income tax
Published on 24 July 2025
SEBI's Revised Related Party Transaction Regulations: Key Changes Explained
SEBI’s New RPT Rules Coming September 2025: What Listed Companies Need to Know
In a move that promises to reshape how listed companies handle related party transactions (RPTs), the Securities and Exchange Board of India (SEBI) has notified significant amendments to its RPT framework under the LODR Regulations. These changes, set to take effect from September 1, 2025, aim to bring greater transparency and consistency to the approval and disclosure process, while reducing unnecessary compliance friction.
The revised norms will apply to all RPTs that come up before a company’s audit committee or require shareholder approval on or after the effective date.
Key Regulatory Changes
1. Executive Accountability: Certification by Management
What’s new: Top management—specifically the CEO or Whole-Time Director (WTD) and the CFO—will now be required to jointly certify that the terms of an RPT are in the best interest of the company. This certification must be submitted to the audit committee as part of the approval process.
What’s gone: The earlier requirement for promoter certification has been dropped. This marks a shift in responsibility from controlling shareholders to the executive leadership, aligning decision-making with those accountable for operational outcomes.
2. Better Disclosures for Shareholders on Material RPTs
Fairness Reports for Major Deals: If a related party transaction qualifies as “material,” companies must provide shareholders with access to the valuation or fairness report that the audit committee relied upon during its review.
Digital Access Simplified: These valuation documents must now be easily accessible through both a QR code and a web link included in the meeting notice or postal ballot. The goal is to simplify access and encourage informed voting.
Consistency in Information: The details shared with shareholders must be identical to what the audit committee saw. This includes the rationale for the transaction, pricing terms, benchmarking analysis, and identification of the related parties involved.
3. Royalty Transactions: Compliance Relaxed
SEBI has acknowledged that peer comparison disclosures for royalty payments often created a disproportionate burden without adding much value. The revised rules ease these requirements, striking a balance between transparency and practicality.
Compliance Summary: What Companies Must Do
| Area | New Requirement | Why It Matters |
|---|---|---|
| Certification | CEO/WTD and CFO must certify RPT terms to audit committee | Executive accountability |
| Valuation Access | Shareholders must receive valuation reports digitally via QR/web link | Informed, digital-first transparency |
| Disclosure Matching | Shareholder info must mirror audit committee details exactly | Ensures consistency and reduces manipulation risks |
| Royalty Payments | Peer comparison norms eased | Reduced reporting burden |
| Redactions in Disclosures | Must be justified and disclosed | Protects sensitive data while maintaining trust |
Who Must Comply and From When?
- Effective Date: September 1, 2025
- Applicability: All listed companies governed by SEBI’s LODR Regulations, 2015
- Scope: Covers any RPT presented before the audit committee or shareholders from the effective date onward
Action Checklist for Boards & Compliance Teams
- Review & update internal policies on RPT approvals and documentation protocols.
- Set up secure digital sharing systems for valuation reports, including generating QR codes.
- Ensure audit committee documentation aligns with shareholder disclosures—no gaps, no mismatches.
- Train key personnel—company secretaries, CFOs, compliance officers—on the new certification and disclosure norms.
- Revisit RPT thresholds and materiality definitions to align with the latest standards.
The Broader Takeaway
SEBI’s overhaul of the RPT framework signals a clear shift towards better governance, increased shareholder trust, and smarter compliance. By moving the onus to executive management and ensuring parity between internal and external disclosures, the regulator is setting a new benchmark for transparency without overburdening companies with red tape.