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Fox Mandal | English | AcademicThink | Nov. 28, 2025 | Regulation

SEBI’s Fifth Amendment to the LODR Regulations in 2025 introduces significant changes to the materiality thresholds and approval processes for related party transactions (RPTs). A new Schedule XII replaces the earlier uniform threshold with a graded, turnover-linked framework, increasing the materiality threshold for larger entities up to a cap of ₹5,000 crore. This adjustment mainly benefits larger listed companies, while smaller entities see little change. Listed entities must update their RPT policies and annual materiality computations accordingly.

The amendment expands the Audit Committee’s oversight to subsidiary-level RPTs, requiring prior approval for transactions exceeding ₹1 crore based on prescribed turnover or capital tests for subsidiaries with and without audited standalone financials. This broadens governance responsibility to the parent listed entity and necessitates group-wide RPT monitoring and centralized controls.

Shareholder approvals for material RPTs now have defined tenures: approvals granted at AGMs remain valid only until the next AGM under Companies Act timelines, while approvals from other general meetings expire after one year. Additionally, clarification was added that “holding company” refers strictly to a listed holding company for exemption purposes concerning transactions with listed subsidiaries.

The amendment redefines the employee and key managerial personnel (KMP) benefit scheme carve-out, broadening its scope to include relatives and enforcing stricter uniformity criteria. This makes selective benefit schemes less likely to qualify for exemption and mandates issuers to reassess their current schemes for compliance.

Changes to annual report requirements acknowledge entities formed under special statutes, requiring reports to meet both statutory and SEBI disclosure norms. Reporting timelines are tightened, with mandatory submission to stock exchanges, debenture trustees, and posting on the entity’s website coinciding with dispatch to shareholders or government submissions. For non-convertible security holders without registered emails, entities must send physical letters providing direct links or QR codes to the online annual report, ensuring timely communication.

Listed entities are advised to incorporate Schedule XII into RPT policies, enhance subsidiary-level RPT oversight, plan for renewal of omnibus approvals, review benefit schemes under the new carve-out, and revise annual reporting and communication protocols in line with the amended regulations. This amendment advances SEBI’s objective to reinforce group-level governance and transparency in related party transactions.