SEBI Strengthens Governance on Related Party



Transactions: Revised Industry Standards Effective from September 2025

In a significant move to enhance transparency and standardization in corporate governance, the Securities and Exchange Board of India (SEBI) issued a circular on June 26, 2025, introducing revised Industry Standards on Minimum Information to be shared with Audit Committees and shareholders for the approval of Related Party Transactions (RPTs). These revised norms will come into effect from September 1, 2025, superseding previous circulars issued in February and March 2025.

Background and Regulatory Framework

Under Regulation 23(2), (3), and (4) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), listed companies are required to obtain audit committee and shareholder approval for related party transactions, particularly when these are material in nature. SEBI had previously issued guidance through its Master Circular dated November 11, 2024, detailing the information required for such approvals under Section III-B.

Evolution of Industry Standards

To streamline and standardize the information disclosure process, an Industry Standards Forum (ISF) was constituted, comprising representatives from leading industry associations — ASSOCHAM, FICCI, and CII — under the guidance of stock exchanges and SEBI. Based on extensive consultation, the ISF released detailed Industry Standards on the minimum information required to be presented for audit committee and shareholder consideration in February 2025. These were initially set to be implemented from April 1, 2025.

However, following stakeholder feedback seeking simplification and clarification, SEBI extended the compliance deadline to July 1, 2025, and requested ISF to revisit the standards. The ISF responded with revised Industry Standards, which SEBI has now formally adopted.

Key Changes Introduced

With this latest circular, SEBI has modified Section III-B of the Master Circular to align with the new Industry Standards. Specifically:

• Part A (Audit Committee Review): Paragraph 4 now mandates that companies submit information in accordance with the updated RPT Industry Standards when seeking audit committee approval.
• Part B (Shareholder Approval): Paragraph 6 now requires that explanatory statements sent to shareholders for RPT approval must include information as specified under the revised Industry Standards, in addition to those required by the Companies Act, 2013.

Compliance Requirements for Listed Entities

From September 1, 2025, all listed entities must adhere to the new RPT Industry Standards to ensure compliance with the amended Master Circular and LODR Regulations. These standards aim to promote consistency, transparency, and informed decision-making at both the audit committee and shareholder levels.

Role of Industry Associations and Stock Exchanges

The circular also outlines responsibilities for ASSOCHAM, FICCI, CII, and the recognized stock exchanges:

• Publication: Upload the revised RPT Industry Standards on their respective websites.
• Guidance Material: Develop and host FAQs, based on queries from stakeholders, in consultation with SEBI, to facilitate smoother implementation.

Conclusion

The revised SEBI circular marks a progressive step in strengthening the governance architecture for related party transactions in India. By setting a standardized disclosure framework, SEBI ensures that stakeholders — especially audit committees and shareholders — have access to comprehensive and comparable information, thereby reducing ambiguities and enhancing corporate accountability. Listed companies must promptly align their internal processes with the revised standards to ensure full compliance by the effective date.