The SEBI notified SEBI (Listing Obligations And Disclosure Requirements) (Sixth Amendment) Regulations, 2021 (hereinafter referred to as “Amended Regulations”) vide Notification No. SEBI/L AD-N RO/GN/2021/55 Dated: November 9, 2021 to amend the existing Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. These regulations shall come into force w.e.f. 01st April, 2022 unless otherwise specified in the respective provision of the regulation.
The Amended Regulations and its comparison and impact is as below:
| Sr. No. | Regulation Number | Prior Amendment Existing Provisions | Post Amendment New Provisions | Impact of the Amendment |
| 1 | Regulation 2(1)(zb) first proviso | In the existing provision it was provided that, any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party. | Substitution of Regulation 2(1)(zb) first proviso Provided that: (a) any person or entity forming a part of the promoter or promoter group of the listed entity; or (b) any person or any entity, holding equity shares: (i) of twenty per cent or more; or (ii) of ten per cent or more, with effect from April 1, 2023; in the listed entity either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at any time, during the immediate preceding financial year; shall be deemed to be a related party: |
However, vide this amendment, it is provided that, any person or entity forming a part of the promoter or promoter group or any person or any entity, holding equity shares of 20% or more (10% w.e.f. 1st April, 2023), either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, shall be deemed to be a related party. |
| 2 | Regulation 2(1)(zc) – Substitution | “related party transaction” means a transfer of resources, services or obligations between a listed entity and a related party, regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract: Provided that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognised stock exchange(s); |
“related party transaction” means a transaction involving a transfer of resources, services or obligations between:
(i) a listed entity or any of its subsidiaries on one hand and a related party of the listed entity or any of its subsidiaries on the other hand; or (ii) a listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of its subsidiaries, with effect from April 1, 2023; regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract: Provided that the following shall not be a related party transaction: (a) the issue of specified securities on a preferential basis, subject to compliance of the requirements under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (b) the following corporate actions by the listed entity which are uniformly applicable/offered to all shareholders in proportion to their shareholding: iii. payment of dividend; ii. subdivision or consolidation of securities; iii. issuance of securities by way of a rights issue or a bonus issue; and iv. buy-back of securities. (c) acceptance of fixed deposits by banks/Non-Banking Finance Companies at the terms uniformly applicable/offered to all shareholders/public, subject to disclosure of the same along with the disclosure of related party transactions every six months to the stock exchange(s), in the format as specified by the Board: Provided further that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognised stock exchange(s); |
Even the list of transactions which shall not be considered as a related party transaction has been widened |
| 3 | Regulation 23(1) Explanation – Substitution | In the existing provisions, it was provided that, a transaction with a related party shall be considered material if it exceeds 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity. | Provided that a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower. | Vide this amendment, it is provided that, a transaction with a related party shall be considered material if it exceeds ₹1000 crore or 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.
This has indeed widened the scope of material related party transactions. |
| 4 | Regulation 23(2) – Substitution | The words mentioned in Post amendment are inserted | after the words “party transactions” the words “and subsequent material modifications” shall be inserted and the words and symbol “audit committee.” shall be substituted with the words and symbol “audit committee of the listed entity:” | Even the subsequent material modifications in a related party transaction shall require prior approval of the audit committee of the listed entity. |
| 5 | Insertion after Regulation 23(2) first proviso | NA | Provided further that:
(a) the audit committee of a listed entity shall define “material modifications” and disclose it as part of the policy on materiality of related party transactions and on dealing with related party transactions; (b) a 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 consolidated turnover, as per the last audited financial statements of the listed entity; (c) with effect from April 1, 2023, a 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; (d) prior approval of the audit committee of the listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred to in (d) above, the prior approval of the audit committee of the listed subsidiary shall suffice. |
Self Explanatory |
| 6 | Regulation 23(4) Insertion | The words mentioned in Post amendment are inserted | after the words “related party transactions” the words and symbol “and subsequent material modifications as defined by the audit committee under sub-regulation (2),” shall be inserted and after the words “shall require” the word “prior” shall be inserted. | prior approval of shareholders shall be required for material related party transactions |
| 7 | Regulation 23(4) – Insertion before existing proviso to | The words mentioned in Post amendment are inserted | Provided that prior approval of the shareholders of a listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary.
Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred above, the prior approval of the shareholders of the listed subsidiary shall suffice. |
Self Explanatory |
| 8 | Regulation 23(4) existing proviso | The words mentioned in Post amendment are inserted | the word “further” shall be inserted after the word “Provided”. | Self Explanatory |
| 9 | Regulation 23(5)(c ) | Nil. Newly inserted Regulation 23(5) (C) | transactions entered into between two wholly-owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. | Self-explanatory. The provisions of sub-regulations (2), (3) and (4) of Regulation 23(5) shall not be applicable in the following cases: (a) transactions entered into between two government companies (already existing Regulation) (b) transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval (already existing Regulation) (c) transactions entered into between two wholly-owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval- (new as per amendment) |
| 10 | Regulation 23(7) – Omission | Omitted provision: For the purpose of this regulation, all entities falling under the definition of related parties shall not vote to approve the relevant transaction irrespective of whether the entity is a party to the particular transaction or not. |
Omitted | It means all entities falling under the definition of related parties can vote to approve the relevant transaction irrespective of whether the entity is a party to the particular transaction or not. |
| 11 | Regulation 23(9) – Substitution | The listed entity shall submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges and publish the same on its website.
Provided that a ‘high value debt listed entity’ shall submit such disclosures along with its standalone financial results for the half year. |
The listed entity shall submit to the stock exchanges disclosures of related party transactions in the format as specified by the Board from time to time, and publish the same on its website:
Provided that a ‘high value debt listed entity’ shall submit such disclosures along with its standalone financial results for the half year: Provided further that the listed entity shall make such disclosures every six months within fifteen days from the date of publication of its standalone and consolidated financial results: Provided further that the listed entity shall make such disclosures every six months on the date of publication of its standalone and consolidated financial results with effect from April 1, 2023. |
High Value Debt Listed Entity’ is require to make 23(9) disclosures along with its standalone financial results for the half year.
The listed entity shall make such disclosures every six months within fifteen days from the date of publication of its standalone and consolidated financial results |
| 12 | Schedule II Part C Para B point 2 – Omission | Schedule II Part C Para B talks about the mandatory review of information by the Audit Committee. Point 2: statement of significant related party transactions (as defined by the audit committee), submitted by management. |
Omission | Self Explanatory |
| 13 | Schedule V Para A point 1 – Insertion | The words mentioned in Post amendment are inserted | after the words “listed entity” the words and symbol, “which has listed its non-convertible securities” shall be inserted | The listed entity which has listed its non-convertible securities shall make disclosures in compliance with the Accounting Standard on “Related Party Disclosures” |
| 14 | Schedule V Para A point 3 – Substitution | The above disclosures shall be applicable to all listed entities except for listed banks. | The above disclosures shall not be applicable to listed banks | Self Explanatory |
| 15 | Schedule V Para C point 10 clause (m) – Insertion | The words mentioned in Post amendment are inserted | disclosure by listed entity and its subsidiaries of ‘Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount’:
Provided that this requirement shall be applicable to all listed entities except for listed banks. |
Schedule V Para C talks about disclosures in Corporate Governance Report |
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