SEBI’s Revised Related Party Transaction Framework: A New Era of Transparency and Governance 

Posted On - 30 June, 2025 • By - Jidesh Kumar

Introduction 

In a decisive regulatory move aimed at improving transparency and bolstering governance standards, the Securities and Exchange Board of India (SEBI) has issued a circular dated June 26, 2025 (Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93), revising the disclosure norms related to Related Party Transactions (RPTs) under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). 

These changes will take effect from September 1, 2025, and are expected to significantly alter the compliance landscape for listed entities and their audit committees. 

Key Highlights of the Amendments  

1. Executive Certification Streamlined  

SEBI has simplified the management certification process. Earlier, the CEO/WTD, CFO, and promoters were all required to certify that an RPT is in the best interest of the company. Under the revised norms, only the CEO or Whole-Time Director and the CFO are now responsible for such certification.  

This change reduces duplicative oversight while maintaining accountability at the top executive level. 

2. Mandatory Disclosure of Valuation or Fairness Reports 

A pivotal addition to the framework is the mandatory sharing of valuation or fairness reports (where relied upon by the Audit Committee) with shareholders. These must be linked or made accessible via QR codes in shareholder notices seeking approval for material RPTs. 

This enhances informed decision-making by shareholders and aligns with global standards of corporate disclosure. 

3. Standardized Disclosure Templates  

SEBI has introduced a uniform disclosure framework, prescribing minimum information requirements under three parts (Part A, B, and C) of the Industry Standards: 

  • Part A: Applicable to all RPTs, whether material or not, requiring basic disclosure like relationship, nature of the transaction, and pricing terms. 
  • Part B: Additional details for material RPTs requiring shareholder approval, including rationale, comparative terms, and justification. 
  • Part C: Specific disclosures where a fairness opinion or external report is considered. 

    These templates will streamline disclosures and foster comparability across companies. 

4. Audit Committee Oversight Strengthened 

The Audit Committee must now not only review and approve RPTs but also explicitly document: 

  •  Certification from the CEO/CFO that the RPT is in the company’s interest.
  • The basis for approving or rejecting the transaction. 
  • The rationale for any redactions made in the information shared with shareholders. 

    These measures underscore SEBI’s focus on ensuring that audit committees are not mere gatekeepers but active evaluators of related party arrangements. 

5. Enhanced Shareholder Disclosures  

Information provided to shareholders for approval of material RPTs must mirror that which was furnished to the Audit Committee. This includes detailed disclosures on pricing, benchmarking, and independent opinions. 
If any part of the disclosure is redacted due to confidentiality concerns, the rationale must be clearly documented and disclosed to shareholders to the extent permissible. 

Impact on Stakeholders  

Stakeholder Action Required 
Listed Companies Update internal policies, train personnel, integrate document sharing mechanisms (QR codes/links) 
Audit Committees Review documentation standards, ensure minuted rationale, enhance documentation protocols 
Legal Counsel Revise RPT policies, prepare standardized notice templates, assist with interpretation of new norms 
Valuation Professionals Deliver structured, SEBI-compliant reports with clear summaries for shareholder use 
Investors Greater access to valuation justifications and management rationale for RPTs 

Implementation Timeline  

  • Circular Issued: June 26, 2025 
  • Effective From: September 1, 2025 
  • Applicability: All RPTs approved or entered into on or after this date. 

    Pre-approved transactions are exempt from the new format and certification requirements. 

 Challenges and Considerations  

  • Operational Readiness: Companies will need to quickly implement digital mechanisms for linking valuation reports and adapt their secretarial and compliance workflows accordingly. 
  • Documentation Burden: Boards and audit committees must be equipped to handle more rigorous documentation and rationale requirements. 
  • Interpretation Questions: The effective date’s scope—whether linked to approval date or transaction date—may raise implementation doubts that need clarification. 

Conclusion  

SEBI’s revised RPT disclosure regime signals a fundamental shift towards higher transparency and accountability. By formalizing the format and process for both internal committee evaluation and shareholder communication, SEBI aims to ensure that related-party transactions withstand scrutiny—not only in substance but also in perception. 

Companies and their advisors must move swiftly to integrate these standards into corporate governance frameworks by the September 2025 deadline.