Outlook Business Desk
The Securities and Exchange Board of India (SEBI) proposed major changes to its related party transaction (RPT) norms on Monday, aiming to make it easier for large firms to do business.
India’s capital markets regulator has suggested major changes to materiality thresholds in related party deals, which could reduce compliance burden for the country’s top listed companies by up to 60%.
At present, listed companies must seek shareholder nod for any related party transaction over ₹1,000 crore or 10% of turnover, whichever is lower. With even routine large-value deals often triggering materiality and adding unnecessary compliance and paperwork for companies, SEBI has proposed to ease the norms.
Calling it a “one-size-fits-all” model, SEBI has proposed a scale-based threshold system. For companies with turnover up to ₹20,000 crore, the current materiality threshold of 10% of consolidated annual turnover will remain unchanged.
For companies with turnover between ₹20,001 crore and ₹40,000 crore, the threshold will be ₹2,000 crore plus 5% of the amount exceeding ₹20,000 crore. For firms above ₹40,000 crore turnover, it will be ₹3,000 crore plus 2.5% of the amount above ₹40,000 crore, subject to a maximum of ₹5,000 crore.
“The approach of scale-based threshold would ensure that materiality threshold increases with the increase in the turnover of the company leading to an appropriate number of related party transactions being categorised as material thereby reducing the compliance burden of listed entities,” Sebi stated.
SEBI proposed that any related party transaction by a subsidiary exceeding ₹1 crore must get Audit Committee approval if it crosses either 10% of the subsidiary’s turnover or the parent’s new scale-based threshold, whichever is lower. If a subsidiary lacks full-year financials, the threshold would be compared against 10% of net worth or the parent’s threshold.
The consultation paper proposes that omnibus approvals for (RPTs) given in an annual general meeting (AGM) stay valid until the next AGM, but not beyond 15 months. For other shareholder meetings, approval would remain valid for one year.
SEBI proposed that exemptions on retail purchases apply only to directors, key managerial personnel, or their relatives. It also clarified that RPT exemptions for holding-subsidiary deals are meant only for listed holding companies.
SEBI has also invited public feedback on the proposed changes by 25 August 2025. Meanwhile, legal experts caution that the reforms must strike a balance between easing compliance and protecting minority shareholder rights.