Detail analysis of amendments in SEBI (Listing Obligation and Disclosure Requirement) 2015

Amendments in SEBI (Listing Obligation and Disclosure Requirement) Regulations 2015 as made by SEBI (Listing Obligation and Disclosure Requirement) (Sixth Amendment) Regulations, 2021, which will become effective from 1^st April 2022 unless otherwise specified in the respective provision of the regulation.

The article covers the following Important aspects: -

Regulation	Before Amendment	After Amendment	Remarks
2(1)(zb)	“Related Party” means a related party as defined under sub-section (76) of section 2 of the Companies Act, 2013 or under the applicable accounting standards: - Provided that any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party.	“Related Party” means a related party as defined under sub-section (76) of section 2 of the Companies Act, 2013 or under the applicable accounting standards: - “Provided that (a) any person or entity forming a part of the    promoter or promoter group of the listed entity; or (b)  any person or any entity, holding equity shares: (i) of twenty per cent or more; or (ii) of ten per cent or more, with effect from April 1, 2023.in the listed entity either directly or on a beneficial interest basis as provided under section 89 of the Companies Act, 2013, at any time, during the immediate preceding financial year shall be deemed to be a related party”.	Now the SEBI has widen the definition of related party by including: 1.All persons or entity belonging to the promoter (P) or promoter group (PG) will be regarded as related party, irrespective of its shareholding in the listed entity. 2.Any person/entity holding equity shares in the listed entity, either directly or on a beneficial interest basis at any time during the immediately preceding FY: ·To the extent of 20% or more; ·To the extent of 10% or more (applicable w.e.f. 01.04.2023).
2(1)(zc)	“related party transaction” means a transfer of resources, services or obligations between a listed entity and a related party, regardless of whether a price is charged and a "transaction" with a related party shall be construed to include a single transaction or a group of transactions in a contract: Provided that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognized stock exchange(s);	“related party transaction” means a transaction involving a transfer of resources, services or obligations between: (i) a listed entity or any of its subsidiaries on one hand and a related party of the listed entity or any of its subsidiaries on the other hand; or (ii) a listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of its subsidiaries, with effect from April 1, 2023; regardless of whether a price is charged and a “transaction” with a related party shall be construed to include a single transaction or a group of transactions in a contract: Provided that the following shall not be a related party transaction: (a) the issue of specified securities on a preferential basis, subject to compliance of the requirements under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (b) the following corporate actions by the listed entity which are uniformly applicable/offered to all shareholders in proportion to their shareholding: - i. payment of dividend; ii. subdivision or consolidation of securities; iii. issuance of securities by way of a rights issue or a bonus issue; and iv. buy-back of securities. (c) acceptance of fixed deposits by banks/Non-Banking Finance Companies at the terms uniformly applicable/offered to all shareholders/public, subject to disclosure of the same along with the disclosure of related party transactions every six months to the stock exchange(s), in the format as specified by the Board: Provided further that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognized stock exchange(s);	Transaction entered between the following parties will now be covered within the ambit of Related Party Transaction:  A listed entity or its subsidiary → Related party of such listed entity or its subsidiary; A listed entity or its subsidiary → Any other person or entity with the purpose and effect to benefit the listed entity or its subsidiary w.e.f., 01.04.2023. Such transactions shall be considered as RPTs regardless of whether a price is charged or whether the transaction is a single transaction or a group of transactions. Further, by removing the following transactions from the ambit of related party transaction major ambiguities has been cleared :- · Issue of specified securities on preferential basis under the SEBI (ICDR) Regulations, 2018; Corporate actions which are uniformly applicable/offered to all the shareholders in proportion to their shareholding: ·Payment of dividend; ·Subdivision/ consolidation of securities; ·Rights issue/ bonus issue; ·Buy-back of securities Acceptance of fixed deposits by banks/ NBFCs at the terms uniformly applicable/ offered to all shareholders, subject to disclosure of such acceptance, and disclosure of RPT in every 6 months to the Stock Exchange.
23(1)	The listed entity shall formulate a policy on materiality of related party transactions and on dealing with related party transactions including clear threshold limits duly approved by the board of directors and such policy shall be reviewed by the board of directors at least once every three years and updated accordingly: Explanation. - A transaction with a related party shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.	The listed entity shall formulate a policy on materiality of related party transactions and on dealing with related party transactions including clear threshold limits duly approved by the board of directors and such policy shall be reviewed by the board of directors at least once every three years and updated accordingly: “Provided that a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.	SEBI has amended the current threshold of 10% of the annual consolidated turnover, any RPT, either individually or taken together with the previous transactions during a financial year, shall be considered ‘material’ if it exceeds Rs. 1000 Cr. or 10% of consolidated annual turnover of the entity, whichever is lower.
23(2)	All related party transactions shall require prior approval of the audit committee: Provided that only those members of the audit committee, who are independent directors, shall approve related party transactions.	All related party transaction and subsequent material modifications shall require prior approval of the “audit committee of the listed entity”. Provided that only those members of the audit committee, who are independent directors, shall approve related party transactions. Provided further that: a)The audit committee of a listed entity shall define “material modifications” and disclose it as part of the policy on materiality of related party transactions and on dealing with related party transactions; b)A related party transaction to which the subsidiary of a listed entity is a party but the listed entity is not a party, shall require prior approval of the audit committee of the listed entity if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year exceeds ten per cent of the annual consolidated turnover, as per the last audited financial statements of the listed entity; c) with effect from April 1, 2023, a related party transaction to which the subsidiary of a listed entity is a party but the listed entity is not a party, shall require prior approval of the audit committee of the listed entity if the value of such transaction whether entered into individually or taken together with previous transactions during a financial year, exceeds ten per cent of the annual standalone turnover, as per the last audited financial statements of the subsidiary; (d) prior approval of the audit committee of the listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred to in (d) above, the prior approval of the audit committee of the listed subsidiary shall suffice.”	Audit Committee approvals will now be required for: ·All RPTs and subsequent material modifications. Further, the audit committee shall define such material modifications and disclose it as a part of policy on materiality of RPT; ·RPTs where subsidiary is a party but listed entity is not a party and where transaction whether entered into individually or taken together with previous transactions during a financial year exceeds 10% of the consolidated turnover of the listed entity, or 10% of standalone turnover of the subsidiary w.e.f. 01.04.2023. Audit Committee approval shall not be required for Transaction(s) entered into between the listed subsidiary and a related party, provided provisions of Regulation 23 and 15(2) are applicable on the listed subsidiary.
23(4)	All material related party transactions shall require approval of the shareholders through resolution and no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not: Provided that the requirements specified under this sub-regulation shall not apply in respect of a resolution plan approved under section 31 of the Insolvency Code, subject to the event being disclosed to the recognized stock exchanges within one day of the resolution plan being approved.	All material related party transactions and subsequent material modifications as defined by the audit committee under sub-regulation (2), shall require prior approval of shareholders through resolution and no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not:  “Provided that prior approval of the shareholders of a listed entity shall not be required for a related party transaction to which the listed subsidiary is a party but the listed entity is not a party, if regulation 23 and sub-regulation (2) of regulation 15 of these regulations are applicable to such listed subsidiary. Explanation: For related party transactions of unlisted subsidiaries of a listed subsidiary as referred above, the prior approval of the shareholders of the listed subsidiary shall suffice.” Provided further that the requirements specified under this sub-regulation shall not apply in respect of a resolution plan approved under section 31 of the Insolvency Code, subject to the event being disclosed to the recognized stock exchanges within one day of the resolution plan being approved.	All materials RPTs and subsequent material modifications basis threshold as defined by the Audit Committee, will now require prior approval of shareholders except where the transaction(s) is being entered into between a listed subsidiary and a related party and provisions of Regulation 23 and 15(2) are applicable on the listed subsidiary.
23(5)	The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases: a) transactions entered into between two government companies; b)transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.	The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases: a) transactions entered into between two government companies; b) transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. c)transactions entered into between two wholly-owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.”	The following transaction shall not require approval of audit committee and shareholders of the company:  a) Transaction entered between two government companies. b) Transaction entered between a holding company and its wholly owned subsidiary, whose account are consolidated with such holding companies. c) Transactions entered between two wholly owned subsidiaries of the listed holding company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval
23(7)	For the purpose of this regulation, all entities falling under the definition of related parties shall not vote to approve the relevant transaction irrespective of whether the entity is a party to the particular transaction or not.	OMITTED
23(9)	The listed entity shall submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges and publish the same on its website.	The listed entity shall submit to the stock exchanges disclosures of related party transactions in the format as specified by the Board from time to time, and publish the same on its website: Provided that a ‘high value debt listed entity’ shall submit such disclosures along with its standalone financial results for the half year: - Provided further that the listed entity shall make such disclosures every six months within fifteen days from the date of publication of its standalone and consolidated financial results: - Provided further that the listed entity shall make such disclosures every six months on the date of publication of its standalone and consolidated financial results with effect from April 1, 2023.”	Listed entities to make disclosures of RPTs to stock exchanges every 6 months: Within 15 days from the date of publication of financial results; and Simultaneously with the financials results w.e.f. 01.04.2023.
Schedule II Part C in para B Point 2	The audit committee shall mandatorily review: - Statement of significant related party transactions (as defined by the audit committee), submitted by management	OMITTED
Schedule V, Para A, Point1	The listed entity shall make disclosures in compliance with the Accounting Standard on “Related Party Disclosures”.	The listed entity which has listed its non-convertible securities shall make disclosures in compliance with the accounting Standards on “Related party Disclosures”.	Listed company whose Non-convertible securities are listed, required to make disclosures in compliance with the accounting Standards on “Related party Disclosures”.
Schedule V, para C point 10		Disclosure by listed entity and its subsidiaries of ‘Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount’: Provided that this requirement shall be applicable to all listed entities except for listed banks.”	All listed entities except listed banks shall disclose details of loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount, by the listed entity and its subsidiaries, in their CG report forming part of annual report.

This article has been Compiled by Swati Garg (Senior Associate), you can direct your queries or comments to the author at swati@factumlegal.com

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