Regulation 23 - Related party transactions - Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

Related party transactions. 23. (1) The listed entity shall formulate a policy on materiality of related party transactions and on dealing with related party transactions 1 [including clear threshold limits duly approved by the board of directors and such policy shall be reviewed by the board of directors at least once every three years and updated accordingly]: 11 [ Provided that a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower 31 [ : ]] 32 [ Provided further that with effect from April 01, 2025, in case of a listed entity which has listed its specified securities on the SME Exchange, a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds Rupees fifty crore or ten per cent. of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower. ] 2 [ (1A) Notwithstanding the above, 7 [ with effect from July 01, 2019, ] a transaction involving payments made to a related party with respect to brand usage or royalty shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceed 8 [ five ] percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.] (2) All related party transactions 12 [ and subsequent material modifications ] shall require prior approval of the 13 [ audit committee of the listed entity: ] 9 [ Provided that only those members of the audit committee, who are independent directors, shall approve related party transactions. ] 14 [ Provided further that: (a) the audit committee of a listed entity shall define material modifications and disclose it as part of the policy on materiality of related party transactions and on dealing with related party transactions; (b) a related party transaction to which the subsidiary of a listed entity is a party but the listed entity is not a party, shall require prior approval of the audit committee of the listed entity if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year exceeds ten per cent of the annual consolidated turnover, as per the last audited financial statements of the listed entity; (c) with effect from April 1, 2023, a related party transaction to which the subsidiary of a listed entity is a party but the listed entity is not a party, shall require prior approval of the audit committee of the listed entity if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year, exceeds ten per cent of the annual standalone turnover, as per the last audited financial statements of the subsidiary; (d) prior approval of the audit committee of the listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred to in (d) above, the prior approval of the audit committee of the listed subsidiary shall suffice. ] 22 [ (e) remuneration and sitting fees paid by the listed entity or its subsidiary to its director, key managerial personnel or senior management, except who is part of promoter or promoter group, shall not require approval of the audit committee provided that the same is not material in terms of the provisions of sub-regulation (1) of this regulation. (f) The members of the audit committee, who are independent directors, may ratify related party transactions within three months from the date of the transaction or in the immediate next meeting of the audit committee, whichever is earlier, subject to the following conditions: (i) the value of the ratified transaction(s) with a related party, whether entered into individually or taken together, during a financial year shall not exceed rupees one crore; (ii) the transaction is not material in terms of the provisions of sub-regulation (1) of this regulation; (iii) rationale for inability to seek prior approval for the transaction shall be placed before the audit committee at the time of seeking ratification; (iv) the details of ratification shall be disclosed along with the disclosures of related party transactions in terms of the provisions of sub-regulation (9) of this regulation; (v) any other condition as specified by the audit committee: Provided that failure to seek ratification of the audit committee shall render the transaction voidable at the option of the audit committee and if the transaction is with a related party to any director, or is authorised by any other director, the director(s) concerned shall indemnify the listed entity against any loss incurred by it. ] (3) Audit committee may grant omnibus approval for related party transactions proposed to be entered into by the listed entity 23 [ or its subsidiary ] subject to the following conditions, namely- (a) the audit committee shall lay down the criteria for granting the omnibus approval in line with the policy on related party transactions 24 [ **** ] and such approval shall be applicable in respect of transactions which are repetitive in nature; (b) the audit committee shall satisfy itself regarding the need for such omnibus approval and that such approval is in the interest of the listed entity; (c) the omnibus approval shall specify: (i) the name(s) of the related party, nature of transaction, period of transaction, maximum amount of transactions that shall be entered into, (ii) the indicative base price / current contracted price and the formula for variation in the price if any; and (iii) such other conditions as the audit committee may deem fit: Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may grant omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction. (d) the audit committee shall review, at least on a quarterly basis, the details of related party transactions entered into by the listed entity 25 [ or its subsidiary ] pursuant to each of the omnibus approvals given. (e) Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year: (4) All material related party transactions 15 [ and subsequent material modifications as defined by the audit committee under sub-regulation (2), ] shall require 16 [ prior ] approval of the shareholders through resolution and 3 [ no related party shall vote to approve] such resolutions whether the entity is a related party to the particular transaction or not: 17 [ Provided that prior approval of the shareholders of a listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred above, the prior approval of the shareholders of the listed subsidiary shall suffice. ] [Provided 18 [ further ] that the requirements specified under this sub-regulation shall not apply in respect of a resolution plan approved under section 31 of the Insolvency Code, subject to the event being disclosed to the recognized stock exchanges within one day of the resolution plan being approved;] 4 (5) The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases: (a) transactions entered into between two 26 [ public sector ] companies; (b) transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. 19 [ (c) transactions entered into between two wholly-owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. ] 27 [ (d) transactions which are in the nature of payment of statutory dues, statutory fees or statutory charges entered into between an entity on one hand and the Central Government or any State Government or any combination thereof on the other hand. (e) transactions entered into between a public sector company on one hand and the Central Government or any State Government or any combination thereof on the other hand. ] 28 [ **** ] (6) The provisions of this regulation shall be applicable to all prospective transactions. (7) 20 [ **** ] (8) All existing material related party contracts or arrangements entered into prior to the date of notification of these regulations and which may continue beyond such date shall be placed for approval of the shareholders in the first General Meeting subsequent to notification of these regulations. 21 [ (9) The listed entity shall submit to the stock exchanges disclosures of related party transactions in the format as specified by the Board from time to time, and publish the same on its website: Provided that a high value debt listed entity shall submit such disclosures along with its standalone financial results for the half year: Provided further that the listed entity shall make such disclosures every six months within fifteen days from the date of publication of its standalone and consolidated financial results: Provided further that the listed entity shall make such disclosures every six months on the date of publication of its standalone and consolidated financial results with effect from April 1, 2023 29 [ : ]] 30 [ Provided further that the remuneration and sitting fees paid by the listed entity or its subsidiary to its director, key managerial personnel or senior management, except who is part of promoter or promoter group, shall not require disclosure under this sub-regulation provided that the same is not material in terms of the provisions of sub-regulation (1) of this regulation. ] ************* NOTES:- 1 Inserted ibid. 2 Inserted by the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, w.e.f. 1.4.2019. 3 Substituted ibid for the words the related parties shall abstain from voting on . 4 Inserted by SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2018, w.e.f. 31.05.2018. 5 Substituted for the words abstain from voting by the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, w.e.f. 1.4.2019. 6 Inserted ibid, w.e.f the half year ending March 31, 2019. 7. Inserted vide Notification No. SEBI/LAD-NRO/GN/2019/07 dated 29-03-2019 8. Substituted vide NOTIFICATION No. SEBI/LAD-NRO/GN/2019/22 dated 27-06-2019 before it was read as two 9. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/35 dated 03-08-2021 w.e.f. 01-01-2022 10. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/47 dated 07-09-2021 11. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 before it was read as, Explanation. - A transaction with a related party shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity. 12. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 13. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 before it was read as audit committee. 14. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 15. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 16. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 17. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 18. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 19. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 20. Omitted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 before it was read as, (7) For the purpose of this regulation, all entities falling under the definition of related parties shall 5 [not vote to approve the relevant transaction] irrespective of whether the entity is a party to the particular transaction or not. 21. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/55 dated 09-11-2021 w.e.f. 01-04-2022 before it was read as, 6 [(9) The listed entity shall submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges and publish the same on its website.] 10 [ Provided that a high value debt listed entity shall submit such disclosures along with its standalone financial results for the half year. ] 22. Inserted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 23. Inserted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 24. Omitted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 before it was read as, of the listed entity 25. Inserted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 26. Substituted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 before it was read as, government 27. Inserted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 28. Omitted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 before it was read as, Explanation. - For the purpose of clause (a), government company(ies) means Government company as defined in sub-section (45) of section 2 of the Companies Act, 2013. 29. Substituted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 before it was read as, . 30. Inserted vide Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12-12-2024 w.e.f. 12-12-2024 31. Substituted vide F. No. SEBI/LAD-NRO/GN/2025/239 dated 27-03-2025 before it was read as, . 32. Inserted vide F. No. SEBI/LAD-NRO/GN/2025/239 dated 27-03-2025