SEBI vide its Circular dated March 30, 2022, has provided clarification on requirement of shareholders’ approval for related party transactions as per the revised materiality threshold under the recent amendment in SEBI LODR Regulations, 2015.
Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 was amended vide notification dated November 9, 2021, inter-alia, enhancing the scope of related party, related party transactions (RPTs), and the materiality threshold for seeking shareholder approval.
Based on the representations received from listed entities and industry bodies, it has been decided to provide the following clarifications and guidance for smooth implementation of the amended Regulation 23 of the LODR Regulations:-
i. For an RPT that has been approved by the audit committee and shareholders prior to April 1, 2022, there shall be no requirement to seek fresh approval from the shareholders.
ii. 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 and which may continue beyond such date shall be placed for approval of the shareholders in the first General Meeting subsequent to notification of these regulations.
In accordance with the said regulation, an RPT that has been approved by the audit committee prior to April 1, 2022 which continues beyond such date and becomes material as per the revised materiality threshold shall be placed before the shareholders in the first General Meeting held after April 1, 2022.
iii. It is reiterated that an 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.
This Circular shall come into force with effect from April 1, 2022.
Circular Link :-
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