The amendments principally:

• recalibrate the materiality test for related party transactions (RPTs) through a new Schedule XII;
• tighten the approval framework for subsidiary-level RPTs and the validity of shareholder approvals; and
• refine the treatment of employee and key managerial personnel (KMP) benefit schemes and update the annual report and debtholder communication requirements.

The amendments relating to the definition clause, Regulation 23 and Schedule XII come into effect on the thirtieth day from publication in the Official Gazette. The remaining changes are effective from the date of such publication.

1. Materiality Of Related Party Transactions: New Schedule XII

Regulation 23(1) has been amended so that materiality is no longer restricted to the lower of ten percent of consolidated turnover or ₹1,000 crore. Instead, it now cross-refers to a new Schedule XII, which prescribes a graded, turnover-linked framework based on the listed entity’s consolidated turnover in the immediately preceding financial year:

• Up to ₹20,000 crore: 10 percent of consolidated turnover.
• Above ₹20,000 crore and up to ₹40,000 crore: ₹2,000 crore plus 5 percent of the turnover in excess of ₹20,000 crore.
• Above ₹40,000 crore: ₹3,000 crore plus 2.5 percent of the turnover in excess of ₹40,000 crore, subject to an overall cap of ₹5,000 crore.

Consequently, while the impact on smaller listed entities remains broadly similar to the earlier framework, larger listed entities will now benefit from an increased numerical materiality threshold, capped at ₹5,000 crore. Listed entities should update their RPT policies, matrices and annual materiality computations to reflect Schedule XII.

2. Subsidiary-Level RPTs And Audit Committee Jurisdiction

The second proviso to Regulation 23(2) has been amended to expand the jurisdiction of the listed entity’s Audit Committee over RPTs undertaken at the subsidiary level. Previously, the listed entity’s audit committee needed to approve a related party transaction by a subsidiary (where the listed entity was not a party) only if its value exceeded 10% of the listed entity’s consolidated or standalone turnover, as specified under sub-clauses (b) and (c) of the second proviso to Regulation 23(2) of SEBI LODR. This gap has now been addressed, leading to enhanced governance.

Subsidiaries with at least one year of audited standalone financials:

Where a subsidiary has at least one year of audited standalone financial statements, any transaction:

• with a related party of the listed entity or of such subsidiary;
• to which only the subsidiary is a party; and
• whose value exceeds ₹1 crore,

requires prior approval of the listed entity’s Audit Committee if the value exceeds the lower of:

• 10 percent of the annual standalone turnover of the subsidiary (as per its last audited standalone financial statements); and
• the materiality threshold prescribed for the listed entity in Schedule XII.

Subsidiaries with less than one year of audited standalone financials:

Where a subsidiary does not yet have one year of audited standalone financials, a parallel test applies. An RPT above ₹1 crore requires prior Audit Committee approval if it exceeds the lower of:

• 10 percent of the aggregate of the paid-up share capital and securities premium account of the subsidiary; and
• the listed entity’s Schedule XII materiality threshold.

The capital and premium base must be taken as of a date not older than three months prior to seeking approval.

These changes are intended to ensure that meaningful RPT oversight operates at the level of the listed parent, including in respect of early-stage subsidiaries. In practice, listed entities will need group-wide RPT registers and centralised monitoring so that subsidiary transactions are screened against both subsidiary-specific metrics and Schedule XII before execution.

3. Tenure Of Shareholder Approvals and Clarification On “Holding Company”

Regulation 23(4) has been supplemented to fix the tenure of omnibus shareholder approvals for material RPTs:

• where approval is obtained at an annual general meeting (AGM), it is valid only until the next AGM held within the timelines prescribed under the Companies Act, 2013;
• where approval is obtained in any other general meeting, its validity cannot exceed one year from the date of that meeting.

Listed entities can therefore no longer rely on long-running omnibus approvals and must build renewal items into AGM and EGM agendas for continuing arrangements.

In addition, an Explanation has been inserted after clause (e) of Regulation 23(5), clarifying that the term “holding company” in that provision refers to a listed holding company and is deemed always to have done so. This settles interpretational questions around the scope of the relevant exemption for transactions between a listed subsidiary and its listed parent.

4. Employee And KMP Benefit Arrangements: Refinement of Carve-Out

The first proviso to clause (e) of Regulation 2(1)(zc), which deals with benefit schemes that are not treated as RPTs, has been expanded upon.

The reference to benefits in respect of “its directors or its employees” is replaced with a broader meaning that expressly covers:

• directors or key managerial personnel of the listed entity or its subsidiary; and
• relatives of such directors or key managerial personnel.

The rule that the scheme must apply on a ‘uniform basis’ now covers the broader group, including employees, directors, key managerial personnel (KMP), and their relatives.

While this language better reflects common market practice, it makes it harder to qualify for the carve-out. Schemes that selectively favour certain related parties (for example, promoters or specific family members) without genuine uniformity of terms are less likely to qualify and may need to be brought within the full RPT approval and disclosure framework. Issuers should review benefit plans currently positioned under this carve-out and test their design against the revised wording.

5. Annual Reports and Communication with Holders of Non-Convertible Securities

Regulation 53(1) now recognises that some listed entities are constituted under special statutes. It provides that an annual report must contain information specified in:

• the Companies Act, 2013, or
• the statute under which the listed entity is constituted,

together with the disclosures required under Regulation 53.

Regulation 53(2) has been substituted to require that the annual report be:

• submitted to the stock exchange(s) and debenture trustee(s); and
• hosted on the listed entity’s website,

on or before the date on which it is dispatched to shareholders or submitted to the Central or State Government, as applicable. Where any change is made to the annual report after such dispatch or submission, a revised copy must be filed with the stock exchange(s) along with details and an explanation of the changes, within specified timelines linked to the AGM or revised dispatch.

Regulation 58 has been amended in respect of holders of non-convertible securities who do not have registered email addresses. In such cases, the listed entity must send a letter that sets out:

• the web link, including the exact navigation path, to the annual report on its website; and
• optionally, a static QR code linking to the report.

A new Regulation 58(1A) aligns dispatch timelines for such communications with Section 136 of the Companies Act, 2013, the associated rules or, in the case of statutory entities, the relevant constitutive statute. In the absence of a specific statutory timeline, dispatch must at least coincide with the date of dispatch to shareholders or submission to Government authorities.

These changes facilitate greater use of electronic and web-based dissemination while preserving a minimum physical intimation for investors who are not on email and ensuring consistency of timing across investor classes.

Way Forward:

In light of the above, listed entities should:

• include Schedule XII into their RPT policies;
• extend RPT tracking and Audit Committee workflows to all subsidiaries, including new entities;
• identify omnibus shareholder approvals that will expire under the revised Regulation 23(4) and plan renewals accordingly;
• review employee and KMP benefit schemes for compliance with the revised carve-out; and
• update the annual report and debtholder communication protocols to align with the amended Regulations 53 and 58.

SEBI’s Fifth Amendment is another step in its broader project of strengthening group-level governance and enhancing transparency in related party dealings and disclosures.