INTRODUCTION :
This circular seeks to provide clarification with respect to approval of related party transactions by the shareholders of a listed entity.
For this purpose, scope and materiality of RPT are given below :
Scope of Related Party Transaction for Listed entity :
a. Transactions between the listed entity and related parties of the subsidiary of the listed entity;
b. Transactions between the subsidiaries of the listed entity and related parties of the listed entity;
c. Transactions between the listed entity or its subsidiaries and any other party that benefits the related party of the listed entity.
Materiality of Related Party Transaction :
As per regulation 23(1) of LODR regulations, a related party transaction is considered to be material if the transactions during a financial year exceeds 10% of the annual consolidated turnover of the listed entity as per the last audited financial statement or Rs.1,000 crores whichever is lower.
APPLICABILITY :
This circular shall come into force from April 1, 2022 and applicable to all the Listed entities having related party transactions.
COMPLIANCES :
a) An RPT that has been approved by audit committee before April 1, 2022 and becomes material after that date shall be placed before the shareholders for approval in the first AGM held after April 1, 2022.
b) There shall be no requirement for an RPT that has been approved by both audit committee and shareholders before April 1, 2022 to seek fresh approval from the shareholders.
c) The explanatory statement contained in the notice sent to the shareholders for seeking approval for an RPT shall provide relevant information so as to enable the shareholders to take a view whether the terms and conditions of the proposed RPT are not unfavorable to the listed entity.
Arunkumar R
Articled Assistant