Amendments To The Securities And Exchange Board Of India (Listing Obligations And Disclosure Requirements) Regulations, 2015.

As per the amendments, a person or entity shall be deemed to be a ‘related party’: (a) if such person or entity is a promoter or a promoter group of the listed entity, irrespective of their shareholding in the listed entity; or (b) if such person or entity is holding 20% (twenty percent) of the equity shares in the listed entity, either directly or beneficially, shall be deemed to be a related party. This threshold is set to be lowered to 10% (ten percent) from 1 April 2023. Prior to the amendment, only persons holding more than 20% (twenty percent) shareholding in the listed entity, were categorised as related parties of such listed entity.
 

The definition of related party transactions will also be widened to include any transactions between the subsidiaries of a listed entity on one hand, and the subsidiaries of the related party of the listed entity on the other hand. Further, with effect from 1 April 2023 related party transactions shall include within its scope any transaction between a listed entity or its subsidiary on one hand and any other entity on the other hand which has the effect of benefitting the related parties of the listed entity or any of its subsidiaries.
 

The threshold for material related party transactions has also been amended. Earlier transactions exceeding 10% (ten percent) of the consolidated annual turnover of the listed entity was deemed to be a material related party transaction, whereas now in the event a related party transactions exceeds INR 10,000,000,000 (Rupees Ten Billion) or 10% (ten percent) of the annual consolidated turnover of the listed entity, whichever is lower, then such a transaction would be a material related party transaction.
 

With effect from the date of these amendments, a listed entity shall be required to submit to the stock exchanges disclosures of related party transactions, every 6 (six) months, and within 15 (fifteen) days from the date of publication of its standalone and consolidated financial results, whereas from 1 April 2023, these disclosures will have to be made every 6 (six) months and on the date of the publication of the standalone and consolidated financial results.
 

Further, SEBI, vide its circular dated 22 November 2021 has also notified the format for reporting of related party transactions to the stock exchanges. The listed entities are advised to make RPT disclosures every 6 (six) months in the format notified by the SEBI.
 

Please click here and here to read the amendment notification and the circular, respectively.
 

al@acuitylaw.co.in