SEBI Introduces Norms For Listed Entities To Seek Related Party Transaction Consent

SEBI Introduces Norms For Listed Entities To Seek Related Party Transaction Consent

The requirements will be effective from 01 April

The Securities and Exchange Board of India (SEBI) has introduced industry standards on the evidence the listed entities must provide to the audit committee and shareholders to seek approval for related party transactions (RPT).

The circular of the capital market regulator stated that the associations and stock exchanges will publish these standards on their websites to facilitate a uniform approach and assist the entities in complying with the norms.

The Industry Standards Forum (ISF) was formulated by representatives from industry associations ASSOCHAM, CII and FICCI.

Under SEBI’s Listing Obligations and Disclosure Requirements (LODR) rules, RPTs need the audit committee’s and shareholders’ approval.

After modifications, while placing any proposal for review and approval of a related party transaction, the listed entities must provide the audit committee with the information specified in the industry standards.

The explanatory statement accompanying notices sent to the shareholders for any RPT’s approval will include the information mandated under the Companies Act, 2013.

While launching a dedicated RPT portal to enhance transparency in corporate transactions, SEBI directed the stock exchanges to notify the listed entities to ensure compliance.

It said that the portal was launched to monitor and analyze RPTS, a crucial area where governance failed frequently.

Ashwani Bhatia, SEBI’s whole-time member stated, "The portal will simplify investor access to critical governance data on RPTs. It will ensure that transparency in related party transactions is not a privilege reserved for institutional investors but a right that’s accessible to all.”