The Securities and Change Board of India (Sebi) on Monday proposed sweeping modifications to its associated social gathering transaction (RPT) regime, sharpening its concentrate on ease of doing enterprise for giant firms.
The capital markets regulator’s session paper recommends a major overhaul of materiality thresholds, probably reducing compliance hurdles by almost 60% for the nation’s high listed companies.
The session paper, launched for public remark, units out a “scale-based threshold mechanism” to find out when RPTs are thought of materials and should be positioned earlier than shareholders for approval.
At present, listed firms should search shareholder approval for any RPT exceeding ₹1,000 crore, or 10% of their annual consolidated turnover, whichever is decrease.
Nevertheless, Sebi famous that this was onerous for listed entities with excessive turnover, as massive firms had been pressured to categorise many substantial—however not essentially vital—transactions as materials, resulting in extreme paperwork.
One-size matches all
To handle this, Sebi has proposed changing the “one-size matches all” strategy with a scale-based system:
- For firms with as much as ₹20,000 crore turnover: Threshold stays 10% of annual consolidated turnover.
- ₹20,001–40,000 crore turnover: Threshold of ₹2,000 crore plus 5% of turnover above ₹20,000 crore.
- Above ₹40,000 crore turnover: Threshold of ₹3,000 crore plus 2.5% of turnover above ₹40,000 crore, topic to a most of ₹5,000 crore.
“The strategy of scale-based threshold would be sure that materiality threshold will increase with the rise within the turnover of the corporate resulting in an applicable variety of associated social gathering transactions being categorized as materials thereby decreasing the compliance burden of listed entities.” Sebi mentioned.
Testing the brand new thresholds with latest information, Sebi discovered the variety of materials RPTs requiring shareholders’ approval has diminished by round 60%.
Sebi additionally addressed transactions by subsidiaries, proposing that offers above ₹1 crore require audit committee approval in the event that they exceed both 10% of the subsidiary’s turnover or the brand new scale-based threshold for the mother or father, “whichever is decrease.”
For subsidiaries with out full-year financials, the comparability can be to 10% of internet value or the mother or father’s threshold.
Noting that the ₹1 crore exemption from full disclosure necessities is a “minuscule quantity for listed entities having excessive turnover,” Sebi proposed that smaller RPTs (as much as 1% of turnover or ₹10 crore, whichever is decrease) want solely present minimal info to the Audit Committee or shareholders.
The session paper seeks to formalize that omnibus RPTs permitted in an AGM shall be legitimate as much as the date of the subsequent AGM for a interval not exceeding 15 months. For different shareholder conferences, the approval stays legitimate for one 12 months.
It proposed that exemptions on retail purchases will apply solely to administrators or key managerial personnel of a listed entity or its subsidiary (or their family members). It additionally clarified that exemptions for transactions between holding firms and subsidiaries are meant for listed holding firms solely.
Sebi has sought public feedback on these proposals by August 25, 2025.
Authorized specialists mentioned the problem shall be to stability effectivity with enough rigour, guaranteeing that the compliance reset doesn’t dilute minority rights or open new avenues for opacity in associated social gathering dealings.
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Ashima Obhan, senior companion at Obhan & Associates, welcomed the nuanced shift, noting that Sebi’s transfer in the direction of scale-based thresholds for materials RPTs mirrored a nuanced recognition of the numerous compliance capacities of listed entities.
“Whereas easing procedural burdens for bigger firms could improve operational agility, it’s essential that such leisure doesn’t dilute the safety framework for minority shareholders.”
Obhan mentioned scaled thresholds require cautious calibration to make sure really vital offers face scrutiny, and that diminished disclosures for small-value transactions needs to be coupled with safeguards like periodic aggregative disclosures or triggers, to keep up transparency with out overburdening firms.
Echoing the sentiment, Hardeep Sachdeva, senior companion at AZB & Companions, mentioned that for giant listed entities, the upper thresholds might scale back procedural friction. “However it’s crucial that shareholder safety, notably for minority traders, stays uncompromised.”
Sachdeva underscored the necessity to keep away from fragmentation of RPTs into small tranches that slip by way of oversight. “Whereas fewer transactions could cross materiality thresholds, the duty to make sure equity and arm’s size dealing will solely develop, demanding larger diligence and inside coordination.”
With probably fewer transactions being escalated by default, audit committees will want strong inside mechanisms to proactively assess the business rationale and equity of intra-group dealings, she mentioned, including that enhanced reliance on inside controls, unbiased evaluations, and information analytics could change into important to meet their fiduciary mandate.
The reforms, if adopted, might mark a major shift within the compliance of associated social gathering transaction norms, promising larger flexibility for India’s most distinguished corporates. However the onus will stay on the businesses’ boards and committees to keep up rigorous oversight.
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