SEBI clarifies that no fresh shareholders’ approval required for RPTs
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Circular No. SEBI/HO/CFD/CMD1/CIR/P/2022/40, Dated: 30.03.2022
SEBI vide. Notification dated November 9, 2021, amended Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 (‘LODR Regulations’). The objective of the amendment was to enhance the scope of a related party, related party transactions(RPTs), and the materiality threshold for seeking shareholder approval. Based on the representation received from listed entities and industry bodies, the SEBI has decided to provide specific clarification and guidance for the smooth implementation of the amended Regulation 23 of the LODR Regulations as under:
(a) No fresh shareholder approval is required for an approved RPT
SEBI clarified that there shall be no requirement to seek fresh approval from the shareholders w.r.t. to Related Party Transactions (RPTs) approved by the audit committee and shareholders prior to April 1, 2022.
(b) Material RPT to be placed in Annual General Meeting
Regulation 23(8) of the LODR Regulations specifies that all existing material related party contracts or arrangements entered into prior to the date of notification of these regulations andwhich may continue beyond such date shall be placed for approval ofthe shareholders in the firstGeneral Meeting subsequent to notification of these regulations
The SEBI further clarified that RPTs that become material as per the revised materiality threshold shall be placed before the shareholders in the first General Meeting held after 01.04.2022. SEBI reiterated that RPT for which the audit committee has granted omnibus approval shall continue to be placed before the shareholders if it is material in terms of Regulation 23(1) of the LODR Regulations.
(c) Cos. to provide relevant information in the explanatory statement to enable shareholder to take informed decision
With an endeavor to provide relevant and detailed information to enable and empower shareholders for taking an informed decisions, the SEBI clarified that the explanatory statement contained in the notice sent to the shareholders for seeking approval for an RPT shall provide relevant information to enable the shareholders to take a view of whether the terms and conditions of the proposed RPT are not unfavorable to the listed entity, compared to the terms and conditions, had the similar transaction been entered into between two unrelated parties. The Circular shall come into force with effect from April 1, 2022.
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