With a view to facilitate a uniform approach and assist listed entities in complying with the requirement to get Related Party Transactions (“RPTs”) approved by the Audit Committee, and by shareholders if material, the Industry Standards Forum has taken an initiative. This Forum comprises representatives from key industry associations, namely ASSOCHAM, CII, and FICCI. The Forum has worked under the guidance of the Stock Exchanges and has formulated industry standards in consultation with SEBI. These standards prescribe the minimum information that must be provided to the Audit Committee and shareholders for the review and approval of RPTs. Initially these standards were effective from April 01, 2025. These standards will be applicable from July 01, 2025.

SEBI through its Master Circular (Link) dated November 11, 2024 has prescribed the list of information, as mentioned below to be placed before Audit Committee and Shareholders for their prior consideration:

1. Following information are required to be placed before Audit Committee for its prior approval of a proposed RPT:
   • Type, material terms and particulars of the proposed transaction;
   • Name of the related party and its relationship with the listed entity or its subsidiary, including nature of its concern or interest (financial or otherwise);
   • Tenure of the proposed transaction (particular tenure shall be specified);
   • Value of the proposed transaction; and
2. Listed entities shall provide following additional information as part of the Explanatory Statement in the notice being sent to the shareholders seeking prior approval for proposed RPT:
   • Summary of the information provided by the management of the listed entity to the Audit Committee.
   • Justification for why the proposed transaction is in the interest of the listed entity.
   • Where the transaction relates to any loans, inter-corporate deposits, advances or investments made or given by the listed entity or its subsidiary.
   • A statement that the valuation or other external report, if any, relied upon by the listed entity in relation to the proposed transaction will be made available through the registered email address of the shareholders.
   • Percentage of the counter-party’s annual consolidated turnover that is represented by the value of the proposed RPT, on a voluntary basis.

The above requirement ensures that the Audit Committee and the shareholders have relevant data to assess the transaction’s nature, terms, and potential impact on the listed entity.

Let us understand how they industry standards may potentially plan a vital role in ensuring that RPTs are conducted transparently, fairly and in the best interests of the listed entity and its public shareholders.

Key Components of the RPT Industry Standards

Applicability Matrix- The applicability matrix has been classified into five heads namely:

Type of Transactions

• Material RPT (MRPT),
• Other RPT, involving promoters/ entity in which promoter or promoter group has concern or interest,
• Residual RPT.

Threshold – Value based threshold criteria has been prescribed under Standard Note for determination of applicability.

Balance Sheet/ P&L Items – Considering the type of transactions and the threshold limit, disclosure w.r.t Balance sheet/ P & L is to be considered for furtherance.

Approvals required – Approval of Audit Committee is required for all RPTs. However, for material RPTs approval of Audit Committee and shareholders are required to be obtained.

Disclosure Requirements – There are three types of disclosures namely Comprehensive Disclosure, Minimum Disclosures and Limited Disclosures.

• Standards for Definitions of words and expressions used in these Standard.
• Standards for Minimum Information to be provided to the Audit Committee for review and approval (including ratification) of RPTs.
• Format for Minimum Information to be provided for review of the Audit Committee for Approval (including ratification) of RPTs.
• Standards for Minimum Information to be provided to the shareholders for consideration of RPTs.

Listed entities must provide the relevant information in the format as prescribed for minimum information to the Audit Committee for its review.

While collecting and collating the information, the management of the listed entity is required to provide comments against each information where it is sought in the format specified in Para 4 of these Standards against transaction-based information. Entities to put ‘NA’ for such field if it is not applicable and ‘NIL’ where no comments have been provided. Additionally, it shall provide certificates from its Chief Executive Officer or Chief Financial Officer or any other Key Managerial Personnel and from every director who is also a promoter along with other aspects as prescribed in the Industry Standard Note.

The information provided in the standardized format shall be incorporated into the agenda of the Audit Committee meeting. The comments of the Audit Committee shall be recorded in the minutes of the meeting. For material RPTs, the information as prescribed in these Standards shall be included in the Explanatory Statement to the Notice sent to shareholders.

While the industry standards are in conformity with the provisions of the LODR Regulations and/or applicable SEBI Circulars however, if a particular standard or any part thereof becomes inconsistent with subsequent changes in the LODR Regulations and/or SEBI Circular, the provisions of the LODR Regulations and/or the SEBI Circular will prevail.

The Industry Standards on RPTs reflect SEBI’s broader goal of strengthening transparency and investor protection. By following the prescribed disclosures and leveraging the guidance provided, listed entities can ensure compliance while reinforcing stakeholder trust.

This transition period is a great opportunity for companies to review their RPT approval workflows, tighten internal governance and prepare for a more accountable financial ecosystem.

As listed entities gear up to adopt these industry standards by July 1, 2025, a proactive approach to compliance is more critical than ever. Implementing internal processes that ensure timely data collation, Audit Committee readiness, and structured disclosures is no longer optional—it’s essential.

For organizations looking to operationalize these standards efficiently, our compliance management solution/software, Komrisk, offers configurable workflows, approval mapping, and document tracking that can be tailored to meet SEBI’s latest expectations—helping you move from reactive compliance to proactive governance.

Written by: Kumar Bambam

Co-authored by: Antara Dasgupta

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