Proposed Framework for Related Party Transactions Based on Threshold Levels by SEBI
SEBI Proposes Relaxations for Related-Party Transactions, Easing Compliance for Large Companies
The Securities and Exchange Board of India (SEBI) has proposed a series of relaxations for related-party transactions (RPTs) and disclosure norms, aiming to address the challenges faced by listed entities with high turnover in obtaining shareholder approval for RPTs exceeding the current thresholds.
The revised thresholds introduce a tiered, turnover-linked scale that raises materiality limits for large companies, substantially decreasing the number of RPTs requiring shareholder approval. This move is expected to significantly ease compliance for large firms, lowering administrative and procedural burdens, especially on entities with high turnovers.
Under the proposed norms, the materiality thresholds for RPTs are now linked to the annual consolidated turnover of the listed company. For entities with turnover up to ₹20,000 crore, an RPT is material if it exceeds 10% of the annual consolidated turnover, the same as the current threshold for this range.
For turnover between ₹20,001 crore and ₹40,000 crore, the materiality threshold will be ₹2,000 crore plus 5% of the turnover exceeding ₹20,000 crore. For entities with turnover exceeding ₹40,000 crore, the threshold will be ₹3,000 crore plus 2.5% of the incremental turnover, capped at a maximum of ₹5,000 crore.
SEBI has also suggested a simplified set of disclosures to be submitted to the audit committee for the total value of RPTs with a related party in a financial year. The proposal was published on August 4, 2025, and comments have been invited by August 25 on the draft paper.
Based on SEBI's backtesting with RPT data for the FYs 24 and 25 of top 100 listed entities on NSE based on turnover, the number of material RPTs requiring shareholders' approval has been reduced by approximately 60%. This implies fewer routine transactions will need shareholder approval, thus lowering administrative and procedural burdens.
Minor, low-value transactions below ₹15 crore (₹150 million) will also no longer need to be disclosed, further reducing compliance loads. The proposal also includes changes related to omnibus approvals for RPTs.
SEBI's revised thresholds aim to protect minority shareholders through a maximum cap and disclosure rules. The absolute ceiling of ₹5,000 crore is in place to safeguard the interests of minority shareholders.
These changes are expected to bring a welcome relief to large firms, easing the regulatory duties on big entities while still ensuring transparency and protection for minority shareholders.
- The Securities and Exchange Board of India (SEBI) has proposed a series of relaxations for related-party transactions (RPTs) and disclosure norms, aiming to ease compliance for large companies in the business sector.
- Under the proposed norms, the materiality thresholds for RPTs are now linked to the annual consolidated turnover of the listed company, enabling large businesses to lower the number of RPTs requiring shareholder approval.
- SEBI's revised thresholds aim to protect minority shareholders through a maximum cap and disclosure rules, with an absolute ceiling of ₹5,000 crore in place to safeguard the interests of these shareholders.
- Based on SEBI's backtesting with RPT data for the FYs 24 and 25 of top 100 listed entities on NSE based on turnover, the number of material RPTs requiring shareholders' approval has been reduced by approximately 60%.
- The proposal also includes changes related to omnibus approvals for RPTs, which could lead to a more efficient use of resources in business management.
- Investors and wealth-management firms should closely analyze the impact of these changes on their portfolio companies, as these revisions could influence the economy and markets.
- With the reduction in administrative and procedural burdens, large companies may now focus more on data-and-cloud-computing and technology to improve business operations and personal-finance management.
