SEBI’s New Related-Party Disclosure Rules: What You Need to Know

by Ashok

Posted on July 4, 2025

The Securities and Exchange Board of India (SEBI) has introduced revised disclosure rules for related-party transactions (RPTs) that have sparked a split in opinion among market participants and stakeholders. These rules, effective from September 1, 2025, require all listed entities to provide comprehensive and standardized information to their audit committees and shareholders before seeking approval for RPTs.

Key Features of the Revised Rules:

• Mandatory Comprehensive Disclosures: Companies must furnish detailed information—including the nature, rationale, terms, pricing, payment conditions, and the identity of related parties—when presenting RPTs to the audit committee and, when required, to shareholders.
• Standardization: The revised norms replace earlier disclosure formats, aiming to create uniformity and reduce ambiguity across listed companies.
• Certificate of Interest: Management must now submit a certificate to the audit committee confirming that the RPT is in the company’s interest, signed by the CEO or whole-time director and the CFO. The previous requirement for promoter signatures has been dropped.
• Independent Valuation: For material transactions, companies must provide a valuation report or independent third-party assessment, accessible to shareholders via weblink or QR code prior to voting.
• Digital Transparency: SEBI has launched a dedicated RPT portal to make governance data on related-party transactions easily accessible to all investors, not just institutional ones.

Divergent Opinions:

• Supporters argue that the new rules will:
  • Enhance transparency and accountability in corporate governance.
  • Empower shareholders with better information for decision-making.
  • Reduce information asymmetry and potential conflicts of interest.
  • Facilitate easier comparison of RPTs across companies due to standardized disclosures.
• Critics and Concerns include:
  • Increased compliance burden for companies, especially smaller firms, due to the detailed and standardized disclosure requirements.
  • Potential delays in transaction approvals, as audit committees and shareholders may require more time to review the expanded information.
  • Practical challenges in obtaining independent valuations for all material transactions and ensuring all disclosures are both comprehensive and timely.
  • Some industry voices worry that the removal of promoter certification could dilute accountability in certain cases.

Context and Rationale:
SEBI’s move follows concerns that earlier disclosure requirements were insufficient, particularly given the complexity and innovative structuring of many RPTs. The revised standards were developed in consultation with major industry bodies (ASSOCHAM, FICCI, CII) and aim to align India’s corporate governance practices with global best practices.

Conclusion:
While SEBI’s revised RPT disclosure rules are widely seen as a step forward in strengthening corporate governance and protecting minority shareholders, the increased compliance demands and operational challenges have led to a split in opinion among market participants. The ultimate impact will depend on how effectively companies adapt to the new standards and how SEBI addresses implementation concerns raised by the industry.

Ref: SEBI Introduces New Disclosure Rules for Related Party Transaction Approvals