Markets regulator Sebi on Friday came out with disclosure requirements for listed entities, which have listed their debt securities, in relation to related party transactions (RPTs).
The new requirement will apply to “high-value debt-listed entities”, the Securities and Exchange Board of India (Sebi) said in a circular.
High-value debt-listed entities are those entities that have listed non-convertible debt securities and an outstanding value of such securities are Rs 500 crore and above.
Under this, certain disclosure requirements need to be placed by high-value debt-listed entities before the audit committee and shareholders for consideration of related party transactions RPTs.
Such entities will have to justify as to why the RPT is in its interest, besides, a copy of the valuation or other external party report will have to be submitted to the audit committee as well as shareholders for approval.
In addition, these entities will have to place information on the percentage of the counter-party’s annual consolidated turnover that is represented by the value of the proposed RPT voluntarily to the audit committee and shareholders.
The RPT disclosures need to be made to stock exchanges in the prescribed format.
With regard to information to be submitted to the audit committee for approval of a proposed RPT, Sebi said such entities will have to disclose type, material terms and particulars of the proposed transaction, name of the RPT and its relationship with the high-value debt-listed entity or its subsidiaries, including nature of its concern or interest.
In addition, they will have to inform the audit committee about tenure as well as the value of the proposed transaction, the percentage of the listed entity’s annual consolidated turnover, for the immediately preceding financial year, which is represented by the value of the proposed transaction.
The notice being sent to the shareholders seeking approval for any proposed RPT will include certain information as a part of the explanatory statement.
The circular will come into force with immediate effect, the regulator said.
In November, Sebi made sweeping changes to strengthen the monitoring and enforcement of norms on related party transactions.
The regulator had tweaked the definition of ‘related party’ and ‘related party transactions’.
Prior to this, Sebi in September came out with corporate governance rules for high-value debt-listed entities. These provisions will be applicable on a “comply or explain” basis until March 31, 2023, and on a mandatory basis thereafter.