Mar 31, 2022

Clarifications in Relation to Related Party Transactions

SEBI had, by way of a Notification dated November 9, 2021, inter alia amended Regulation 23 of the Listing Regulations to enhance the scope of, and compliances for, related party transactions (‘RPTs’). Our write-up on the Notification dated November 9, 2021 can be accessed here. By way of a recent Circular dated March 30, 2022, SEBI has issued the following clarifications in this regard:

  1. An RPT approved by the audit committee and shareholders prior to April 1, 2022, will not require any fresh approval;
  2. An RPT approved only by the audit committee prior to April 1, 2022, and which: (a) continues beyond such date; and (b) becomes material in accordance with the revised materiality thresholds set out in the Notification, will be required to be placed before the shareholders in the first general meeting after April 1, 2022; and
  3. The explanatory statement to be provided to shareholders for approval on RPT should set out the relevant information, including the information prescribed by SEBI in its circular dated November 22, 2022, to enable the shareholders to assess that the terms and conditions of the proposed RPT are not unfavorable to the listed entity, compared to the terms and conditions, assuming similar transaction is entered into between two unrelated parties.




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