India’s capital markets regulator, SEBI (the Securities and Exchange Board of India), has proposed a set of changes to its oversight of related-party transactions (RPTs), the often-sensitive financial dealings between companies and their affiliates. The changes would significantly raise the thresholds for which transactions must be disclosed or approved by shareholders, particularly for large corporations.
The proposal, published Monday, is part of SEBI’s ongoing effort to reduce what it describes as unnecessary regulatory friction. If adopted, the new framework would result in fewer routine or low-value RPTs being subject to public disclosure or minority shareholder approval. SEBI’s intent, as stated under the leadership of its recently appointed chairman, Tuhin Kanta Pandey, is to prioritize “honest” and “optimal” disclosure over procedural compliance.
What Is a Related-Party Transaction?
A related-party transaction occurs when a company does business with a connected entity, such as a subsidiary, a company owned by a director or major shareholder, or a business tied to board members or executives. These transactions are not inherently improper, but they can raise concerns about conflicts of interest, insider control, or preferential treatment. To safeguard transparency and investor trust, regulators like SEBI require many of these transactions to be disclosed, and in certain cases, approved by disinterested shareholders.
In India, RPT regulation has historically been tight, especially given the country’s prevalence of business groups with complex cross-holdings. Over the past decade, SEBI has imposed increasing scrutiny on such transactions to ensure accountability and board independence.
What Is SEBI Proposing?
SEBI’s new proposal introduces a more flexible, size-adjusted approach to both reporting and approval requirements. The key features include:
- No disclosure required for RPTs below ₹150 million (approximately $1.7 million)
- Reporting still required for RPTs above that amount, but only some of those will require shareholder approval
- For companies with annual revenue over ₹300 billion (around $3.4 billion), shareholder approval would only be needed if the RPT exceeds ₹25 billion (about $285 million)
- All companies would require shareholder approval for RPTs exceeding ₹50 billion (approximately $570 million), which is a fivefold increase from the current ₹10 billion threshold
This shift, in effect, creates a revenue-based gradient. Larger companies conducting relatively smaller transactions would no longer need to seek shareholder clearance for each deal. According to SEBI, the revised thresholds would have exempted 60 percent of RPTs conducted by India’s top 100 listed firms over the past two fiscal years from needing shareholder approval.
Why Is SEBI Making This Change?
This proposal reflects SEBI’s broader regulatory shift under Chairman Pandey, who took over in March 2025. The current administration has expressed interest in streamlining regulatory expectations to reduce compliance costs and delays. Rather than continuing to tighten disclosure requirements, as seen in earlier regimes, SEBI is now considering how to better calibrate its rules to the scale and risk of the transactions involved.
The rationale is that not all RPTs pose the same level of risk, and smaller or routine inter-company deals may unnecessarily burden both companies and shareholders with procedural hurdles. The regulator has described this move as one that will ease the compliance burden on listed entities, give some flexibility, and reduce timelines for related-party transactions.
Implications for Corporate Governance
The proposal is notable not because it removes oversight altogether, but because it shifts the focus to materiality. It redefines where oversight is most needed, aiming scrutiny at large, potentially riskier transactions and moving away from the one-size-fits-all threshold approach.
However, the governance implications are nuanced. RPTs are closely watched for signs of insider advantage, lack of board independence, and opaque financial structuring, particularly in India’s many promoter-driven firms. While a revenue-based approach makes sense in principle, some observers may worry that raising the approval threshold could allow certain deals to escape investor scrutiny, especially if they are frequent but individually small.
In environments where corporate governance maturity varies, clarity around board roles, internal approvals, and reporting consistency becomes even more important. Companies will need to be deliberate in how they interpret and implement the new rules, ensuring that they do not simply treat the absence of a legal requirement as an invitation to reduce transparency.
How This Connects to ESG and Reporting Practices
Although the proposal does not directly reference ESG disclosure requirements, it affects the governance pillar, the “G” in ESG, in a meaningful way. For firms reporting under India’s Business Responsibility and Sustainability Report (BRSR) framework, or mapping their disclosures to global standards such as SASB, GRI, or TCFD, the shift in RPT thresholds introduces a new line of internal decision-making. Companies must decide which transactions should still be disclosed voluntarily, even if no longer legally required.
For sustainability teams and ESG officers, this could involve revisiting internal definitions of materiality and reviewing how RPT-related risks are flagged in public disclosures. Investors increasingly expect companies to go beyond compliance and explain how they manage integrity and oversight, particularly in areas prone to conflicts of interest.
What’s Next?
The proposal is currently open for public comment. If SEBI moves forward, implementation could begin before the end of 2025. Between now and then, legal teams, boards, and compliance functions should be working through what this means for their controls and disclosures.
Recommended actions include:
- Reviewing internal policies for classifying related parties
- Re-evaluating internal thresholds for when an RPT triggers board review or public disclosure, even outside SEBI requirements
- Updating ESG risk registers and sustainability disclosures accordingly
