Mumbai – SEBI has lowered the threshold at which a related party transaction becomes material, and added a personal certification that puts promoters and directors on the record.
A transaction now counts as material where it exceeds 500 crore rupees or 5 per cent of annual consolidated turnover, whichever is lower. Material transactions require approval from disinterested shareholders, and no related party may vote, whether or not it is involved in the particular transaction.
Certification changes the incentive
Promoters, directors and key managerial personnel must now certify that a related party transaction is not prejudicial to public shareholders. The company must separately justify how the transaction serves its own interest and that of shareholders generally.
This is the meaningful change. A disclosure obligation can be satisfied by a committee. A personal certification attaches a named individual to the assertion, which alters how carefully the assertion gets examined before signature.
The bid question
Audit committees must review the terms of bids received from unrelated parties. Where no such bids were invited, the disclosure must say why not.
That provision reaches the practice it targets. The standard defence of a related party contract is that the group entity offered the best terms. Requiring evidence of a market test, or an explanation of its absence, makes that claim checkable.
Board composition follows
Separately, listed companies with a market capitalisation of 10,000 crore rupees or more must have at least one-third of their independent directors be women, effective 1 April 2027, with a transition through FY 2026-27.
Related party transaction volume is also an assured BRSR Core indicator, filed under openness of business. Companies now report the same underlying activity through two regimes that ask different questions about it.
Source: SEBI circulars on minimum information for audit committee and shareholder approval of related party transactions, and SEBI Listing Obligations and Disclosure Requirements Regulations.
