Date: 2025-02-14Category: Not ApplicableState: Union GovernmentCountry: India
Industry Standards on “Minimum information to be provided for review of the audit committee and shareholders for approval of a related party transaction
Executive Summary:
This circular, effective April 1, 2025, outlines industry standards for minimum information required for audit committee and shareholder review and approval of related party transactions (RPTs) under SEBI LODR Regulations. It incorporates industry standards formulated by the Industry Standards Forum (ISF) and modifies Section IIIB of the SEBI Master Circular. Listed entities must adhere to these standards for compliance.
Key Points / Main Content:
* **Background and Purpose:**
* Regulation 23(2, 3, and 4) of SEBI LODR Regulations requires audit committee and shareholder approval for RPTs, if material.
* The circular aims to facilitate a uniform approach for listed entities in complying with these requirements.
* Industry Standards Forum (ISF), including ASSOCHAM, CII, and FICCI, developed industry standards in consultation with SEBI.
* ASSOCHAM, FICCI, CII, and stock exchanges shall publish the industry standards on their websites.
* **Industry Standards Implementation:**
* Listed entities shall follow the industry standards for compliance with Part A and Part B of Section IIIB of the Master Circular and Regulation 23(2, 3, and 4) of LODR Regulations.
* **Modifications to Master Circular:**
* Paragraph 4 of Part A, Section IIIB of the Master Circular is replaced, requiring listed entities to provide the information specified in the Industry Standards to the audit committee.
* Paragraph 6 of Part B, Section IIIB of the Master Circular is replaced, requiring that notices to shareholders seeking approval for any RPT shall include the information as part of the explanatory statement as specified in the Industry Standards.
* **Effective Date:**
* The circular is effective from April 1, 2025.
Impact Analysis:
* **Listed Entities:**
* Impact: Must comply with the new industry standards for providing information related to RPTs to the audit committee and shareholders.
* Action Required: Implement the industry standards, modify internal processes for RPT review and approval, and ensure compliance with the modified Section IIIB of the Master Circular.
* **Stock Exchanges:**
* Impact: Responsible for ensuring listed entities are aware of and comply with the circular.
* Action Required: Bring the contents of the circular to the notice of their listed entities and ensure compliance.
* **Industry Associations (ASSOCHAM, FICCI, CII):**
* Impact: Involved in the formulation of the industry standards and responsible for their dissemination.
* Action Required: Publish the industry standards on their websites.
* **Audit Committees and Shareholders:**
* Impact: Will receive more standardized and comprehensive information for reviewing and approving RPTs.
* Action Required: Review RPTs based on the information provided as per the new industry standards.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for securities and commodity market in India.
SEBI Listing Obligations and Disclosure Requirements Regulations, 2015: Regulations pertaining to listing obligations and disclosure requirements for listed entities.
LODR Regulations: Abbreviation for SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Related Party Transactions: Financial transactions between related parties that require audit committee and shareholder approval under Regulation 23 of LODR Regulations.
SEBI Master Circular dated November 11, 2024: Circular issued by SEBI specifying information to be placed before the audit committee and shareholders for consideration of Related Party Transactions.
Industry Standards Forum: A forum comprising representatives from industry associations (ASSOCHAM, CII, and FICCI) under the aegis of the Stock Exchanges, which formulates industry standards.
The Associated Chambers of Commerce and Industry of India: One of the industry associations that is part of the Industry Standards Forum (ISF).
Federation of Indian Chambers of Commerce and Industry: One of the industry associations that is part of the Industry Standards Forum (ISF).
Confederation of Indian Industry: One of the industry associations that is part of the Industry Standards Forum (ISF).
Companies Act, 2013: An Act of the Parliament of India that regulates Indian companies.
CIRCULAR
SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/18 February 14, 2025
To,
All listed entities
All the recognized Stock Exchanges
The Associated Chambers of Commerce and Industry of India (ASSOCHAM)
Federation of Indian Chambers of Commerce and Industry (FICCI)
Confederation of Indian Industry (CII)
Dear Sir/Madam,
Sub: Industry Standards on “Minimum information to be provided for review of
the audit committee and shareholders for approval of a related party
transaction”
1. Regulation 23(2), (3) and (4) of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (“LODR Regulations”) require related party
transactions (“RPTs”) to be approved by the audit committee and by the
shareholders, if material. Part A and Part B of Section III-B of SEBI Master
Circular dated November 11, 20241 (“Master Circular”) specify the information
to be placed before the audit committee and shareholders, respectively, for
consideration of RPTs.
2. In order to facilitate uniform approach and assist listed entities in complying with
the above mentioned requirements, the Industry Standards Forum (“ISF”)
comprising of representatives from three industry associations, viz. ASSOCHAM,
CII and FICCI, under the aegis of the Stock Exchanges, has formulated industry
standards, in consultation with SEBI, for minimum information to be provided for
review of the audit committee and shareholders for approval of RPTs. The
industry associations which are part of ISF (ASSOCHAM, FICCI, and CII) and
the stock exchanges shall publish the industry standards on their websites.
3. The listed entities shall follow the aforesaid industry standards to ensure
compliance with Part A and Part B of Section III-B of the Master Circular read
with Regulation 23(2), (3) and (4) of LODR Regulations.
1 Master Circular for compliance with the provisions of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 by listed entities
Page 1 of 24. Section III-B of the Master Circular shall stand modified as given below:
4.1. 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 for
review of the audit committee and shareholders for approval of a related party
transaction”, while placing any proposal for review and approval of an RPT.”
4.2. 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 for review of the audit
committee and shareholders for approval of a related party transaction”.”
5. This circular shall come into effect from April 1, 2025.
6. The Stock Exchanges are advised to bring the contents of this circular to the
notice of their listed entities and ensure its compliance.
7. This circular is issued in exercise of the powers conferred under Section 11(1)
and 11A of the Securities and Exchange Board of India Act, 1992 read with
regulation 101 of LODR Regulations.
8. This circular is available on SEBI website at www.sebi.gov.in under the category:
‘Legal → Circulars’.
Yours faithfully,
Raj Kumar Das
Deputy General Manager
Corporation Finance Department
Tel. No.: +91 22 2644 9253
Email id: rajkd@sebi.gov.in
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