The SEBI has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) on November 9, 2021, with effect from April 1, 2022 in respect of provisions relating inter alia to related party transactions (‘RPT’). Certain key amendments are set out below:

i.    Any person or entity: (a) forming part of the promoter or promoter group; or (b) holding 20% or more (or 10% or more with effect from April 1, 2023), in the listed entity, directly or on beneficial interest basis, at any time during the immediately preceding financial year will be a deemed related party;

ii.    Scope of RPT has been expanded to include certain additional categories of transactions. Certain transactions will not constitute RPT including: (a) preferential issue as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (‘ICDR Regulations’); and (b) corporate actions uniformly applicable to all shareholders;

iii.   SEBI has revised the materiality thresholds and an RPT must be considered material where such transaction, individually or together with previous transactions during a financial year, exceeds Rs 10,000,000,000 (approx. US$ 135 million), or 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements (‘Financials’) of the listed entity, whichever is lower. Prior to the amendment, an RPT was considered material where such transaction, individually or together with previous transactions during a financial year exceeded 10% of the annual consolidated turnover of the listed entity as per the Financials;

iv.   Prior shareholder and audit committee approval will be required for material modifications to an RPT and the audit committee is required to define ‘material modifications’ and disclose the same in the policy on materiality of RPT;

v.    If the subsidiary of a listed entity (but not the listed entity) is a party to an RPT, prior audit committee approval of the listed entity will be required if value of such transaction, individually or together with previous transactions during a financial year, exceeds 10% of the annual consolidated turnover, as per Financials of the listed entity. However, with effect from April 1, 2023, such audit committee approval of the listed entity will be required if such value of the transaction exceeds 10% of the annual standalone turnover, as per Financials of the subsidiary;

vi.   Prior approval of the audit committee and shareholders of a listed entity will not be required for RPTs involving the listed subsidiary (but not the listed entity) if the RPT provisions under Regulation 23 and corporate governance provisions under Regulation 15(2) of the Listing Regulations are applicable to such listed subsidiary;

vii.  Transactions executed between two wholly-owned subsidiaries of a listed holding entity are exempt from the requirement of relevant approvals under Regulations 23(2) and 23(4) of the Listing Regulations, subject to certain conditions; and

viii. While the restrictions on related parties to vote on RPTs have been deleted, the voting restrictions on RPTs under the Companies Act, 2013 continue to apply. Under the Companies Act, 2013, a related party is only entitled to vote on an RPT, where such related party has no interest, or it is not a party to such RPT.

Further, SEBI has, by way of a Circular dated November 22, 2021, which will come into effect on April 1, 2022, inter alia specified the information to be provided to audit committee and the shareholders (as part of the explanatory statement) for approval of RPTs.