Archive · 6 Aug 2025
SEBI Proposes Overhaul of Related-Party Transaction Rules
SEBI, the market regulator in India, is changing the rules for how companies handle deals with related parties.
They're setting new limits based on a company's size.
If a deal is below a certain amount, shareholder approval isn't needed.
They're also making it easier to report smaller transactions.
Some experts worry that these changes could be exploited, especially by subsidiaries.
The goal is to ease the burden on companies while making sure everything is still fair and transparent.
SEBI proposes to overhaul related-party transaction (RPT) rules, changing the threshold for material transactions.
The new scale-based model will tie the RPT threshold to a company's annual turnover, impacting over 2,000 listed firms.
Experts welcome the shift for compliance relief, but caution against potential misuse and regulatory arbitrage.
Materiality for subsidiaries will be based on the lower threshold of the parent or subsidiary, using net worth for new entities.
Disclosure exemptions are proposed for RPTs below the lower of 1% of turnover or Rs 10 crore, streamlining procedures.
- Who
- The Securities and Exchange Board of India (SEBI)
- What
- SEBI proposed overhauling related-party transaction (RPT) rules, introducing a scale-based threshold.
- When
- The proposals were announced on Monday.
- Where
- India
- Why
- To provide compliance relief and reshape governance standards.
Potential for Misuse
Compliance Relief
Risk of Gaming the System
Potential for Misuse
Experts caution that the new rules could create opportunities for misuse, especially through subsidiaries.
Compliance Relief
The changes aim to streamline procedures and ease the compliance burden.
Subsidiary Thresholds
Potential for Misuse
Different threshold calculations for subsidiaries may create confusion or lead to potential misuse.
Compliance Relief
The focus should be on improving disclosures, rather than raising the compliance burden
- Organization
- Securities and Exchange Board of India (SEBI)
- Regulation
- Related-party transaction (RPT) rules
- Impacted Firms
- Over 2,000 listed firms
- Disclosure Exemption
- Below the lower of 1% of turnover or Rs 10 crore
- Proposed threshold calculation
- Based on company's turnover
Sources
SEBI proposes threshold-based framework for related party transactions
Sebi moots major relief for big firms on related party transaction norms
Seven IPOs qualify under SEBI’s new proposal on retail quota
SEBI proposes to relax RPT guidelines
