the standalone turnover of the subsidiary, thus not requiring approval of audit committee of the listed entity.

b) For example, consolidated turnover of a listed entity on Main Board is Rs. 30,000 Crore and standalone turnover of a subsidiary of the listed entity is Rs. 28,000 Crore. A transaction amounting to Rs. 2600 Crore undertaken by the subsidiary is more than the proposed material RPT threshold viz. Rs. 2500 Crore (Material RPT threshold as per the new proposed threshold = 10% of Rs. 20,000 Crore + 5% of remaining Rs 10,000 Crore). Hence, it would require shareholders’ approval. However, the transaction amount is lower than 10% of standalone turnover of the subsidiary viz. Rs. 2800 Crore. Hence, it would not require approval by audit committee.

c) Further, ACLOD suggested that the aforesaid threshold should only be made applicable on RPTs exceeding Rs. 1 Crore, undertaken by a subsidiary of a listed entity.

d) Issue 2: The threshold limit for approval by audit committee is based on standalone turnover of the subsidiary of the previous financial year. In case of subsidiaries which do not have a financial track record, i.e., published financial statements for at least one year, such a threshold limit cannot be determined.

2.3. Proposal 1 and rationale:

2.3.1. In case of RPTs undertaken by a subsidiary of a listed entity, it is proposed that the scale-based materiality threshold of listed entities as proposed under Regulation 23(1) of LODR may be specified in addition to the existing percentage-based threshold of 10% of standalone turnover of the subsidiary for approval of RPTs by audit committee of the listed entity, whichever is

lower. This would harmonize the threshold under Regulation 23(2) of LODR with the proposed materiality threshold under Regulation 23(1) of LODR. This proposal shall be applicable to subsidiaries which have financial track record, i.e., published financial statements for at least one year.

2.3.2. Proposal 1: A related party transaction above rupees one crore to which the subsidiary of a listed entity is a party but the listed entity is not a party shall require prior approval of the audit committee of the listed entity if the value of such transaction, whether entered into individually or taken together with previous transactions during a financial year, exceeds the lower of the following amount:

(i) ten percent of the annual standalone turnover of the subsidiary as per the last audited financial statements of the subsidiary or;

(ii)  the threshold for material related party transactions of listed entity as determined in accordance with proposed threshold under Regulation 23(1) of LODR.

2.4. Proposal 2 and rationale:

2.4.1. In case of subsidiaries which do not have financial track record, i.e., published financial statements for at least one year, the percentage-based threshold may be specified as 10% of standalone net worth of the subsidiary computed on a date not more than 3 months prior to the date of seeking approval and it shall be certified by a practicing chartered accountant. Further, the scale-based materiality threshold of listed entities as proposed under Regulation 23(1) of LODR may also be applicable in such cases and lower of the two thresholds may be considered for approval of RPTs by the audit committee of the listed entity. This will maintain consistency in the thresholds for subsidiaries which have and the subsidiaries which don’t have financial track record. It may also be clarified that in case of negative net worth, aggregate of share capital and securities premium may be considered instead of 10% of net worth.

2.4.2. Proposal 2: In the event of a related party transaction above rupees one crore to which the subsidiary of a listed entity is a party but the listed entity is not a party and such subsidiary does not have audited financial statements for a period of at least one year, prior approval of the audit committee of the listed entity shall be obtained if the value of such transaction, whether entered into individually or taken together with previous transactions during a financial year, exceeds the lower of the following:

(i) ten per cent of the standalone net worth of the subsidiary or;

(ii)  the threshold for material related party transactions of listed entity as determined in accordance with proposed threshold under Regulation 23(1) of LODR.

Provided that, the standalone net worth of the subsidiary shall be computed on a date, not older than 3 months prior to the date of seeking approval of the audit committee and it shall be certified by a practicing chartered accountant.

Provided further that, in case the net worth of the subsidiary is negative, it shall be replaced with an amount equals to the aggregate value of paid-up share capital and securities premium of the subsidiary computed on a date, not older than 3 months prior to the date of seeking approval of the audit committee and it shall be certified by a practicing chartered accountant.

2.4.3. The proposed amendments to Regulation 23(2) of LODR are placed at Annexure 1.

2.5. Public comments:

2.5.1. Public comments are invited on the following:

Proposal 2: Do you agree with the proposed threshold in this consultation paper for a related party transaction exceeding rupees one crore to which the subsidiary of a listed entity is a party but the listed entity is not a party, and such subsidiary has audited financial statements for a period of at least one year?

Proposal 3: Do you agree with the proposed threshold in this consultation paper for a related party transaction exceeding rupees one crore to which the subsidiary of a listed entity is a party but the listed entity is not a party, and such subsidiary does not have audited financial statements for a period of at least one year?

SECTION – II

1. Relaxation in the minimum information to be furnished to the Audit Committee and Shareholders for the approval of related party transactions

1.1. Background

1.1.1. SEBI circular dated June 26, 2025 prescribed Industry Standards for minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions (“RPT Industry Standards”). As per Para 3 (c) of the RPT Industry Standards, it is stated that these standards shall not be applicable to transaction(s) upto Rupees One Crore with a related party to be entered into individually or taken together with previous transactions during a financial year (including which are approved by way of ratification).

1.2. Need for review

1.2.1. Industry Standard Forum (“ISF”) comprising of 3 industry associations, namely, FICCI, CII and ASSOCHAM have represented that the limit of Rupees One Crore prescribed in the RPT Industry Standards at Para 3 (c) seems to be miniscule amount for listed entities having high turnover. Hence, the existing threshold of Rupees One Crore may be enhanced with an objective of facilitating ease of doing business to the listed entities.

1.3. Proposal and rationale

1.3.1. In order to ease compliance for the related party transactions above Rupees One Crore, but are still small , it is proposed that, if related party transaction(s) with a related party, whether individually or taken together with previous transactions during a financial year (including transaction(s) which are approved by way of ratification), do not exceed 1% of annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity or Rupees Ten Crore, whichever is lower, the listed entity shall provide ‘Information to be reviewed by the Audit Committee and Shareholders for approval of RPTs’ as specified in draft Circular placed as Annexure 2.

Information in the proposed circular requires lesser information to be furnished than minimum information required to be furnished in RPT Industry Standards circulated vide SEBI Circular dated June 26, 2025. The exemption threshold of Rupees one crore shall continue to apply.

1.3.2. An analysis of data for listed entities on NSE for FYs 2023-24 and 2024­25 applying the proposed threshold is shown as follows:

FY 2024-25

FY 2023-24

1.4. Public comments

1.4.1. Public comments / suggestions are invited on the following:

Proposal 1: Do you agree with the proposed threshold in the enclosed draft circular?

2. Inclusion of Provision in LODR with respect to validity of omnibus approval for RPTs granted by the shareholders

2.1. Background:

2.1.1. As per Regulation 23(3) of LODR, the Audit Committee may grant omnibus approval for related party transactions and such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.

2.1.2. As per Regulation 23(4) of LODR, all material related party transactions shall require prior approval of shareholders through resolution.

2.1.3. Para (C)11 of Section III of the master circular on LODR Regulations dated November 11, 2024 states that shareholders’ approval of omnibus RPTs approved in an AGM shall be valid up to the date of the next AGM for a period not exceeding fifteen months. In case of omnibus approvals for material RPTs, obtained from shareholders in general meetings other than AGMs, the validity of such omnibus approvals shall not exceed one year.

2.1.4. Similarly, Section 96(1) of the Companies Act, 2013 specifies that the time gap between two Annual General Meetings (AGMs) cannot be more than fifteen months.

2.2. Need for review:

2.2.1. The aforesaid clauses of Para (C)11 of Section III of the master circular with respect to omnibus approval for RPTs granted by the shareholders needs to be incorporated in the Regulation 23(4) of LODR.

2.3. Proposal and rationale

2.3.1. In order to bring the provisions related to omnibus approval for RPTs granted by the shareholders as stated in the Master Circular, it is proposed to add the following to Regulation 23(4) of LODR:

a) In case, the omnibus approval is given by the shareholder, such approval of omnibus RPTs approved in an AGM shall be valid up to the date of the next AGM for a period not exceeding fifteen months. In case of omnibus approvals for material RPTs, obtained from shareholders in general meetings other than AGMs, the validity of such omnibus approvals shall not exceed one year.

2.3.2. The proposed amendments to Regulation 23(4) of LODR are placed at Annexure 1.

2.4. Public comments

2.4.1. Public comments / suggestions are invited on the following:

Proposal 2: Do you agree with the proposed amendments to Regulation 23(4) of LODR in this consultation paper?

3. Clarifications pertaining to applicability of RPT provisions

3.1. Background:

3.1.1. Issue (i):  Currently, the proviso (e) of regulation 2(1)(zc) of the LODR provides that retail purchases from any listed entity or its subsidiary by its directors or its employees, without establishing a business relationship and at the terms which are uniformly applicable/offered to all employees and directors, shall not be considered RPT.

In this regard, ACLOD has suggested that the ‘relatives’ of directors and employees of the listed entity or its subsidiary may also be included under the said proviso.

In this regard, it is noted that in terms of the definition of ‘related party’ as provided under Section 2(76) of the Companies Act, 2013 and also encompassed under Regulation 2 (1)(zb) of the LODR Regulations, (i) a director or his relative; and (ii) a key managerial personnel or his relative; are considered as related party. Accordingly, “employees or their relative” do not fall under the definition of related party, hence there is no need to specifically provide an exemption for them from RPT norms under LODR Regulations. Hence, there is need to remove the term ‘employees’ from the proviso (e) of regulation 2(1)(zc) of the LODR and to include relatives of directors as well as ‘key managerial personnel’ and their relatives in the exemption.

3.1.2. Issue (ii): Regulation 23(5) of LODR specifies RPTs which are exempted from approval requirements. The said regulation was amended in November, 2021 by insertion of clause (c) which exempted transactions between two wholly-owned subsidiaries of the ‘listed’ holding company since RPTs by subsidiaries was brought into the ambit of approval requirements under LODR. SEBI has received representation seeking clarity whether the exemption under clause (b) of Regulation 23(5) of LODR, which refers to transaction between holding company and its wholly owned subsidiary, is applicable to only listed holding company or unlisted holding company as well. The intention has always been to apply the provision to wholly owned subsidiary of “listed companies” only and this is required to clarified by way of a clarification.

3.2. Proposal and rationale:

3.2.1. Proposal (i): To harmonize the exemption provided in the definition of related party transaction with the definition of related party as provided under LODR Regulations, it is proposed that the proviso (e) of Regulations 2(1)(zc) of the LODR Regulations may be amended to provide that the exemption under the said proviso shall be applicable to directors or key managerial personnel(s) of listed entity or its subsidiary or their relatives.

3.2.2. Proposal (ii): The exemptions from RPT approval requirements under clauses (b) and (c) of Regulation 23(5) of LODR are applicable when the accounts of the subsidiary(ies) are consolidated with the listed holding company and placed before the shareholders of the listed entity at the general meeting for approval. Hence, the exemption from RPT approval requirements is applicable when the transaction is between the listed holding company and its wholly owned subsidiary and the accounts of the wholly owned subsidiary are consolidated with the listed holding company. Same may be clarified by adding the following explanation to this effect in Regulation 23(5) of LODR:

Explanation: For the removal of doubt, it is clarified that the term “holding company” used in clause (b) refers to and shall be deemed to have always referred to “listed holding company”.

3.2.3. The proposed amendments to 2(1)(zc) and Regulation 23(5) of LODR are placed at Annexure 1.

3.3. Public comments:

3.3.1. Public comments are invited on the following:

Proposal 3: Whether the proviso (e) of Regulations 2(1)(zc) of the LODR Regulations may be amended to provide that the exemption under the said proviso shall be applicable to directors or key managerial personnel(s) of listed entity or its subsidiary or their relatives?

Proposal 4: Whether an explanation as proposed above should be added in the Regulation 23(5) of LODR Regulations to clarify that the exemption from RPT approval requirements are applicable to transactions between a listed holding company and its wholly owned subsidiary?

3.3 Public Comments

1.1. In order to take into consideration, the views of various stakeholders, public comments are invited on Proposals 1 to 2 mentioned at paragraphs 1.4 and 2.5 in SECTION – I and Proposals 1 to 4 mentioned at paragraphs 1.4, 2.4 and 3.3 in SECTION – II of this consultation paper.

The comments or suggestions, along with rationale, may be submitted latest by  August 25,2025 through  the following   link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?  doPublicComments=yes

1.2. In case of any technical issue in submitting your comments through web based public comments form, you may send your comments through e-mail to consultationcfd@sebi.gov.in with the subject “CONSULTATION PAPER ON AMENDMENTS TO PROVISIONS RELATING TO RELATED PARTY TRANSACTIONS UNDER SEBI (LODR) REGULATIONS, 2015”.