SEBI Proposes Relaxation of RPT Guidelines: A Boost to Indian Corporates

The Securities and Exchange Board of India (SEBI) has proposed to relax the Related Party Transactions (RPT) guidelines, which is expected to bring relief to Indian corporates. The move is aimed at reducing the compliance burden and increasing transparency in related party transactions. The proposed relaxation is part of SEBI’s efforts to simplify and clarify the regulatory framework for RPTs. The current RPT guidelines require listed companies to obtain shareholder approval for related party transactions exceeding certain thresholds. However, the proposed relaxation will exempt certain transactions from the requirement of shareholder approval. The exemption will apply to transactions between a company and its wholly-owned subsidiary, as well as to transactions where the related party is a bank or a financial institution. The proposed relaxation will also increase the threshold for disclosure of RPTs from Rs 1 crore to Rs 5 crore. Additionally, the proposal suggests that the audit committee of a company will be responsible for approving RPTs, rather than the board of directors. The relaxation of RPT guidelines is expected to benefit Indian corporates, particularly those with complex group structures. The move is also expected to increase the efficiency of related party transactions and reduce the compliance burden on companies. However, some experts have raised concerns that the relaxation of RPT guidelines could lead to increased related party transactions, which could be detrimental to minority shareholders. SEBI has invited comments from stakeholders on the proposed relaxation, which will be considered before the final guidelines are issued. The proposed relaxation of RPT guidelines is part of SEBI’s ongoing efforts to improve the regulatory framework for Indian corporates. The regulator has been working to simplify and clarify the rules and regulations governing related party transactions. The move is expected to increase transparency and reduce the compliance burden on companies. The proposed relaxation will also bring the Indian regulatory framework more in line with international best practices. The relaxation of RPT guidelines is expected to have a positive impact on the Indian stock market, as it will increase the efficiency of related party transactions and reduce the compliance burden on companies. The move is also expected to increase investor confidence in the Indian market. However, it is important to note that the proposed relaxation is still in the consultation stage, and the final guidelines will be issued after considering the comments from stakeholders. The relaxation of RPT guidelines is a significant development in the Indian regulatory landscape, and it will be interesting to see how it plays out in the coming months. The proposed relaxation is expected to benefit Indian corporates, but it is also important to ensure that the interests of minority shareholders are protected. SEBI will need to balance the need to reduce the compliance burden on companies with the need to protect the interests of minority shareholders. The regulator will also need to ensure that the relaxation of RPT guidelines does not lead to increased related party transactions, which could be detrimental to minority shareholders. Overall, the proposed relaxation of RPT guidelines is a positive development, and it is expected to increase the efficiency of related party transactions and reduce the compliance burden on companies.

Source