The Securities and Exchange Board of India (SEBI) has issued fresh guidelines on minimum information that listed companies are required to provide to their audit committees and shareholders to get related party transaction (RPT) approval.
Under the new framework, companies must clearly justify why a related party transaction (RPT) serves the best interests of the listed entity. They are required to provide valuation or external reports (if any were relied upon), disclose the percentage of the counterpartys annual turnover represented by the transaction (on a voluntary basis), and furnish any other relevant details necessary for the audit committees review and approval.
When seeking shareholder approval, the explanatory statement must summarize the information shared with the audit committee, explain how the transaction benefits the company, disclose any loans, advances, or investments involved, and confirm that any valuation or external report will be accessible to shareholders via their registered email, SEBI said in its circular.
This information must be disclosed to both the audit committee and shareholders whenever a proposal for review and approval of an RPT is placed before them.
The circular would become effective immediately, it added.
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SEBI has eased disclosure requirements for smaller related party transactions (RPTs) those not exceeding 1% of a companys annual consolidated turnover or ₹10 crore, whichever is lower whether individually or when aggregated with earlier transactions in the same financial year. Such smaller transactions will now be exempt from providing detailed disclosures.
This relaxation follows SEBIs board approval in September of a proposal to reduce the minimum information that companies must furnish to audit committees and shareholders when seeking approval for RPTs.
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