RPT Regulations

Background

SEBI’s amendments to the regulatory architecture for related party transactions (“RPTs”) under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) came into force from April 1, 2022[1] (“RPT Regulations”), bringing about a paradigm shift in the RPT approval and disclosure requirements applicable to listed companies in India.[2]

Continue Reading RPT Regulations – Some Suggestions for SEBI’s consideration

Regulatory overload on Audit Committees

Background

The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (LODR) Regulations, 2015 (“LODR”) places significant emphasis on the functioning of various committees of the Board of Directors (“Board”) of a listed company. While all Board committees have been entrusted with important responsibilities, a disproportionate amount of the regulatory burden has been placed on the Audit Committee. The Audit Committee has multifarious responsibilities under Section 177 and various other provisions of the Act, the LODR, and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).

Continue Reading Regulatory overload on Audit Committees – Is there a need to have a fresh look at its role?

Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test

Background

SEBI[1] has recently revised the materiality threshold for obtaining shareholder approval for related party transactions (“RPTs”) under Regulation 23(1) of the SEBI (LODR) Regulations, 2015 (“LODR”), to cover RPTs that exceed INR 1000 crore or 10% of a listed entity’s annual consolidated turnover (as per the last audited financial statements), whichever is lower.

The revised materiality threshold has come into effect on April 1, 2022, and this change assumes significance, as prior to April 1, 2022, there was no absolute numerical threshold for RPTs that require shareholders’ approval.

This also raises the question as to whether an absolute numerical threshold of INR 1000 crore could potentially be considered as violative of Article 14 of the Indian Constitution.

In this post, the authors aim to probe deeper into this constitutional aspect and examine some of the arguments that can be made from both sides of the spectrum.

Continue Reading Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test?