Markets regulator Sebi has introduced new industry standards outlining the minimum information that listed entities must provide to the audit committee and shareholders when seeking approval for related party transactions (RPTs). The new rules, developed by the Industry Standards Forum (ISF)—which includes representatives from ASSOCHAM, CII, and FICCI—aim to streamline the approval process and ensure uniform compliance across the market.
According to Sebi’s circular released on Friday, these standards will require listed entities to provide detailed information to the audit committee when placing RPT proposals for review. In addition, the explanatory statement accompanying notices sent to shareholders seeking approval for any RPT will now include extra details, beyond those already required under the Companies Act, 2013.
The new disclosure requirements will take effect on April 1. To support compliance, industry associations and stock exchanges will publish these standards on their respective websites.
Sebi’s Listing Obligations and Disclosure Requirements (LODR) rules stipulate that RPTs need approval from both the audit committee and shareholders if deemed material. With these modifications, Sebi aims to enhance transparency and ensure that all stakeholders are well-informed before approving such transactions.
In addition to the new disclosure standards, Sebi launched a dedicated RPT portal on Friday. The portal is designed to provide investors with easy access to critical governance data on RPTs, ensuring that transparency is no longer limited to institutional investors. “This portal will simplify investor access to critical governance data on RPTs, making transparency a right for all,” said Sebi’s whole-time member, Ashwani Bhatia. The regulator also intends for the portal to improve monitoring and analysis of RPTs, an area often prone to governance failures.
(With PTI Inputs)
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