[ad_1]
The Securities and Exchange Board of India (Sebi) on Thursday clarified that related party transactions (RPTs) that have been approved by the audit committee and shareholders prior to April 1, 2022, will not be required to obtain fresh approval from the shareholders.
The market regulator, however, has refused to extend the deadline for implementation of the new RPT norms, dashing hopes of India Inc.
Industry body Confederation of Indian Industry (CII) requested Sebi to defer the implementation of the RPT norms, announced in November 2021, by at least six months. It said the new rules, which come into effect from April 1, 2022, would have a far-reaching impact on the running of business.
Sebi has further said RPTs that become ‘material’ under the revised threshold will have to be placed before the shareholders in the first general meeting after April 1, 2022.
The regulator has revised the materiality threshold whereby any listed entity would be required to seek prior approval of the shareholders for all transactions exceeding Rs 1,000 crore, or 10 per cent, of the consolidated annual turnover of the listed entity, whichever is lower. Earlier, shareholder approval was required only if material transactions entered into with related parties exceeded 10 per cent of the consolidated annual turnover of the listed entity.
CII had said the Rs 1,000-crore threshold was an irritant for large-sized entities. “ For companies conglomerates having multiple subsidiaries including listed subsidiaries with high turnover, transactions worth Rs 1,000 crore may not qualify as ‘material’ or ‘substantial’ but will still need to be approved by shareholders as per the amended law,” it has said in a presentation to Sebi.
Sebi, however, has held that the new norms are necessary to improve corporate governance.
“Transparency, accountability and shareholder empowerment are the bedrock of robust corporate governance. Listed entities, therefore, shall ensure to comply with the spirit of the law and endeavor to provide relevant and detailed information to enable and empower shareholders for taking an informed decision,” Sebi has said.
The regulator has urged India Inc to provide explanatory statement while seeking shareholders’ approval for an RPT “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, compared to the terms and conditions, had similar transaction been entered into between two unrelated parties.”
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
[ad_2]
Source link