Turnover-Linked RPT Thresholds: SEBI Simplifies Rules for Listed Companies

Understanding SEBI’s Recent Relaxation of RPT Norms under SEBI (LODR) Regulations, 2015

Introduction

Related-party transactions (RPTs) have long been an area of intense regulatory focus in India. Such transactions — between a listed entity and its promoter, key managerial personnel (KMP), or entities related to them — have the potential for conflict of interest and adverse impact on minority shareholders. To safeguard investor interests, SEBI has over time imposed strict norms under the LODR Regulations for approval, disclosure and audit-committee oversight of RPTs.

In response to feedback about the compliance burden and to align the regime with ease-of-doing-business concerns, SEBI has recently issued a circular/amendment relaxing certain RPT norms. These changes aim to introduce flexibility while retaining the governance guardrails.

https://www.sebi.gov.in/legal/regulations/nov-2025/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-fifth-amendment-regulations-2025_97840.html

What Has Changed: Key Relaxations

1. Materiality Thresholds & Scale-Based Approach

• • The existing regime under Regulation 23(1) of LODR defines a “material RPT” if the transaction (individually or aggregating with prior transactions in a financial year) exceeds either ₹ 1,000 crore or 10 % of the annual consolidated turnover of the listed entity (whichever is lower)
  • The new circular introduces a scale-based threshold model, linking the materiality threshold to the turnover of the listed entity rather than one-size-fits-all. For example, under one proposed bucket: for entities with annual consolidated turnover up to ₹20,000 crore, the threshold remains at 10 %; for higher turnover entities, the percentage is lower and there is a higher absolute ceiling of up to ₹5,000 crore. Schedule XII has been inserted for Regulation 23(1) explaining the threshold limits.
  • Implication: Larger companies will have higher absolute thresholds before an RPT becomes “material”, which reduces the number of transactions requiring shareholder approval.

2. Relaxed Minimum Information for Smaller Transactions

• • For small-value RPTs — where value individually or aggregated does not exceed a specified low threshold (for example, the lesser of 1% of consolidated turnover or ~₹10 crore) — the management of the listed entity is now required to provide only “minimum information” (Annexure – 1) to the Audit Committee/shareholders for approval, rather than full scale disclosures.
  • For newly incorporated subsidiaries which are <1 year old, the threshold to be lower of 10% aggregate of paid-up share capital and securities premium of the subsidiary or material RPT threshold as applicable to the listed holding company.
  • This helps streamline the process for low-risk, routine group/related transactions.

3. Validity of Omnibus Approvals

• • Under earlier norms, omnibus approvals (Audit Committee approval in advance for class of RPTs) had to be renewed every year (and had interpretational issues when given at the AGM). The new amendments clarify that an omnibus shareholder approval obtained at the AGM remains valid until the next AGM (within the maximum permitted gap under the Companies Act) subject to conditions and if obtained at any other general meeting/postal ballot for one year.
  • This reduces the administrative burden of repeated approvals for similar recurring transactions.

4. Clarifications on Applicability & Exemptions

• • Transactions between a holding company and its wholly-owned subsidiary (WOS) now have clearer treatment: the exemption from RPT approval requirements is available only when the holding company is the listed entity and the subsidiary’s accounts are consolidated.
  • Also, the exemption for retail purchases by employees (which earlier excluded relatives of KMPs/directors) has been extended so that if purchases are on uniform terms for all employees, directors, KMPs and their relatives, they may not be treated as RPTs.

5. Effective Date & Transition

• • Although the amendments have been notified, their effective date is set (for example, December 19 2025 in one commentary) so that listed entities can prepare and transition.

Why These Changes Matter

• For Listed Companies: They offer greater operational flexibility, fewer approvals for lower-risk transactions, and lower compliance workload for in-group and routine dealings.
• For Professionals (Company Secretaries, Legal, Compliance, Advisory): The focus shifts from simply compliance formality to stronger internal controls and risk assessment for significant RPTs. Lawyers and compliance functions will need to update internal policies and approval matrices.

Practical Implementation Checkpoints

• Review the entity’s existing approval matrix for RPTs: Identify which transactions now fall below the new thresholds and can benefit from simplified process.
• Update internal policy documents and board/Audit Committee charters to reflect new thresholds, exemptions, and validity periods of omnibus approvals.
• Ensure management captures necessary minimum information for small-value RPTs and keeps documentation to support “arm’s-length” nature.
• Reassess transactions involving WOS or intra-group that earlier required full shareholder approval – confirm if they qualify for the clarified exemption.
• Communicate changes to stakeholders (audit committee, internal audit, board) so that compliance risk is monitored accordingly.

Annexure-1

Minimum information to be provided to Audit Committee for approval of Related Party Transactions:

The listed entity shall submit the following details to the Audit Committee for review and approval of a proposed RPT:

a. Type, key terms and details of the proposed transaction.

b. Name of the related party, its relationship with the listed entity/subsidiary, and nature of its interest.

c. Specific tenure of the transaction.

d. Value of the transaction.

e. Percentage of the listed entity’s previous year consolidated turnover represented by the transaction value (and additionally, for subsidiary RPTs, the percentage of the subsidiary’s standalone turnover).

f. For loans, ICDs, advances or investments:

i. Source of funds.

ii. If financial indebtedness is incurred, details of the nature, cost and tenure of such indebtedness (not applicable to listed banks/NBFCs/insurance/housing finance companies).

iii. Terms of the facility including covenants, tenure, interest rate, repayment schedule, and security (if any).

iv. Purpose for which the ultimate beneficiary will use the funds.

g. Justification that the RPT is in the interest of the listed entity.

h. Valuation or external report relied upon, if any.

i. Voluntary disclosure of the percentage of the counterparty’s annual consolidated turnover represented by the RPT value.

j. Any other relevant information.

Minimum information to be provided to shareholders for approval of Related Party Transactions:

The notice to shareholders seeking approval for an RPT must include, in addition to the requirements of the Companies Act, 2013:

a. A summary of the information submitted by management to the Audit Committee as per para 4 of this Section.

b. Justification for why the proposed RPT is in the interest of the listed entity.

c. For loans, ICDs, advances or investments, the details required under para 4(f).

d. A statement that any valuation or external report relied upon will be shared with shareholders on their registered email IDs.

e. Voluntary disclosure of the percentage of the counterparty’s annual consolidated turnover represented by the RPT value.

f. Any other relevant information.