Industry Standards on “Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions”  

Posted On - 29 July, 2025 • By - King Stubb & Kasiva

Introduction 

The Securities and Exchange Board of India (“SEBI”) issued the circular on revised Industry Standards on ‘Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions (“RPTs”).” The decision comes as a result of a series of consultations by SEBI with major industry bodies to rationalise and harmonise the disclosure norms on RPT approvals.  

Law 

As per Regulations 23(2), (3), and (4) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), all RPTs entered into by listed entities are required to be approved by the Audit Committee and Shareholders (in the case of RPTs which are material). The information to be placed before the Audit Committee and the shareholders for consideration of RPTs in respect of RPTs is specified under Part A and Part B of Section III-B of the SEBI Master Circular dated November 11, 2024. 

Amendments 

In order to enable implementation of the same in a smoother manner, SEBI had earlier, vide circular dated February 14, 2025, prescribed that listed entities shall follow Industry Standards developed by the Industry Standards Forum (“ISF”), consisting of ASSOCHAM, CII and FICCI in consultation with the stock exchanges and under guidance from SEBI. The deadline for these regulations had been April 1, 2025. Subsequently, based on feedback from stakeholders and requests for rationalisation, SEBI also issued a circular on March 21, 2025 further extending the period of time to July 1, 2025, and requested the ISF to review and revise the standards. 

In light of such review and after subsequent discussions with SEBI, the ISF has subsequently issued revised Industry Standards for Related Party Transactions approvals. In view of the same, SEBI has modified Section III-B of the Master Circular. Paragraph 4 of Part A has been replaced to provide that the listed entity will disclose to the Audit Committee such information as is contained in the updated Industry Standards when it brings an RPT proposal for review and approval. Likewise, Paragraph 6 under Part B has been amended to require that any notice which is sent to shareholders for Related Party Transactions approval must, in addition to disclosures under the Companies Act, 2013, include the prescribed information under the revised Industry Standards as part of the explanatory statement.  

Accordingly, Section III-B of the Master Circular shall stand modified as under from the effective date of this circular:  

  • Paragraph 4 under Part A of Section III-B shall stand substituted by the following paragraph: “The listed entity shall provide the audit committee with the information as specified in the Industry Standards on “Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions”, while placing any proposal for review and approval of an RPT.”  
  • Paragraph 6 under Part B of Section III-B shall stand substituted by the following paragraph: “The notice being sent to the shareholders seeking approval for any RPT shall, in addition to the requirements under the Companies Act, 2013, include the information as part of the explanatory statement as specified in the Industry Standards on “Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions.” The listed entities shall comply with the amended RPT Industry Standards under Regulation 23 of LODR and Parts A and B of the Master Circular. 

From the date of effect of this circular, all listed entities need to ensure full compliance with the new norms in accordance with the provisions of this Master Circular and Regulation 23 of the LODR Regulations. Moreover, industry associations and stock exchanges have been advised to host the amended Industry Standards on their websites and develop and circulate a FAQ document with answers to the Frequently Asked Questions (“FAQs”). These FAQs shall be prepared in consultation with SEBI and placed on the websites of ASSOCHAM, FICCI, CII and stock exchanges. 

Conclusion  

This circular shall be effective as of September 01, 2025. It supersedes SEBI Circulars: 

  • SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/18 dated February 14, 2025 
  • SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/37 dated March 21, 2025 

Stock Exchanges have been asked to disseminate the new requirements to all listed entities. The said directions are with reference to powers under Section 11(1) and 11A of the SEBI Act, 1992, and Regulation 101 of the LODR Regulations.  

The circular can be found on the official website of SEBI at ‘Legal → Circulars’.