Section 23 in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
23. Related party transactions.
(1)The listed entity shall formulate a policy on materiality of related party transactions and on dealing with related party transactions [including clear threshold limits duly approved by the board of directors and such policy shall be reviewed by the board of directors at least once every three years and updated accordingly] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/10, dated 9.5.2018 (w.e.f. 2.9.2015).]:Explanation. - A transaction with a related party shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.(1A)[ Notwithstanding the above, [with effect from July 01, 2019,] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/10, dated 9.5.2018 (w.e.f. 2.9.2015).] a transaction involving payments made to a related party with respect to brand usage or royalty shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceed [five] [Substituted 'two' by Notification No. SEBI/LAD-NRO/GN/2019/22, dated 27.6.2019 (w.e.f. 2.9.2015).] percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.](2)All related party transactions shall require prior approval of the audit committee.(3)Audit committee may grant omnibus approval for related party transactions proposed to be entered into by the listed entity subject to the following conditions, namely-(a)the audit committee shall lay down the criteria for granting the omnibus approval in line with the policy on related party transactions of the listed entity and such approval shall be applicable in respect of transactions which are repetitive in nature;(b)the audit committee shall satisfy itself regarding the need for such omnibus approval and that such approval is in the interest of the listed entity;(c)the omnibus approval shall specify:(i)the name(s) of the related party, nature of transaction, period of transaction, maximum amount of transactions that shall be entered into,(ii)the indicative base price / current contracted price and the formula for variation in the price if any; and(iii)such other conditions as the audit committee may deem fit:Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may grant omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction.(d)the audit committee shall review, atleast on a quarterly basis, the details of related party transactions entered into by the listed entity pursuant to each of the omnibus approvals given.(e)Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year:(4)All material related party transactions shall require approval of the shareholders through resolution and [no related party shall vote to approve] [Substituted 'the related parties shall abstain from voting on' by Notification No. SEBI/LAD-NRO/GN/2018/10, dated 9.5.2018 (w.e.f. 2.9.2015).] such resolutions whether the entity is a related party to the particular transaction or not.[Provided that the requirements specified under this sub-regulation shall not apply in respect of a resolution plan approved under section 31 of the Insolvency Code, subject to the event being disclosed to the recognized stock exchanges within one day of the resolution plan being approved;] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/21, dated 31.5.2018 (w.e.f. 2.9.2015).](5)The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases:(a)transactions entered into between two government companies;(b)transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.Explanation. - For the purpose of clause (a), "government company(ies)" means Government company as defined in subsection (45) of section 2 of the Companies Act, 2013.(6)The provisions of this regulation shall be applicable to all prospective transactions.(7)For the purpose of this regulation, all entities falling under the definition of related parties shall [not vote to approve the relevant transaction] [Substituted 'abstain from voting' by Notification No. SEBI/LAD-NRO/GN/2018/10, dated 9.5.2018 (w.e.f. 2.9.2015).] irrespective of whether the entity is a party to the particular transaction or not.(8)All existing material related party contracts or arrangements entered into prior to the date of notification of these regulations and which may continue beyond such date shall be placed for approval of the shareholders in the first General Meeting subsequent to notification of these regulations.(9)[ The listed entity shall submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges and publish the same on its website.] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/10, dated 9.5.2018 (w.e.f. 2.9.2015).]
