MAJOR CHANGES ANNOUNCED BY SEBI ON RPT RULES

 MAJOR CHANGES ANNOUNCED BY SEBI ON RPT RULES

Now ,Shareholders of Listed Companies will receive valuation reports for significant  RPT transactions, accessible via a web link and QR code.

 

SEBI has made significant updates to the rules around Related Party Transactions (RPTs) under LODR Regulations, with changes announced today, June 27, 2025

 

1.CEO/CFO CERTIFICATE NOW MANDATORY  FOR RPT

 

The audit committee must receive a certificate from the CEO (or whole-time director) and CFO, verifying that the terms of proposed RPTs are indeed in the best interest of the company.

 

Previously, promoters were also required to provide such certification; this requirement has now been removed.

 

DETAILED DISCLOSURES FROM SEPTEMBER 1,2025

 

From September 1, 2025, companies are required to furnish:

 

·      The new CEO/CFO certificate,

 

·      An external valuation or valuation report,

 

·      Detailed disclosures in a standardized format to both the audit committee and shareholders

 

INDUSTRY STANDARDS FRAMEWORK

 

• These disclosures must align with the Industry Standards developed by ASSOCHAM, CII, and FICCI, in consultation with SEBI.

 

• RPTs are categorized as Material, Limited, or Minimum, depending on thresholds (e.g., ₹1 crore, 2% of turnover/net worth), with corresponding disclosure levels

 

• Material RPTs require comprehensive disclosures; smaller residual RPTs only need limited or minimal info

BROADER MATERIALITY POLICY REQUIREMENTS

• The LODR Amendment 2025 further mandates that boards must approve materiality policies for RPTs, to be reviewed at least once every three years, with thresholds clearly defined .

 

• It also empowers audit committees to review subsidiary RPTs exceeding 10% of a subsidiary's turnover.

 

WHAT LISTED COMPANIES SHOULD DO?

 

·      Update internal RPT policies to include signature requirements from CEO/CFO.

 

·      Engage external valuers for RPTs above ₹1 crore.

 

·      Revise templates to match standardized disclosure formats.

 

·      Train audit committees and boards on the new thresholds, categories, and documentation needs.

 

·      Schedule a policy review once every 3 years, in line with LODR amendments.

 

RELAXATION IN ROYALTY PAYMENT DISCLOSURES:

 

 SEBI has eased the requirement for peer comparison in royalty payment-related disclosures, reducing compliance burden.

 

R V SECKAR FCS,LLB 79047 19295