SEBI ISSUES CIRCULAR ON INDUSTRY STANDARDS FOR RELATED PARTY TRANSACTION (RPT) DISCLOSURES
In a continued push for transparency and good governance, SEBI has issued a circular dated 26th June, 2025 (SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93), titled “Industry Standards on Minimum Information to be Provided to the Audit Committee and Shareholders for Approval of Related Party Transactions” which will come into effect from 1st September, 2025.
This circular modifies Section III-B of SEBI’s Master Circular for compliance with provisions of SEBI LODR Regulations by listed entities (“Master Circular”) dated November 11, 2024 (SEBI/HO/CFD/PoD2/CIR/P/0155). The modification pertains to revisions made to the “Minimum information to be provided for Review of the Audit Committee and Shareholders for Approval of Related Party Transaction” (“RPT Industry Standards”). These RPT Industry Standards have been formulated by the Industry Standards Forum (ISF) (comprising ASSOCHAM, CII, and FICCI) in consultation with SEBI and the stock exchanges.
1. Uniform Disclosure Framework: The circular mandates listed entities to comply with revised RPT Industry Standards for information to be placed before Audit Committees and shareholders for the approval of Related Party Transactions (“RPTs”).
2. Amendment to Master Circular: The circular substitutes Paragraph 4 of Part A (Audit Committee) and Paragraph 6 of Part B (Shareholders) under Section III-B of the Master Circular and requires listed entities to follow the newly notified RPT Industry Standards while seeking approvals for RPTs.
3. Objective: The objective of the RPT Industry Standards is to bring uniformity and clarity in RPT related disclosures to be made by the management to the Audit Committee/ shareholders to ensure that such decision-makers (both the Audit Committee/ Board of Directors and/ or the shareholders) are equipped with the appropriate information to make an informed decision.
Detailed Disclosure Requirements under the Industry Standards
The newly published Industry Standards include structured disclosure templates (Parts A, B, and C) that specify the minimum fields required for Audit Committee and shareholder approvals. These fields vary depending on the type of transaction—such as loans, guarantees, investments, or royalty payments— and aim to ensure uniform, comprehensive disclosures.
For example:
– Justification of pricing or terms, including peer comparisons or third-party valuation reports, if applicable.
– Related-party credit ratings or security details in the case of loans/guarantees.
– Details on payment milestones, security cover, and usage of proceeds.
– Specific requirements for explaining material modifications to existing RPTs.
Shareholder notices for material RPTs must now replicate the minimum information shared with Audit Committees, ensuring consistent transparency. This includes annexing valuation reports, fairness opinions, or any external expert assessments relied upon for pricing or terms.
4. Publication of the standards: The participating industry associations (ASSOCHAM, CII, and FICCI) and stock exchanges have been directed to publish the RPT Industry Standards on their websites and have also been instructed to prepare FAQs in consultation with SEBI to address stakeholder queries.
5. Actions required by Listed Entities: Listed Entities must update their reporting formats and Board/Audit Committee notes in accordance with the revised format and ensure consistency in all shareholder communications, particularly when seeking approval for material RPTs.
Editorial Comment
SEBI’s latest circular is part of a broader regulatory shift to improve transparency, comparability, and investor protection in RPT approvals. By prescribing a standardised, detailed disclosure format, SEBI aims to reduce inconsistencies in the information provided to decision-making bodies. Listed companies will need to adapt internal governance processes, revise board and shareholder materials, and implement internal training to ensure smooth adoption before the September 2025 deadline.
This measure signals a clear expectation that Audit Committees and shareholders will exercise sharper scrutiny of RPTs—armed with complete and consistent information. It also reflects SEBI’s ongoing focus on strengthening disclosure norms and corporate governance in India.