The Securities and Exchange Board of India (Sebi) has rolled out new rules aimed at enhancing transparency in related party transactions (RPTs). Under these new guidelines, listed entities will be required to provide more detailed information to both their audit committees and shareholders when seeking approval for such transactions.
The industry standards for minimum disclosure requirements were formulated by the Industry Standards Forum (ISF), which includes representatives from major industry bodies such as ASSOCHAM, CII, and FICCI. These standards were developed in consultation with Sebi and will be implemented under the supervision of stock exchanges.
The new disclosure requirements will come into effect starting April 1. The revised guidelines mandate that when listed entities propose an RPT, they must provide their audit committees with specific information as per the new standards. Furthermore, when seeking shareholder approval for any RPT, the explanatory statement accompanying the notice will need to include this additional information, alongside the existing requirements under the Companies Act, 2013.
In a bid to facilitate compliance, Sebi has instructed stock exchanges to inform listed entities about the new circular. The exchanges and industry associations will also publish the new standards on their websites to help companies adhere to the updated requirements.
Sebi also introduced a dedicated portal for RPTs to promote greater transparency. The platform aims to give investors, including retail investors, easier access to critical governance data related to RPTs. Sebi's whole-time member, Ashwani Bhatia, highlighted that the portal will make transparency in these transactions a right available to all investors, not just institutional ones.
The move comes as part of Sebi's ongoing efforts to strengthen corporate governance and ensure greater accountability in related party transactions, a sector that has seen its share of governance lapses in the past.
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Published 21:27 IST, February 15th 2025
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