| Introduction of Scale-Based thresholds for determining material RPTs undertaken by listed entities |
- Present regulation: Under Regulation 23(1) of LODR Regulations, a RPT is considered material if the transaction to be entered into individually or taken together with previous transactions during a financial year, exceeds INR 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.
- Need for amendment: It was observed that the provision requiring shareholders’ approval for RPTs exceeding the current threshold is onerous for listed entities with high turnover. Also, the fixed materiality limit of INR 1,000 crore imposes a “one-size-fits-all” approach, treating all listed entities similarly regardless of their turnover, scale of operational, or nature of business.
- Proposal: The following scale-based thresholds have been proposed by linking the annual consolidated turnover buckets to different % threshold for consideration of material RPTs:
| Buckets of Annual Consolidated Turnover of Listed Entity |
Proposed Threshold |
| up to INR 20,000 crores |
10% of annual consolidated turnover of the listed entity |
| between INR 20,001 – 40,000 crores |
INR 2,000 crores + 5% of annual consolidated turnover of the listed entity above INR 20,000 crores |
| more than INR 40,000 crores |
INR 3,000 Crore + 2.5% of annual consolidated turnover of the listed entity above INR 40,000 crores or INR 5,000 crore, whichever is lower |
Also, in order to protect the interest of minority shareholders, an absolute threshold of INR 5000 crores as upper ceiling has also been proposed for the listed entities having turnover above INR 40,000 crores.
| ELP Comments |
| This is a landmark shift from a ‘one-size-fits-all’ approach to a dynamic, turnover-linked model. For large listed entities, this will significantly reduce the frequency of seeking shareholder approvals for routine, high-value RPTs, freeing up management bandwidth and streamlining operations. |
|
| Thresholds for determining material RPTs by subsidiaries of a listed entity |
- Present Regulation: Under the second proviso to Regulation 23(2) of the LODR Regulations, 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.
- Need for amendment: The following issues have been identified with the present regulation:
-
-
- 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.
- The existing threshold for audit committee approval is based on the subsidiary’s standalone turnover from 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.
- Proposal for subsidiaries with a financial track record: In case of RPTs exceeding INR 1 crores 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.
| ELP Comments |
| The aforesaid proposal aligns with the changes to the materiality threshold proposed under Regulation 23(1) and will provides uniformity in determining the thresholds for subsidiaries which have and the subsidiaries which don’t have financial track record. This consistency in the application of thresholds across all subsidiaries, irrespective of financial history, will provide greater regulatory clarity and promote uniformity in the approval process for related party transactions. |
|
| Relaxation in the minimum information to be furnished to Audit Committee and shareholders for the approval of RPTs |
- Present Regulation: Para 3(c) of the SEBI circular dated June 26, 2025, on ‘Industry Standards for Minimum Information to be Provided to the Audit Committee and Shareholders for Approval of Related Party Transactions’ (“RPT Industry Standards”), specifies that these industry standards do not apply to transactions with a related party where the value, whether considered individually or aggregated with previous transactions during a financial year (including those approved by ratification), does not exceed INR 1 crore with a related party.
- Need for amendment: The limit of INR 1 crore prescribed in the RPT Industry Standards at Para 3(c) is a miniscule amount for listed entities having high turnover. Hence, the existing threshold of INR 1 crore may be enhanced with an objective of facilitating ease of doing business to the listed entities.
- Proposal: It is proposed that where RPTs with a particular related party, whether considered individually or together with previous transactions during a financial year (including transactions approved by ratification), do not exceed 1% of the listed entity’s annual consolidated turnover as per the last audited financial statements or INR 10 crore, whichever is lower, the listed entity will be required to provide only the prescribed minimum information for review by the Audit Committee and shareholders when seeking approval for such RPTs as prescribed under Annexure 2 of the Consultation Paper.
| ELP Comments |
| The proposed increase in the threshold for furnishing information to the Audit Committee and shareholders in connection with RPT approvals as per the industry standards is expected to reduce administrative burden for listed entities for small value transactions thereby facilitating the ease of doing business. |
|
| Inclusion of provision related to validity of omnibus approval for RPTs granted by the shareholders |
- Present Regulation:
- Regulation 23(3) of the LODR Regulations permits the Audit Committee to grant omnibus approval for related party transactions, with each such approval being valid for up to one year and requiring renewal thereafter.
- Regulation 23(4) of the LODR Regulations requires all material related party transactions to receive prior approval from shareholders through a resolution.
- Para (C)11, Section III of the master direction on LODR Regulations dated November 11, 2024 (“Master Circular on LODR Regulations”) clarifies that shareholder approvals for omnibus RPTs granted at an annual general meeting (“AGM”) remain valid until the next AGM, but not beyond 15 months. For omnibus approvals obtained at general meetings other than AGMs, the validity is capped at one year.
- Consistently, Section 96(1) of the Companies Act, 2013 provides that the maximum allowable interval between two consecutive AGMs is 15 months.
- Need for Amendment: The provisions under Para (C)11 of Section III of the master circular with respect to omnibus approval for RPTs granted by the shareholders is required to be incorporated in the LODR Regulations.
- Proposal: In light of the above, it is proposed that a provision similar to that specified under Para (C)11, Section III of the Master Circular on LODR Regulations may be incorporated in Regulation 23(4) the LODR Regulations
| ELP Comments |
| The inclusion of the Para (C)11, Section III of the Master Circular in the LODR Regulations is a positive step towards removing ambiguity regarding the validity of omnibus approvals and providing further clarity on the requirements relating to omnibus approvals. |
|
| Clarifications pertaining to applicability on RPT provisions |
- Present Regulation: Regulation 2(1)(zc)(e) of the LODR Regulations exempts retail purchases from any listed entity or its subsidiary by its directors or employees, without establishing a business relationship and at the terms which are uniformly offered to all employees and directors, from being considered as RPT.Separately, Regulation 23(5) of the LODR Regulations exempts certain transactions from RPT approval requirements. Clause (b) of this regulation exempts transactions between a holding company and its wholly-owned subsidiary and Clause (c) exempts transactions between two wholly-owned subsidiaries of a listed holding company.
- Need for Amendment: The following issues have been identified with the present Regulations:
-
- The definition of a ‘related party,’ as provided under Section 2(76) of the Companies Act, 2013, and adopted by Regulation 2(1)(zb) of the LODR Regulations, specifically includes directors, key managerial personnel (KMPs), and their respective relatives. Crucially, this definition does not extend to employees (who are not also directors or KMPs) or their relatives. As transactions with such individuals do not constitute RPTs by definition, a specific exemption for them from RPT norms under the LODR Regulations is unnecessary.
- Regulation 23(5)(b), which exempts transactions between a holding company and its wholly-owned subsidiary, creates ambiguity because it does not specify whether the holding company must be a ‘listed’ entity for the exemption to apply. SEBI’s intended scope has always been to limit this exemption to listed holding companies, and this needs to be explicitly incorporated into the regulations to ensure consistent application.
- Proposal with respect to issue (i): 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.
- Proposal with respect to issue (ii): The exemptions from RPT approval requirements under clauses (b) and (c) of Regulation 23(5) 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 an explanation to this effect in Regulation 23(5) of LODR.
| ELP Comments |
| The proposed amendments are expected to provide further clarity and consistency in relation to applicability of the RPT provisions. |
|
