Provision of LODR (Regulation 23)

Regulation 23.1

• Formulate on Materiality of RPT including clear threshold limits duly approved by the Board and such policy shall be reviewed by the Board at lease once every 3 years.

• RPT considered material exceeds lower of the following:

• • Transaction to be entered into along with previous transactions during a FY exceeds 1000 Cr., or
  •  Transaction exceeds 10% of annual consolidated turnover as per last audited FS Whichever is lower.
• For SMEs the above limit is 500 Cr. (w.e.f. 01/04/2025)
• For brand usage or royalty, limit is 5%. (w.e.f. 01/07/2019)

Regulation 23.2

• All RPTs and subsequent material modification requires prior approval of Audit Committee (AC).

• Only ID members of AC shall approve RPTs or subsequent material modification thereof.

• “Material Modifications” shall be defined and disclose in the policy on materiality by AC.

• In a RPT where subsidiary of a Listed entity is a Party but not the listed entity, prior approval of AC of Listed entity shall be required if value of transaction exceeds 10% of annual consolidated turnover as per last audited FS of the Listed entity.

• In a RPT where subsidiary of Listed entity is a Party but not the listed entity, prior approval of AC of Listed entity shall be required if value of transaction exceeds 10% of annual standalone turnover as per last audited FS of the subsidiary.

• Prior approval of AC of Listed entity shall not be required for a RPT where Listed subsidiary is a party and not the listed entity, if regulation 23 and 15(2) are applicable to such listed subsidiary.

• For RPTs of unlisted subsidiaries of a listed subsidiary as referred above, prior approval of Listed subsidiary shall suffice.

• Approval of AC shall not be required for remuneration and sitting fees paid by the Listed entity or its subsidiary to its Directors/KMPs or senior management, except who is part of promoter group if the same is not material as per sub-reg. 23(1).

• IDs of AC may ratify RPTs within 3 months from the date of transaction or in the immediate next meeting of AC whichever is earlier, subject to following conditions:

• • Shall not exceeding 1 Cr. individually or taken together during a FY.
  • Transaction is not material.
  • Rationale for inability to seek prior approval.
  • Details of ratification shall be disclosed along with disclosure of RPT as per 23(9).
  • Any other conditions as advised by AC.

Failure to seek ratification of the AC render transaction voidable at the option of AC if transaction is with director, or is authorised by any director, the directors concerned shall indemnify the listed entity.

Regulation 23.3

• Omnibus approval (OA) by AC for proposed RPTs subject to following conditions: –

• • AC shall lay done criteria for granting the OA in line with Policy on RPT for transactions of repetitive nature.

• • Satisfaction of AC regarding need for such OA and in the interest of Listed entity.
  • OA shall specify:
    • Name of RP, Nature of Transaction, Period, Maximum amount
    • Indicative base price/current contracted price and the formula for variation in price, if any
    • Such other conditions as deemed fit.
    • In case of unforeseen RPT and in the absence of above details, transaction value shall not exceed 1 Cr.
• Quarterly review of details of RPTs entered into by the listed entity or its subsidiaries pursuant to each of the OAs given.

• Such OAs shall be valid for a period not exceeding 1 year and shall require subsequent approval after its expiry.

Regulation 23.4 

• All material RPTs and subsequent material modifications shall require prior shareholders’ approval through Resolution and no RP shall vote to approve such resolutions whether or not the entity is RP to the particular transaction.

• Prior approval of shareholders of listed entity shall not be required for RPTs to which Listed subsidiary is a party and not the listed entity, subject to applicability of regulations 23 & 15(2) to the listed subsidiary.

• Above approval shall not apply in respect of resolution plan approved under section 31 of Insolvency Code subject to disclosure of resolution plan within 1 day from its approval to the recognised stock exchange.

Regulation 23.5 

• Sub-regulations (2), (3) and (4) shall not be applicable in case of following transactions: –
  • between two public sector undertakings
  • between holding company and its WOS whose accounts are consolidated with such holding company and placed before the shareholders in General meeting for approval
  • Between two WOS of listed entity whose accounts are consolidated with such holding company and placed before the shareholders in General meeting for approval
  • Payment of statutory dues, fees or charges entered into between an entity and CG or SG or combination thereof.
  • Between public sector company and CG/SG or combination thereof.

Regulation 23.6

• This regulation shall be applicable to all prospective transactions.

Regulation 23.8

• Approval of all existing material RPT contracts or arrangements existing and effective on the date of notification of these regulations.

Regulation 23.9 

• Disclosure of RPTs to stock exchange and on website in the prescribed format.
• HVDL entities submit such disclosure along with half yearly financials results.
• Such disclosure every six months on the date of publication of standalone & consolidated half yearly results.
• No disclosure required for remuneration/sitting fees paid to directors/KMPs/SM by Listed entity its subsidiary, except who is part of promoter or promoter group.

INDUSTRY STANDARDS ON “MINIMUM INFORMATION TO BE PROVIDED TO THE AUDIT COMMITTEE AND SHAREHOLDERS FOR APPROVAL OF RELATED PARTY TRANSACTIONS

• Effective From 1st September 2025.

• The objective of these Standards is to standardize the format for “Minimum information to be provided to the Audit Committee and the shareholders, wherever required, for review and approval of a Related Party Transaction (RPT)”.

• The information provided in the standardized format shall be incorporated into the agenda of the Audit Committee meeting. The comments of the Audit Committee, where applicable, shall be recorded in the minutes of the meeting. For material RPTs, the information as prescribed in these Standards shall be included in the Explanatory Statement to the Notice sent to shareholders.

Applicability of these Standards:

• The RPT Industry Standards shall be applicable for all RPTs placed for review and approval by the Audit Committee of the listed entity, in terms of Regulation 23(2) and 23(3) of the SEBI and RPTs defined under Regulation 23(1) & 23(1A) for approval of both the Audit Committee and the shareholders

• The RPT Industry Standards shall not be applicable to:

• Transactions exempted under Regulation 23(5) of the LODR Regulations; and
• Quarterly review of RPTs by the Audit Committee in terms of Regulation 23(3)(d) of the LODR Regulations.
• Transaction(s) with a related party to be entered into individually or taken together with previous transactions during a financial year (including which are approved by way of ratification) do not exceed Rs. One Crore.

• Structure of RPT Industry Standards: –

• • Part A: This Part of the Standards captures the minimum information of the proposed RPT and is applicable to all RPTs.

• • Part B: This Part is applicable only if a specific type of RPT is proposed to be undertaken and is in addition to Part A. Seven types of RPTs have been specified.

• • • Sale, purchase or supply of goods or services or any other similar business transaction and trade advances
    • Loans and advances (other than trade advances) or inter-corporate deposits given by the listed entity or its subsidiary
    • Investment made by the listed entity or its subsidiary
    • Guarantee (including performance guarantee in nature of security/contractual commitment or which could have an impact in monetary terms on the issuer of such guarantee), surety, indemnity or comfort letter, by whatever name called, made or given by the listed entity or its subsidiary.
    • Borrowings by the listed entity or its subsidiary
    • Sale, lease or disposal of assets of subsidiary or of unit, division or undertaking of the listed entity or disposal of shares of subsidiary or associate.
    • Transactions relating to payment of royalty
  •  Part C: This Part is applicable only if a specific type of RPT proposed to be undertaken is a Material RPT as defined under Regulation 23(1) & (1A) of the LODR Regulations (“Material RPTs”); and is in addition to Part A and Part B (with respect to such RPT).
    •  Transactions relating to any loans and advances (other than trade advance) or inter-corporate deposits given by the listed entity or its subsidiary.
    • Investment made by the listed entity or its subsidiary.
    • Guarantee (including performance guarantee in nature of security/contractual commitment or which could have an impact in monetary terms on the issuer of such guarantee), surety, indemnity or comfort letter, by whatever name called, made or given by the listed entity or its subsidiary.
    • Borrowings by the listed entity or its subsidiary.
    • Sale, lease or disposal of assets of subsidiary or of unit, division or undertaking of the listed entity or disposal of shares of subsidiary or associate.
    • Transactions relating to payment of royalty.