Industry Standards on “Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions with effect from September 1, 2025
Summary: SEBI’s revised circular, effective September 1, 2025, introduces updated Industry Standards for Related Party Transactions (RPTs), aiming to standardize minimum disclosures for Audit Committee and shareholder approvals. This supersedes previous circulars from February and March 2025. A transaction is considered material if it individually or cumulatively exceeds INR 1,000 crore or 10% of consolidated annual turnover, whichever is lower. For brand usage or royalty payments, the materiality threshold is 5% of annual consolidated turnover. The new standards are structured into Part A (Basic details for all RPTs), Part B (Additional details for specific RPT types), and Part C (Additional disclosures for material RPTs), applying transaction-wise. Key compliance requirements include presenting RPTs in the revised format to the Audit Committee and shareholders, submitting CEO/MD & CFO certificates affirming the company’s interest, and disclosing valuation reports. Shareholders must receive comprehensive information, including rationale and pricing details. Exemptions apply to certain transactions, including those under Regulation 23(5) and those not exceeding INR 1 crore. Prior approvals granted before the effective date remain valid unless materially modified.
Effective Date: September 1, 2025
In a move to enhance transparency and streamline disclosures, the Securities and Exchange Board of India (SEBI) issued a revised circular on June 26, 2025 [SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93], which supersedes its earlier circulars dated February 14 and March 21, 2025. The revised Industry Standards on Minimum Information for Audit Committee and Shareholder Approval of Related Party Transactions (RPTs) will come into effect from September 1, 2025.
The primary goal of these updated standards is to:
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Standardize the minimum disclosures required for:
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Review and approval by the Audit Committee
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Approval by Shareholders, particularly in the case of material RPTs
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Definition of Material RPT under Regulation 23, SEBI(Listing Obligation and Disclosure Requirements)Regulation 2015 (“LODR”)
- a transaction with a related party shall be considered material, 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 of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.
- Notwithstanding the above a transaction involving payments made to a related party with respect to brand usage or royalty shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceed five percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity
Structure of Revised Industry Standards
- Part A – Basic details of all RPTs
- Part B – Additional details for specific types of RPTs (e.g., loans, guarantees, investments etc…)
- Part C – Additional disclosures if the RPT is material under LODR Regulations
Applicability of the Standards Transaction-wise. For the detailed content of the standards, please refer to the actual SEBI circular. The link is provided in the last paragraph of this article.
| S.no | Specific type of RPT | Standard Applicable | If such transactions are material under SEBI (LODR) Regulations, 2015 |
| 1 | Sale, purchase or supply of goods or services or any other similar business transaction and trade advances | Part A + Para 1 of Part B | Part A + Para 1 of Part B
(Any Para of Part C is NA) |
| 2 | Loans and advances (other than trade advances) or inter-corporate deposits given by the listed entity or its subsidiary | Part A + Para 2 of Part B | Part A + Para 2 of Part B + Para 1 of Part C |
| 3 | Investment made by the listed entity or its subsidiary | Part A + Para 3 of Part B | Part A + Para 3 of Part B + Para 2 of Part C |
| 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 | Part A + Para 4 of Part B | Part A + Para 4 of Part B + Para 3 of Part C |
| 5 | Borrowings by the listed entity or its subsidiary | Part A + Para 5 of Part B | Part A + Para 5 of Part B + Para 4 of Part C |
| 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 associate. | Part A + Para 6 of Part B | Part A + Para 6 of Part B + Para 5 of Part C |
| 7 | Transactions relating to payment of royalty | Part A + Para 7 of Part B | Part A + Para 7 of Part B + Para 6 of Part C |
| NOTES: The RPT Industry Standards shall be applicable from the date as may be specified by the SEBI (“effective date”). However, it is clarified that::
1. If the Audit Committee and/or shareholders have granted approval before effective date, for RPTs to be executed on or after effective date, then it will not be necessary for the listed entity to seek approval during the validity of the approval unless there is any material modification to such RPTs which is presented to Audit Committee after effective date. 2. Omnibus Approvals: If omnibus approval for FY 2025–26 was granted before the effective date, fresh approval isn’t required under the new Standards. But again, material modifications after the effective date must comply with the new Standards. 3. If a Material RPT is approved by Audit Committee before effective date, the RPT Industry Standards shall not apply, irrespective of whether the notice to shareholders is sent either before or on or after the effective date. |
Key Compliance Requirements
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- Listed entities must follow the revised format while placing RPTs before the Audit Committee and shareholders.
- CEO/MD & CFO certificates affirming that RPTs are in the company’s interest must be submitted.
- Valuation or external reports, if any, must be disclosed.
- Shareholders must receive:
- Full rationale, pricing details, and fairness opinion
- Web link/QR code for valuation reports
- Assurance that confidential commercial info may be redacted, but all critical info remains.
Exemptions from RPT Industry Standards
- Transactions under Regulation 23(5) (exempted RPTs)
- Quarterly RPT review of omnibus approvals under Reg. 23(3)(d)
- Transaction(s) 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) do not exceed Rs. One Crore.
https://www.sebi.gov.in/legal/circulars/jun-2025/industry-standards-on-minimum-information-to-be-provided-to-the-audit-committee-and-shareholders-for-approval-of-related-party-transactions-_94809.html
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