RPT identification, materiality assessment, audit committee and shareholder approval, arm length pricing, SEBI LODR Regulation 23 compliance and disclosure obligations.
Short, direct, on the record.
Under Companies Act Section 188: sale/purchase/supply of goods or materials, selling/buying property, leasing property, availing/rendering services, appointment to office, and remuneration to related parties. SEBI LODR Regulation 23 has a broader definition covering any transaction between a listed entity (or its subsidiary) and a related party involving transfer of resources, services or obligations.
Related party includes: any person or entity forming part of the promoter or promoter group, any person or entity holding 20% or more (10% from April 2023) equity in the listed entity, and any person or entity as defined under Section 2(76) of the Companies Act (directors, KMPs, their relatives, and entities in which they have significant influence).
Under Companies Act: contract is voidable at the option of the board, and the director or any other employee who authorised the transaction can be imprisoned up to 1 year and fined INR 25,000 to INR 5 lakh. Under SEBI LODR: non compliance attracts SEBI enforcement action including penalties under the SEBI Act.
Yes. SEBI LODR Regulation 23(5) exempts RPTs between a listed entity and its wholly owned subsidiary from the requirement of shareholder approval, provided the financial statements of the subsidiary are consolidated with the listed entity. The audit committee approval requirement still applies.
Share the company type, group structure and the RPT context for a confidential assessment.