SEBI’s 2025 RPT Reforms: A New Benchmark for Corporate Transparency and Governance

“Change is constant — but compliance is leadership.”
As India’s corporate ecosystem evolves, regulators continue to strengthen the pillars of transparency, accountability, and fairness.
In line with this vision, the Securities and Exchange Board of India (SEBI) has released a comprehensive circular on Related Party Transactions (RPTs), marking a decisive step toward uniformity in disclosures and governance.

These reforms — effective September 1, 2025 — go beyond mere procedural updates. They reshape how listed entities define, approve, and report transactions with their related parties, ensuring that investor confidence remains at the heart of corporate India.

???? Why SEBI’s RPT Overhaul Matters

RPTs are not inherently problematic — they are often integral to business operations.
However, the lack of uniformity, fragmented disclosures, and varying interpretations across listed entities have historically blurred accountability.

Recognizing these gaps, SEBI’s circular introduces a standardized, data-driven, and certification-backed framework.
The result: a transparent and comparable disclosure system that balances governance needs with operational practicality.

???? Implementation Timeline

?? Key Highlights of the Circular

1?? Dual Materiality Threshold

To remove ambiguity, SEBI introduces a two-tier threshold for identifying material RPTs:

• Absolute Threshold: ?1,000 crore
• Relative Threshold: 10% of the annual consolidated turnover of the listed entity
• Special Category: 5% threshold for Brand or Royalty Payments

???? Any transaction breaching either threshold requires prior shareholder approval.
???? All RPTs, irrespective of materiality, must be reported to the Audit Committee.

Impact:
Companies must now track both value and percentage to remain compliant — introducing dual monitoring systems within ERP and finance functions.

2?? Expanded Definition of “Related Party”

SEBI’s new definition aligns with global best practices and goes beyond the Companies Act, 2013:

• Includes all promoter and promoter group entities, even those without any shareholding.
• Covers any entity holding 10% or more of equity (reduced from 20%).
• Recognizes indirect and control-based linkages, not just shareholding connections.

Impact:
This expansion significantly broadens the compliance universe, compelling companies to update their RPT master data, shareholding records, and ownership mappings.

3?? Standardized 3-Part Disclosure Template

SEBI now prescribes a comprehensive disclosure framework comprising three parts:

Part A – Related Party Information

• Legal identity (CIN, PAN, GST, jurisdiction)
• Nature and duration of relationship
• KMP overlaps and shareholder linkages
• Three-year transaction history and outstanding balances
• Exposure and risk analysis

Purpose: To provide full visibility into the nature, depth, and continuity of related party relationships.

Part B – Transaction Details

• Category (sale/purchase of goods, services, loans, guarantees, property, etc.)
• Transaction value and terms
• Market benchmark and arm’s length assessment
• Payment schedule and strategic rationale

Purpose: To justify business need and fairness for every RPT undertaken.

Part C – Valuation & Fairness Reports

• Independent valuation by qualified, registered valuers
• Multiple valuation methodologies with justification for selection
• Comparative market benchmarks
• Digital availability for Audit Committee and shareholder review

Purpose: To ensure every RPT stands the test of fairness, independence, and objectivity.

4?? Certification by Executives

In a landmark move, SEBI mandates joint certification by top management:

CEO / Whole-Time Director and CFO must jointly certify that RPT disclosures are
“accurate, complete, fair, and compliant with SEBI’s prescribed framework.”

???? Promoter certification, which was initially proposed, has been removed in the final circular following stakeholder feedback — striking a practical balance between responsibility and execution.

5?? Audit Committee – Strengthened Oversight Role

The Audit Committee now becomes the nerve center of RPT governance:

• Mandatory pre-approval for all RPTs
• Enhanced scrutiny of valuation and fairness reports
• Right to grant omnibus approvals for recurring transactions (within defined limits)
• Disclosure verification – ensuring alignment between internal reports and shareholder communications

This shift positions the Audit Committee as the final line of defense against related party risks.

???? Strategic Implications for Listed Entities

???? Industry Perspective

The RPT circular signals SEBI’s continued emphasis on investor protection through governance standardization.
By merging transparency with accountability, SEBI ensures that related party linkages no longer operate in the shadows.

For corporates, the message is clear:

“Strong governance isn’t about ticking boxes — it’s about earning trust.”

???? Conclusion

SEBI’s enhanced RPT framework is more than a regulatory update — it’s a structural reform aimed at reinforcing the credibility of India’s capital markets.

Transparency, fairness, and accountability will now define the new corporate governance order.
Companies that adapt early will not just comply — they’ll stand out as trustworthy, investor-ready, and future-proof.