SEBI Introduces New Disclosure Rules for Related Party Transaction Approvals

The Securities and Exchange Board of India (SEBI) has introduced standardized guidelines outlining the minimum information that listed companies must disclose to the audit committee and shareholders when seeking approval for related party transactions (RPTs).

These standards have been developed by the Industry Standards Forum (ISF), which consists of representatives from three major industry associations—ASSOCHAM, CII, and FICCI. In collaboration with SEBI and under the oversight of stock exchanges, the ISF has formulated the necessary information requirements for audit committees and shareholders reviewing RPTs.

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According to a circular issued by SEBI on Friday, industry associations and stock exchanges will publish these standards on their respective websites to promote consistency and assist listed companies in meeting compliance obligations. The implementation of uniform disclosure norms aims to bring greater transparency, reducing discrepancies in how different companies present information related to RPTs. This move is expected to strengthen corporate governance practices by ensuring stakeholders have access to standardized, relevant data before making key decisions.

The revised disclosure norms are set to take effect from April 1, giving companies some time to align their internal processes with the new regulatory framework.

Key Changes in Disclosure Requirements

Under SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations, related party transactions require approval from both the audit committee and shareholders, particularly if they are deemed material. The latest modifications specify that listed entities must present the audit committee with structured and standardized information as per the newly established industry standards when submitting proposals for RPT review and approval.

Similarly, any explanatory statements accompanying notices sent to shareholders for RPT approvals must include the prescribed information, in addition to the disclosures mandated under the Companies Act, 2013. This ensures that investors have a clearer understanding of the nature, scope, and implications of such transactions before providing their consent.

Furthermore, SEBI has directed stock exchanges to inform all listed entities about the circular's contents to ensure complete and timely compliance. The uniform guidelines are expected to reduce ambiguity, prevent selective disclosures, and help stakeholders compare transactions more effectively across different companies.

Launch of RPT Portal to Enhance Transparency

In a move to further enhance transparency in corporate dealings, SEBI also launched a dedicated RPT portal on Friday. The portal is designed to provide investors and stakeholders with easy access to critical governance data on related party transactions.

"This portal will streamline investor access to essential governance data on RPTs. It ensures that transparency in related party transactions is not just an advantage for institutional investors but a right available to all," said Ashwani Bhatia, SEBI’s Whole-Time Member.

By introducing this platform, the regulator aims to improve the monitoring and analysis of RPTs—an area often prone to governance lapses. The portal will serve as a centralized database where information on RPTs can be accessed in a structured manner, enabling greater scrutiny by investors, analysts, and regulatory bodies.

Industry experts believe that these measures will contribute to a more transparent and accountable corporate ecosystem. By mandating detailed disclosures and introducing digital tools to track related party dealings, SEBI is taking a proactive approach to curb potential conflicts of interest and improve investor confidence.

Going forward, companies will need to ensure robust internal controls and governance frameworks to comply with the new norms effectively. Failure to provide adequate disclosures or misrepresentation of information could result in regulatory actions, including penalties and reputational damage.

With these initiatives, SEBI continues to strengthen India’s regulatory environment, reinforcing its commitment to investor protection and fair corporate practices.