SEBI puts in place disclosure norms for high-value debt-listed entities in connection to related party transactions

Market regulator Securities and Exchange Board of India (SEBI) issued disclosure rules for listed entities which have listed their debt securities in connection to related party transactions (RPTs). 

In a circular issued on Friday, SEBI stated that the new criteria will apply to "high-value debt-listed businesses".

Firms that have listed non-convertible debt securities with an outstanding value of Rs 500 crore or more are classified as high-value debt-listed entities.

Under this, certain disclosure requirements need to be placed by high-value debt-listed entities before the audit committee and shareholders for consideration of related party transactions RPTs, PTI reported.

Such entities will have to justify as to why the RPT is in its interest, besides, a copy of the valuation or other external party report will have to be submitted to the audit committee as well as shareholders for approval, this report said.

In addition, these entities will have to place information on the percentage of the counter-party's annual consolidated turnover that is represented by the value of the proposed RPT voluntarily to the audit committee and shareholders.

The RPT disclosures need to be made to stock exchanges in the prescribed format.

According to PTI, Sebi said such entities will have to disclose the type, material terms, and particulars of the proposed transaction, the name of the RPT, and its relationship with the high-value debt-listed entity or its subsidiaries, including the nature of its concern or interest, when submitting information to the audit committee for approval of a proposed RPT.

In addition, they must also tell the audit committee about their tenure as well as the amount of the proposed transaction, which is the percentage of the listed entity's annual consolidated turnover for the previous financial year reflected by the value of the proposed transaction.

Certain information will be included in the explanatory statement of any notice addressed to shareholders seeking approval for any proposed RPT.

The circular will take effect immediately, according to the regulator.

In November, Sebi made sweeping changes to strengthen the monitoring and enforcement of norms on related party transactions.

The regulator had tweaked the definition of 'related party' and 'related party transactions'.

Prior to this, the Sebi issued corporate governance regulations for high-value debt-listed businesses in September, as per the PTI said.

These provisions will be applicable on a "comply or explain" basis until March 31, 2023, and on a mandatory basis thereafter.