Open to Scrapping All LODR Norms Except Those on Related-Party Transactions

SEBI Chairperson Madhabi Puri Buch expressed her willingness to discard the entire Listing Obligations and Disclosure Requirements (LODR) Regulations, except for those related to related-party transactions (RPTs).

She made this statement during the launch of India’s first dedicated portal designed to track and analyze RPTs on February 14. The platform will provide access to a broad range of stakeholders, including investors, banks, and credit rating agencies.

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Details of The Portal

The portal aims to compile comprehensive information on RPTs, including shareholder voting patterns from the past two years, enabling investors and other entities to make well-informed decisions. By consolidating such data in a single platform, the initiative seeks to bridge information gaps and enhance corporate governance practices in India.

Speaking at the launch event held at the Institute of Chartered Accountants of India (ICAI) Tower on Friday, Buch highlighted the significant interest in enhancing transparency around RPTs, emphasizing that the portal represents a step in that direction. She noted that related-party transactions have long been a subject of scrutiny by investors, regulators, and corporate governance watchdogs due to their potential impact on minority shareholders.

She also pointed out that institutional investors, including foreign investors, frequently inquire about measures taken to improve transparency concerning RPTs. The new portal is expected to provide them with deeper insights into corporate governance practices, helping them assess risks associated with related-party transactions.

The initiative, spearheaded by the Securities and Exchange Board of India (SEBI), will be managed by three proxy advisory firms—InGovern Research Services, Institutional Investor Advisory Services, and Stakeholder Empowerment Services (SES). These firms specialize in analyzing corporate governance issues and will play a crucial role in ensuring that the portal remains updated with accurate and relevant data.

Over time, the entities managing the portal plan to introduce additional features, such as identifying which institutions voted in favor of or against specific RPT transactions. This level of transparency is expected to bring more accountability to corporate decision-making, ensuring that shareholders, particularly minority investors, are better informed about the potential conflicts of interest involved in related-party dealings.

Buch’s comments regarding the LODR regulations also highlight an ongoing debate about regulatory burden versus the need for transparency in financial markets. While the LODR framework is designed to ensure that listed entities adhere to high disclosure and compliance standards, some market participants have argued that excessive regulations can be cumbersome. By suggesting that she would be willing to do away with most LODR regulations except those concerning RPTs, Buch underscored the critical importance of transparency in related-party dealings over other regulatory requirements.

What Does The Markets Say?

Market experts believe that the portal’s launch is a progressive move, as it aligns with global best practices in corporate governance. In several developed markets, regulatory bodies have implemented stringent measures to track and monitor related-party transactions to prevent conflicts of interest and promote fair business practices. India’s move to introduce such a portal signals its commitment to improving corporate governance standards and fostering a more investor-friendly environment.

Additionally, the portal’s ability to track shareholder voting patterns over the past two years will provide critical insights into how different institutions engage with related-party transactions. Analysts expect this feature to be particularly useful for investors looking to assess whether companies have a history of making controversial RPTs and whether institutional investors have consistently supported or opposed such transactions.

The Way Ahead

Going forward, SEBI and proxy advisory firms are likely to expand the portal’s scope by integrating additional data analytics tools, which could offer predictive insights into corporate governance trends. These enhancements could help stakeholders identify patterns in voting behavior and anticipate potential governance risks before they escalate into larger issues.

With this initiative, SEBI aims to reinforce investor confidence in the Indian financial markets by promoting greater accountability and transparency in corporate dealings. The success of the portal will depend on how effectively it is maintained and whether it encourages companies to adopt stronger governance frameworks in their business operations.