The Securities and Exchange Board of India (“hereinafter referred to as SEBI”), on April 8, 2022 has issued Clarification (ref no SEBI/HO/CFD/CMD1/CIR/P/2022/47 on applicability of Regulation 23(4) read with Regulation 23(3)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015(“hereinafter referred to as SEBI LODR”) in relation to Related Party Transactions (“hereinafter referred to as RPT’s”) and the validity of omnibus approval granted by the shareholders in relation to RPT’s.
RELEVANT PROVISIONS UNDER SEBI LODR AND THE COMPANIES ACT, 2013:
As per Reg 23 (3) of SEBI LODR, the Audit committee may grant omnibus approval for related party transactions proposed to be entered into by the listed entity subject to the conditions as mentioned in the aforesaid Regulations.
Further, such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.
As per Regulation 23 (4) of SEBI LODR, all material related party transactions and subsequent material modifications as defined by the audit committee under Regulation 23 (2) of SEBI LODR shall require prior approval of the shareholders through resolution and no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not.
Further, Section 96(1) of the Companies Act, 2013 specifies that the time gap between two Annual General Meetings (AGMs) cannot be more than fifteen months.
SEBI CLARIFICATION VIDE AFORESAID CIRCULAR:
Several representations were received by SEBI, seeking clarity on the period of validity of the omnibus approval where the transactions are material and shareholders’ approval is also required.
In order to facilitate listed entities to align their processes to conduct AGMs and obtain omnibus shareholders’ approval for material RPTs, SEBI vide aforesaid Circular has specified that the shareholders’ approval of omnibus RPTs approved in an AGM shall be valid upto the date of the next AGM for a period not exceeding fifteen months.
SEBI has also clarified that in case of omnibus approvals for material RPTs, Obtained from shareholders in general meetings other than AGMs, the validity of such omnibus approvals shall not exceed one year.
The aforesaid SEBI Circular can be referred at:
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