Introduction:
The Securities And Exchange Board of India (SEBI) has notified the Listing Obligations And Disclosure Requirements Fifth Amendment Regulation, 2025, significantly reforming the Related Party Transactions (RPT) framework under Regulation 23. The amendments stem from SEBI’s view that the earlier threshold of ₹1,000 crore or 10% of turnover created a disproportionate compliance burden for large-cap companies and did not reflect the scale of modern conglomerates.
This amendment tightens shareholder approval requirements, introduces new monetary thresholds, and inserts an entirely new Schedule XII prescribing turnover-linked RPT approval limits.
Key Amendments Approved
(a) Scale-based Thresholds for Material RPTs – Reg. 23(1)
- Existing provision before amendment: Under Regulation 23(1) of the LODR Regulations treats an RPT as material if it exceeds ₹1,000 crore or 10% of the annual consolidated turnover of the listed entity, whichever is lower.
- Amended provision: It has now been approved to introduce a scale-based threshold mechanism for determining material RPTs based on the annual consolidated turnover of the listed entity as under: (Schedule XII of the regulations)
| Annual Consolidated Turnover | New Materiality Threshold |
| Up to Rs.20,000 crore | 10% of annual consolidated turnover of the listed entity |
| Rs.20,001–40,000 crore | Rs.2,000 crore + 5% of annual consolidated turnover of the listed entity above Rs.20,000 crore |
| Above Rs.40,000 crore | Rs.3,000 crore + 2.5% of turnover above Rs.40,000 crore or Rs.5,000 crore (whichever lower) |
- Impact: The change will eliminate the “one-size-fits-all” approach and reduce shareholder-approval burden for large-cap entities while retaining a Rs.5,000 crore upper cap to protect minority investors.
- The term “last audited financial statements” shall be used for computing the threshold, i.e. March 31, 2025, for transactions to be approved after the amendment during the FY 2025-2026 and FY 2026-2027 onwards.
Thresholds for RPTs of Subsidiaries – Reg. 23(2)
- Existing provision before amendment: The existing provision before amendment provided that 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;
- Amended provision: It has been amended to provide that any RPT exceeding ₹1 crore, to which the subsidiary of a listed entity is a party, but the listed entity is not, shall require prior approval of the Audit Committee of the listed entity if the transaction value exceeds the lower of:
- ten percent of the annual standalone turnover of the subsidiary, as per its last audited financial statements of the subsidiary; or
- the threshold for material RPTs of the listed entity determined under Schedule XII of the regulations.
- Impact: This change brings subsidiary RPT thresholds in line with the parent company’s limits, making the approval process more consistent and improving overall oversight.
Thresholds for RPTs of Subsidiaries under 23(2)- Subsidiaries not having audited financial statements for at least a year:
- In case where the subsidiary does not have audited financial statements for at least one financial year, prior approval of the Audit Committee of the listed entity shall be required if the transaction during a financial year exceeds the lower of:
- ten percent of the aggregate value of paid-up share capital and securities premium account of the subsidiary; or
- the material RPT threshold of the listed entity determined under Schedule XII of the regulations.
- The aggregate value of paid-up share capital and securities premium account of the subsidiary shall be computed on a date not older than three months prior to the date of seeking approval of the Audit Committee.
- Impact: Harmonising thresholds and ensuring that significant transactions at the subsidiary level (especially newly formed subsidiary) are also placed before the Audit Committee of the listed entity.
Validity of Shareholder Omnibus Approvals – Reg. 23(4)
- The validity of omnibus approvals for material RPTs by shareholders, earlier prescribed under the Section III Master Circular on LODR dated November 11, 2024, is now incorporated directly into the Regulations.
- Omnibus approvals obtained in an AGM shall remain valid up to the date of the next AGM but not exceeding fifteen months.
- Omnibus approvals obtained in general meetings other than AGMs (including postal ballot) shall remain valid for a period not exceeding one year.
- The amendment consolidates all provisions relating to omnibus approvals for RPTs within Regulation 23(4) of the LODR Regulations.
Additional parties exempted from RPT
- Retail Purchase Exemption Updated:
- Earlier retail purchases from directors or employees were exempted from the ambit of related party transactions.
- Exemption now applies to directors or KMPs and their relatives for retail purchases from the listed entity or subsidiary, provided such purchases are uniformly offered to all directorsor KMPs and relative of directors of KMPs.
- The term “employees” has been deleted from the exemption scope to maintain alignment with the definition of “related party”.
- Clarification on Holding Company Reference (Reg. 23(5)):
- An Explanation has been inserted clarifying that the term “holding company” used in clause (b) refers to and shall be deemed always to have referred to a “listed holding company”.
- Accordingly, the exemption under Regulation 23(5)(b) will apply only to transactions between a listed holding company and its wholly owned subsidiary, whose accounts are consolidated with such holding company and placed before shareholders.
Conclusion:
All RPTs already approved by the Audit Committee as on the date of notification may continue to be placed before shareholders as per the earlier thresholds.
Post-notification, materiality must be computed as per the revised scale-based thresholds under regulation 23 read with Schedule XII.
Listed entities must review and amend their RPT Policies to align with the amended Regulation 23. Subsidiaries which are recently incorporated must evaluate transaction values carefully to determine whether parent-level Audit committee approval is triggered.