Authored by Lakshmi Narasimhan Srikrishna
SEBI had issued a circular dated 26th June 2025 (Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93) (“Circular”) with respect to the ‘Industry Standards on Minimum Information’ to be provided for review of the audit committee and shareholders for approval of related party transactions (“RPT Industry Standards”).
In this regard, in our last month’s edition of All Things Listed (August 2025), we had covered the ‘Consultation Paper on Amendments To Provisions Relating To Related Party Transactions Under SEBI (LODR) Regulations, 2015 And Circulars Thereunder’ (“Consultation Paper”) dated 4th August 2025 proposing amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) and related circulars to ease compliance requirements for listed entities, particularly in relation to Related Party Transactions (“RPTs”).
Following the issuance of the said Circular and the Consultation Paper, the National Stock Exchange of India (“NSE”) has issued clarifications to the same by way of an FAQ document dated 4th September 2025 (“FAQs”). Certain key takeaways from the FAQs are as follows:
1. The RPT Industry Standards replaces Section III-B of the Master Circular for compliance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 by listed entities dated 11th November 2024 (“Master Circular”) and comes into effect from 1st September 2025 (“Effective Date”). In the event of any inconsistency between the RPT Industry Standards and any subsequent amendments to the LODR Regulations and/ or any SEBI circulars, such amendments/ circulars shall prevail.
2. While the RPT Industry Standards seek to provide a baseline for the provision of minimum information, the management may provide and the audit committees of listed entities shall be entitled to seek additional information as may be deemed necessary and reasonable to evaluate the proposed transaction.
3. If approvals for RPTs are required for transactions between a listed holding entity and its foreign subsidiaries, then the RPT Industry Standards shall be applicable at the level of the holding (listed) company.
4. While listed entities may have additionally restrictive approval requirements, the RPT Industry Standards do not apply where the cumulative RPTs for a listed entity with its related party during a financial year does not exceed Rs. 1 Crore. Therefore, a listed entity may enter into RPTs with a related party without adhering to the RPT Industry Standards till such time that the aggregate value of RPTs amount to Rs. 99,99,999/-.
5. If the audit committee of a listed entity rejects a proposal to enter into an RPT, then the reasons for the same along with comments, if any, are to be recorded in the minutes of the audit committee meeting. The audit committee may also choose to comment on the information provided by the management while seeking approval of the said RPT.
6. The certificate to be provided by the management to the audit committee (confirming that the terms of RPTs proposed to be entered into are in the interest of the listed entity) with the minimum information as set out by the RPT Industry Standards is to be signed by two individuals from and out of the following five persons: (i) Chief Executive Officer (CEO); (ii) Managing Director; (iii) Whole Time Director; (iv) Manager; and (v) Chief Financial Officer (CFO).
7. Any redactions while sharing the minimum information (as per RPT Industry Standards) to shareholders (following approval of the audit committee) require approval of the audit committee and the board of directors of the listed entity. The explanatory statement issued as part of the notice to shareholders seeking their approval are to contain a QR Code and a weblink to enable shareholders to access all supporting documents considered by the audit committee while approving the RPT.
