Note on revised Industry Standards pursuant to SEBI Circular No. SEBI/HO/CFD/CFD-POD-2/P/CIR/2025/93 dated June 26, 2025

Background

Initially, SEBI, vide a circular dated February 14, 2025, mandated listed entities to follow Industry Standards on "Minimum information to be provided for review of the audit committee and shareholders for approval of a related party transaction". Due to stakeholder feedback requesting an extension, a circular dated March 21, 2025, extended the effective date to July 1, 2025, and advised the Industry Standards Forum ("ISF") to consider feedback for simplification. This led to the significant revisions.

Changes Introduced by the June 26, 2025, Circular (Revised Industry Standards)

The circular dated June 26, 2025, introduced the revised "Industry Standards on Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions" ("RPT Industry Standards"). These standards shall be effective from September 1, 2025 ("effective date").

1. Applicability

The standards are applicable to:

All RPTs placed for review and approval by the Audit Committee.
Material RPTs placed for approval of both the Audit Committee and shareholders.

Specific Non-Applicability (Exemptions)

The RPT Industry Standards shall not be applicable for:

Transactions exempted under Regulation 23(5) of SEBI LODR Regulations, including:
- Transactions between two public sector Companies.
- Transactions between a holding company and its wholly owned subsidiary Company.
- Transactions between two wholly-owned subsidiaries of the listed holding company.
- Transactions involving payment of statutory dues, fees, or charges between an entity and the Central or State Government.
- Transactions between a public sector company and the Central and/or State Government.
Quarterly review of RPTs by the Audit Committee in terms of Reg. 23(3)(d) of SEBI LODR Regulations.
Transactions (individually or together) not exceeding Rupees One Crore (a key change, exempting them from the standards themselves).
Approvals (including omnibus) granted before the effective date, unless there are material modifications post-effective date.

2. Comparison with February 2025 Industry Standards

Aspect	February 2025 Standards	June 2025 Standards
Effective Date	April 1, 2025 (subsequently extended to July 1, 2025)	September 1, 2025 ²⁰
Disclosure Format	Matrix-based: Comprehensive, Limited, Minimum disclosures	Simplified tiered structure: Parts A, B, and C
Exemption Threshold	Transactions below ₹1 crore required minimum disclosures	Transactions below ₹1 crore fully exempted
Management Certification	From CEO/CFO/KMP and Promoter Directors	Limited to CEO/MD/WTD/Manager and CFO
Shareholder Access to Reports	No specific provision	Web-links and QR codes for valuation reports introduced
Redaction of Commercial Secrets	Permitted with Audit Committee/Board approval	Re-emphasised and clarified role of Audit Committee/Board in permitting redactions
Look-back Period for Past Transactions	Generally last three financial years for several disclosures ³¹	Simplified to last financial year and current year up to preceding quarter
Financial Performance of Related Parties	Last three financial years required ³³	Only immediately preceding financial year

3. Structured Information Requirements (Part A, B, and C)

The revised RPT Industry Standards are structured into three distinct parts, tailored to the type and materiality of the RPT:

Part A: Minimum Information (Applicable to ALL RPTs)	Part B: Information for Specific RPT Types (In addition to Part A)	Part C: Information for Specific Material RPT Types (In addition to Part A & B)
Basic details of the related party (name, country of incorporation, nature of business).	Sale, purchase or supply of goods/services/trade advances	Loans and advances or inter-corporate deposits given (e.g., credit rating of related party, default history, insolvency status).
Relationship and ownership (shareholding of listed entity/subsidiary in related party, and vice versa, including indirect shareholding and relatives' holdings).	Loans and advances (other than trade advances) or inter-corporate deposits given	Investments made by the listed entity or its subsidiary (e.g., credit rating, regulatory approvals).
Details of previous transactions (total amount in last and current financial year, any defaults by the related party).	Investments made by the listed entity or its subsidiary.	Guarantees, surety, indemnity, or comfort letters given (e.g., credit rating, solvency status, default history).
Basic details of the proposed transaction (type, tenure, value, percentage of turnover, whether omnibus approval is sought, justification, interest of promoters/directors/KMP, external reports).	Guarantees, surety, indemnity, or comfort letters.	Borrowings by the listed entity or its subsidiary (e.g., debt to equity ratio, debt service coverage ratio before and after transaction)
Financial performance of related party.	Borrowings by the listed entity or its subsidiary.	Sale, lease or disposal of assets/undertakings/shares (e.g., details of earlier sales, impact on segment reporting, transfer of key intangible assets).
	Sale, lease, or disposal of assets of subsidiary or unit/division/undertaking of listed entity, or disposal of shares of subsidiary/associate	Payment of royalty (e.g., gross amount of royalty paid in last three financial years, purpose breakdown, royalty as % of net profits, peer comparison).
	Transactions relating to payment of royalty.

4. Information to be provided before Audit Committee and Shareholders

Guidelines for Information to Audit Committee

Minimum Information for Shareholders for Material RPTs

Management must provide information in the specified format (Parts A, B, and C as applicable), indicating 'NA' with reasons for non-applicable fields.

The explanatory statement in the notice to shareholders must include information as placed before the Audit Committee and the details specified in the RPT Industry Standards (to the extent applicable).

A certificate from the CEO/MD/WTD/Manager and CFO confirming that RPT terms are in the listed entity's interest is now required.

Justification for the RPT being in the listed entity's interest, basis for price determination, and other material terms are required.

A copy of valuation or external party reports, if any, must be provided.

Disclosure that the Audit Committee has reviewed the CEO/MD/WTD/Manager and CFO certificates.

If the audited financial statements of the related party are not available for the immediately preceding financial year, provide financial extracts relevant to the minimum information, duly certified by the related party, as drawn from its books of accounts.

Requirement to provide a web-link and QR Code for access to valuation or other external reports.

When the related party follows a different financial year, such fact shall be disclosed.

Disclosure that the material RPT has been approved by the Audit Committee and the Board of Directors recommends the proposed transaction to the shareholders for approval.

In case of multiple types of proposed transactions, details must be provided separately for each type (e.g., sale of goods and purchase of goods are separate transactions).

Audit Committee and Board can approve redaction of commercial secrets which would affect the competitive position of the listed entity, provided they confirm the redacted disclosures still provide necessary information for informed decision-making.

Audit Committee has the discretion to comment on information and record the rationale for not approving RPTs.

Our Remarks (Summary)

The revised RPT Industry Standards marks a practical step forward in addressing operational and compliance challenges previously faced by listed entities under the SEBI framework.
The simplification of the applicability matrix ensures focus on transactions involving only related parties as defined under SEBI regulations, while retaining essential exemptions for low-risk, routine, and government-related transactions.
Rationalization of certification requirements — shifting the responsibility from promoter directors to executive management (CEO/MD/WTD/Manager and CFO) — aligns accountability with operational leadership and improves governance efficiency.
The reduction in disclosure requirements and linking disclosures directly to transaction types significantly eases compliance burden, especially for banks, NBFCs, and insurance companies, without compromising the quality of oversight.
Elimination of redundant disclosures relating to royalties, brand payments, and in-house R&D is a sensible move, reducing clutter and focusing attention on materially significant transactions.
Simplified peer benchmarking norms for royalty payments address industry concerns around data availability and comparability, making compliance more practical while maintaining shareholder transparency.
The clarification around comfort letters and likely financial liabilities resolves prior ambiguities, providing greater certainty to listed entities in structuring and reporting such arrangements.
Alignment of trade advance disclosures with Companies Act thresholds standardizes practices and eases administrative challenges associated with long-outstanding advances.
The regulatory response to concerns around unaudited financial statements, through clarifications and flexibility in representations, ensures disclosures remain reliable without imposing impractical demands on entities or their related parties.
Overall, these amendments are expected to enhance procedural clarity, reduce regulatory overreach, and improve the operational efficiency of Audit Committees and Boards, while preserving robust governance and informed shareholder decision-making.
It is advisable for listed companies to proactively update their internal documentation, approval processes, and reporting templates in alignment with the revised standards before the September 1, 2025, effective date to ensure seamless compliance.

FAQs on Revised Industry Standard on Related Party Transactions (RPT)

Q1: When do these RPT Industry Standards become effective?

The RPT Industry Standards will come into effect from September 01, 2025.

Q2: Do we need to re-approve RPTs that were approved before September 01, 2025, but will be executed after this date?

No, it is not required to seek fresh approval. If the Audit Committee and/or shareholders granted approval for RPTs before September 01, 2025, for execution on or after this date, a new approval under these standards is not required for the validity of that approval. This is only unless there is a material modification to such RPTs presented to the Audit Committee after the effective date.

Q3: What if the omnibus approval for FY 2025-26 is already in place?

If omnibus approval for RPTs for the financial year 2025-26 was granted before September 01, 2025, a fresh approval with disclosures as per these RPT Industry Standards is not required. However, any material modification to such RPTs on or after the effective date shall be subject to the RPT Industry Standards.

Q4: What is the new structure for RPT disclosures?

The standards introduce a new tiered structure:

Part A: Minimum information applicable to all RPTs.
Part B: Additional information required only if a specific type of RPT (e.g., loans, sale of goods, guarantees) is proposed, in addition to Part A.
Part C: Further additional information required only if a specific type of RPT proposed is a Material RPT, in addition to Part A and Part B.

Q5: Are there any RPTs that are fully exempt from these standards?

Yes, the RPT Industry Standards are not applicable to:

Transactions exempted under Regulation 23(5) of the LODR Regulations.
Quarterly review of RPTs by the Audit Committee as per Regulation 23(3)(d) of the LODR Regulations.
Transactions with a related party that, individually or taken together with previous transactions during a financial year, do not exceed Rs. One Crore. This is a key change, as transactions below Rs. 1 Crore are now exempt from the standards themselves.

Q6: Who is required to provide the certificate confirming the RPT terms are in the interest of the listed entity?

The management of the listed entity is now required to provide a Certificate from the Chief Executive Officer (CEO)/Managing Director/Whole Time Director/Manager and Chief Financial Officer (CFO), confirming that the terms of the proposed RPTs are in the interest of the Listed Entity. The previous requirement for promoter director certificates has been removed.

Q7: How will shareholders access valuation reports for Material RPTs?

For Material RPTs, the explanatory statement in the notice to shareholders must now include a web-link and QR Code through which shareholders can access the valuation report or other external party reports, if any, considered by the Audit Committee while approving the RPT.

Q8: Can commercial secrets be excluded from shareholder disclosures for Material RPTs?

Yes, the Audit Committee and Board of Directors can approve the redaction of commercial secrets and other competitive information from disclosures to shareholders. However, they must affirm that, in their assessment, the redacted disclosures still provide all the necessary information for public shareholders to make an informed decision.

Industry Standards Pursuant to SEBI