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SEBI Plan: Turnover-Linked Limits for Related Party Deals

5 August 20251 min read
ECONOMYSEBI Plan:Turnover-LinkedLimits for RelatedParty Deals5 August 2025safalsetu.com

Why in the news

SEBI issued a consultation paper to link RPT materiality to company size, easing compliance for big listed firms.

Key facts

  • RPTs are dealings with promoters, subsidiaries, key managerial personnel or their close family; examples include loans, guarantees and director pay.
  • Material RPTs cross a money limit and need shareholder approval.
  • Today: lower of ₹1,000 crore or 10% of annual consolidated turnover.

Proposed slabs

TurnoverThreshold
Up to ₹20,000 crore10% of turnover
₹20,001-₹40,000 crore₹2,000 crore plus 5% of the excess over ₹20,000 crore
Above ₹40,000 crore₹3,000 crore plus 2.5% of the excess over ₹40,000 crore, capped at ₹5,000 crore if lower

Why regulate

  • Protect minority shareholders.
  • Ensure accountability with related entities.
  • Stop fund diversion disguised as internal deals.

Exam angle

  • Regulator: SEBI.
  • Related terms: KMP, audit committee.

Test yourself

1. Under the rule existing before SEBI's proposal, a transaction is material if it exceeds which limit?

The notes cite the lower of ₹1,000 crore or 10% of turnover.

2. For companies with turnover up to ₹20,000 crore, SEBI's proposal sets the RPT materiality threshold at what?

The first slab is 10% of annual turnover.

3. Which group is mainly protected by regulating material related party transactions?

The notes say safeguarding minority shareholders is a purpose.

This topic is part of Daily Current Affairs 5 August 2025 (15 topics).

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