related party transactions

SEBI has in its board meeting held on 28th September, 2021 review the provisions relating to related party transactions (RPT) and made the following changes in the Listing Obligations and Disclosure Requirements Regulations. The amendment in the LODR will of course come later in due course of time.

It seeks enhanced disclosure and approval process for RPTs. The gist of the changes are given below.

The Board considered and approved the amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in relation to regulatory provisions on related party transactions (RPTs). Key amendments are as follows:
I. The definition of related party shall include:
a. all persons or entities forming part of promoter or promoter group irrespective of their shareholding;
b. any person/entity holding equity shares in the listed entity, as below, either directly or on a beneficial interest basis at any time during the immediately preceding financial year:
i. to the extent of 20 % or more
ii. to the extent of 10% or more w.e.f. April 1, 2023.
II. The definition of RPT shall include transactions between:
a. the listed entity or any of its subsidiaries on one hand and a related party of the listed entity or any of its subsidiaries on the other hand;
b. the listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of
its subsidiaries w.e.f. April 1, 2023.
III.Prior approval of the shareholders of the listed entity shall be required for material RPTs having a threshold of lower of Rs. 1000 crore or 10% of the consolidated annual turnover of the listed entity.
IV. Approval of the Audit committee shall be required for
a. All RPTs and subsequent material modifications as defined by the Audit committee;
b. RPTs where subsidiary is a party but listed entity is not a party subject to threshold of
i. 10% of the consolidated turnover of the listed entity,
ii. 10% of the standalone turnover of the subsidiary w.e.f. April 1, 2023.
V. Enhanced disclosure of information related to RPTs to be:
a. placed before the audit committee,
b. provided in the notice to shareholders for material RPTs, and
c. provided to the stock exchanges every six months in the format specified by the Board with the following timelines:
i. within 15 days from the date of publication of financials;
ii. simultaneously with the financials w.e.f. April 1, 2023.
The amendments shall come into force with effect from April 1, 2022 unless otherwise specified above.

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