India’s Proposed Overhaul of Thresholds for Related Party Transactions: Lessons from Global Regimes

Background

Related-party transactions (RPTs)—deals between a listed entity and parties with control or influence (ie promoters, subsidiaries, or key managerial personnel)—are fraught with the potential for conflicts of interest and abuse, particularly in promoter-driven markets like India. Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 currently deems an RPT ‘material’ if it exceeds INR 1,000 crore (INR 10 billion) or 10 percent of annual consolidated turnover, whichever is lower. This invokes both audit-committee scrutiny and shareholder approval, preventing related parties from voting. While this regime, reinforced during the 2021–2022 tightening of disclosure norms, was intended to curb self-dealing and enhance minority protection, it has also been criticised as disproportionate for large-cap firms facing frequent, routine intragroup transactions.

On August 4 2025, the Securities Exchange Board of India (SEBI) released a consultation paper proposing a scale-based threshold structure that would align materiality with turnover as tabulated below: 

Subsidiary transactions would trigger audit-committee oversight only when they exceed 10 percent of the subsidiary’s standalone turnover or the parent’s threshold, whichever is lower. A de-minimis exemption is also proposed whereby transactions under INR 100 million or 1 percent.

 of turnover would require only minimal audit-committee disclosure. SEBI’s own modelling indicates that these reforms could reduce RPTs demanding shareholder approval by approximately 60 percent. Additional governance updates, including replacing promoter certification with CEO/CFO attestation and extending approval validity to 15 months for AGM-approved RPTs, have been introduced.

Impact on Minority Shareholders

Although the proposals are pitched as pragmatic relief for large entities drowning in redundant paperwork, they strike the governance architecture at its core, especially regarding minority shareholder protection. RPTs have long been instruments of corporate tunnelling and expropriation in concentrated ownership structures; raising thresholds weakens the early warning signals for minority investors. When disclosure triggers retreat, shareholders lose meaningful opportunities to intervene or question transactions with subtle but cumulative impact. Indian precedents like Fortis Healthcare, where promoter-linked fund diversions were first unveiled through late disclosures, and the Zee–Sony merger, which prompted debate on insufficient transparency in promoter-driven deal-making, illustrate how RPT opacity may inflict lasting damage on minority rights. Although these cases did not directly involve threshold debates, they resonate with the risks amplified by higher materiality bars.

Calibrating Materiality

A robust approach to calibrating materiality demands a nuanced blend of quantitative thresholds and qualitative triggers, an approach strongly advocated by international governance bodies. The OECD Principles of Corporate Governance recommend distinguishing RPTs according to both materiality and terms: ongoing, arm’s-length transactions may warrant periodic reporting but not continuous disclosure, whereas unusual or non-market dealings must trigger immediate scrutiny. Anti-elusive provisions, such as aggregating transactions with the same related party over a period, are necessary to prevent fragmentation aimed at avoiding threshold. International Organization of Securities Commissions, too, warns against abusive RPTs in emerging markets, and underscores transparency and board independence as vital safeguard.

In India’s promoter-dominated landscape, aligning material thresholds solely with turnover effectively ignores qualitative risk metrics. Transactions involving promoter-controlled entities, strategic assets, or sensitive arenas (such as pricing far from market norms) may pose systemic risks regardless of scale. A regime that treats such RPTs as immaterial unless crossing high numeric caps fails to capture governance realities. Hence, ‘turnover’ is a convenient but insufficient yardstick for materiality; regulators must also weigh identity, pattern, and intent.

Considerations from cross-Jurisdictional positions

A cross-jurisdictional comparison further illuminates how other markets balance efficiency and minority protection. In the United Kingdom, Listing Rules (LR 11) employ multiple percentage ratio tests, assessing transactions against asset value, profit, or consideration, and incorporate qualitative waiver mechanisms and independent advice provisions for RPTs exceeding thresholds; smaller or intragroup transactions may qualify for procedural exemptions subject to conditions. 

In the United States of America, Item 404 of Regulation S-K requires disclosure of any RPT exceeding USD 120,000, regardless of whether it is quantitatively significant, with narrative explanations of context and fairness. Even low-value, recurrent related-party dealings are visible to investors, allowing oversight through transparency rather than threshold filtering. 

Singapore and Hong Kong, with corporate landscapes similarly dominated by family-controlled entities, have built strong procedural safeguards into their RPT regimes, including independent shareholder approval for significant transactions and rigorous continuous disclosure obligations. In Hong Kong, connected transactions under a de-minimis cap, ie under HKD 1 million or below certain percentage ratios, may be exempted, but those exceeding limits require formal announcements, shareholder approvals and prior documentation. Similarly, Singapore prescribes rigorous scrutiny and disclosure for family-controlled firms. These jurisdictions demonstrate that combining quantitative thresholds with qualitative filters, independent assessments, and minority veto rights can preserve both market efficiency and governance integrity.

Considerations for SEBI

SEBI’s reforms, while timely in addressing operational inefficiencies, risk undermining governance unless accompanied by binding qualitative safeguards. Minority investors need both transparency and procedural recourse. SEBI could fortify the regime by: 

• empowering independent directors or audit committees to deem certain RPTs material on qualitative grounds;
• mandating aggregation of related transactions in a financial year to prevent threshold evasion;
• instituting periodic consolidated disclosures of sub-threshold RPTs; and
• requiring independent fairness opinions for large-cap RPTs even when they fall below the threshold. 

Additional minority safeguards, such as super-majority approvals or enhanced scrutiny for promoter-linked RPTs, could also help preserve accountability.

SEBI’s move toward scale-based thresholds can hence be said to aptly acknowledge that governance frameworks must be proportionate to corporate scale. Yet, once thresholds rise, governance rigour must not fall in tandem. Embedding qualitative filters, ensuring aggregated visibility, and preserving robust minority voice are essential to prevent the unintended erosion of transparency. The art of RPT regulation lies in balancing ease of doing business with the uncompromising protection of shareholder integrity. Unless qualitatively anchored, numeric reform may well hollow out the very safeguards it claims to simplify.

Diya Vaishnav is an Associate at Cyril Amarchand Mangaldas.

Tejas Sateesha Hinder is an Associate at Cyril Amarchand Mangaldas.