On November 19, 2025, the Securities and Exchange Board of India (“SEBI“) notified the fifth amendment to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations“) vide the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2025 (“Amendment“). The Amendment revises the test determining materiality for related party transactions (“RPTs“), annual reporting requirements, and payment mechanisms, amongst others. These changes mark a deliberate shift towards determining materiality through a turnover-linked mechanism and aims to tighten timelines and responsibilities to improve transparency and corporate governance.
The Amendments have been notified with a staggered commencement date, wherein select provisions, including the regulations amending the regulatory structure surrounding RPTs, shall be effective only 30 (thirty) days after the date of notification, whereas the provisions governing the amendments to annual reports, and the definitions shall be effective on the date of notification (i.e. November 19, 2025). The key changes introduced through the amendment are as follows:
- Materiality of Related Party Transactions
Under Regulation 23(1) of the LODR Regulations, the test to determine the materiality of RPTs was restricted to determining whether the transaction amounted to either INR 1,000 Crore or 10% (ten percent) of the consolidated annual turnover, whichever is lower. Under the Amendment, the scale to determine materiality has been divided into a graded framework, wherein the annual consolidated turnover of the listed entity plays a pivotal role.
The Amendment, through the introduction of a new Schedule XII, has prescribed the following threshold to determine the circumstances under which a RPT shall be considered material, when taken either individually or together with other transactions undertaken during the financial year:
Consolidated Turnover of a Listed Entity Threshold to Determine Materiality If the consolidated turnover of the listed entity is up to INR 20,000 Core 10% of the annual consolidated turnover of the listed entity If the consolidated turnover of the listed entity is more the INR 20,000 Crore and up to INR 40,000 Crore INR 2,000 Crore plus 5% of the annual consolidated turnover of the listed entity above INR 20,000 Crore If the consolidated turnover is more than INR 40,000 Crore INR 3,000 Crore plus 2.5% of the annual consolidated turnover of the listed entity above INR 40,000 Crore, or INR 5,000 Crores, whichever is lower The introduction of the scale-based framework through the Amendment is a welcome shift, allocating appropriate standards for determining the materiality of a transaction. The static standard implemented by the LODR Regulation was overly restrictive on large companies and/or conglomerates while being overly permissive to smaller listed entities. The introduction of these revised materiality threshold marks a significant regulatory shift and would require all listed entities to recalibrate the standards by which the entity would need to seek shareholder approval.
- Subsidiary Related Party Transactions
Under the second proviso to Regulation 23(2), the Amendment has expanded the jurisdiction of the listed entity to scrutinise RPTs undertaken by their subsidiary companies, even when such listed entity is not a party to the transaction. Such materiality thresholds have been divided into two categories:
- In instances where the subsidiary has at least 1 (one) year of audited standalone financial statements and the transaction value exceeds INR 1 Crore, the subsidiary of such listed entity would require prior approval of the audit committee of the listed entity if such transaction exceeds either 10% (ten percent) of the annual standalone turnover of the subsidiary or the materiality thresholds set out in Schedule XII of the LODR Regulations for the listed entity, whichever is lower; and
- In instances where the subsidiary has less than 1 (one) year of audited standalone financials, a RPT which exceeds INR 1 Crore would require the prior approval of the audit committee of the listed entity if the transaction exceeds either 10% (ten percent) of the aggregate paid up share capital and securities premium account of the subsidiary or the listed entity’s materiality thresholds under Schedule XII of the LODR Regulation. It is specified that in such instances, the capital and premium base calculations must be taken on a date not more than 3 (three) months prior to seeking approval of the listed entity’s audit committee.
Prior to the Amendment, if the listed party was not a party to the transaction, its audit committee was only required to approve the RPT if the value exceeded 10% of the listed entity’s consolidated or standalone turnover. Such enhanced oversight given to the listed entities would ensure better information flows are maintained by the listed entity and ensure that the listed entity is engaged in the monitoring and oversight of their subsidiaries.
- Shareholders’ Approvals
SEBI has further clarified the validity of omnibus approvals granted by the shareholders for material RPTs, specifying that if the approval is granted: (i) during an annual general meeting (“AGM“), the validity of such approval shall only be valid under the date of the next (“AGM“) held within the timelines prescribed under the Companies Act 2013; or (ii) during any general meeting other than during the AGM, the validity of the approval shall not exceed 1 (one) year from the date of such approval. This amendment would ensure that shareholders maintain enhanced regulatory control, where all approvals for RPTs would need to be renewed during such shareholder meetings.
- Exceptions to Related Party Transactions
The Amendment has clarified that retail purchases are exempt from the definition of RPTs under Regulation 2(1)(zc), even if such retail purchases are made by directors and key managerial personnel of the listed entity or its subsidiary, and relatives of such directors or key managerial personnel. This exemption only applies if the retail purchase is made without establishing a business relationship and on terms which are uniformly applicable and/or offered to all. The Amendment seeks to clarify the terms surrounding the exemptions to RPTs while ensuring that any deviation from standard terms would receive the appropriate regulatory scrutiny.
In addition to the aforementioned key changes, the Amendment tightens the timelines for submission of annual reports to stock exchanges, requiring the listed entities to submit the annual reports to the stock exchanges on or before the date of dispatch to the shareholders or making any regulatory submissions. The Amendment further requires that the listed entity use the facility of electronic clearing services, real time gross settlement or national electronic funds transfer to make payments of dividend/interest on securities issued/redemption of repayment amount. This streamlines the payment mechanism through the removal of payments made either by warrants or cheques.
In conclusion, the impact of the Amendment on listed entities is operationally demanding, requiring ongoing calibration of the turnover linked thresholds and the maintenance of group wide governance structures. In reducing the validity of the shareholder’s omnibus approvals and compressing the timelines for annual report submission, the Amendment requires the listed entities to be more vigilant of the terms of their compliance. This Amendment represents a decisive shift towards a turnover sensitive architecture, ensuring guardrails placed on RPTs are proportionate to the risk involved therein, coupled with a deliberate move to ensure enhanced transparency through subsidiary oversight. Listed entities would need to increasingly depend on a robust data system, integrated group governance and proactive engagement to ensure compliance.
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