SEBI has actually made changes in standards governing associated celebration transactionsMarkets regulator Securities and Exchange Board of India (SEBI) has made sweeping modifications to strengthen the tracking and enforcement of standards pertaining to related-party transactions.The regulator has modified the meaning of 'associated party' and 'related-party transactions' (RPTs), according to a notification.It made modifications to the process followed by a company's audit committee for approval of RPTs that are material.Further, there will be a format for reporting of RPTs to the stock market.
Cases like Zee, Meal TV and the current judgment by NCLT in the Videocon case might have probably triggered changes in the RPT framework.Generally, RPT means a deal involving a transfer of resources, services in between the listed entity or its subsidiaries on the one hand and an associated celebration of the noted entity or its subsidiaries on the other hand.Cases like Zee, Meal TV and the current ruling by NCLT in the Videocon case might have probably triggered changes in the RPT framework.According to professionals, any deal benefiting a related celebration (even indirectly) will need the approval of the audit committee and shareholders of a noted company.When the transaction is with a third party but may benefit associated party will be difficult to recognize and can often lead to unneeded claims of violation on corporates.Under the brand-new guidelines, SEBI stated the associated celebration will be anyone or entity belonging to the promoter or promoter group of the listed entity.Besides, any person or any entity, straight or indirectly (including with their relatives), holding 20 per cent or more of the holding in the noted entity throughout the preceding fiscal and 10 percent or more with effect from April 1, 2023, will be thought about as an associated party.Prior approval of the shareholders of the listed entity will be required for product RPTs having a threshold of lower than Rs 1,000 crore or 10 per cent of the consolidated annual turnover of the listed entity.SEBI said approval of the audit committee will be required for all RPTs and subsequent material modifications as specified by the audit committee.In addition, approval will be needed for RPTs where the subsidiary is a celebration however the listed entity is not a party.This goes through a limit of 10 per cent of the combined turnover of the noted entity and 10 per cent of the standalone turnover of the subsidiary from April 1, 2023.