Also, the regulator has revised the threshold for approval by audit committees for RPTs conducted by subsidiaries and simplified disclosure requirements for minor related party transactions.
These new norms aim to address practical challenges, remove ambiguities and strike a balance between investor protection and ease of doing business under the Listing Obligations and Disclosure Requirements (LODR) norms.
Under the new norms, Rs. An entity with a turnover of up to Rs 20,000 crore will be considered material if the transaction is more than 10 per cent of the annual consolidated turnover, Sebi said in a notification on November 18.
Rs. 20,001 crore and Rs. In case of entities with turnover between Rs.40,000 crore, the threshold is Rs. 2,000 crore apart from Rs. 20,000 crore will be 5 percent of the turnover.
Rs. For entities with a turnover of more than 40,000 crores, the threshold is Rs. 3,000 crores apart from Rs. 40,000 crore over 2.5 percent of the turnover or Rs. 5,000 crore, whichever is lower.
To protect the interests of minority shareholders, Rs. 40,000 crore as an upper ceiling for listed entities with a turnover of Rs. An absolute threshold of Rs 5,000 crore has been notified.
Earlier, under LODR norms, if a listed entity carried out transactions during a financial year individually or together with previous transactions exceeding Rs. 1,000 crore or more than 10 per cent of the entity’s annual consolidated turnover, as per its last audited financial statements, whichever is lower, the RPT was required to be considered material.
The new norms come after stakeholders pointed out that Rs. The absolute materiality threshold of Rs 1,000 crore promotes a “one-size-fits-all” approach, as all listed entities are treated equally irrespective of their turnover, operational scale or business model.
Apart from the materiality limit, SEBI has relaxed the minimum information required to be provided to the audit committee and shareholders for RPT approvals.
Under this, if the total value of RPT with a related party in a financial year (including ratification transactions) exceeds 1 percent of the annual consolidated turnover of the listed entity or Rs. 10 crores, whichever is less, not exceeding, a simplified set of advertisements shall be submitted for approval.
This reduced information requirement will be less detailed than is mandated under current industry standards.
Further, Sebi said, “the best approval given by the shareholders for material related party transactions at the Annual General Meeting shall be valid till the date of the next Annual General Meeting (AGM)”.
“In case of omnibus approvals for material related party transactions approved by shareholders at general meetings other than AGM, the validity of such omnibus approvals shall not exceed one year from the date of such approval,” it added. PTI
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