Moderate Value RPTs : Interplay of disclosure norms and impracticalities

Pammy Jaiswal, Partner & Lavanya Tandon, Senior Executive | corplaw@vinodkothari.com

Preface

On October 13, 2025, SEBI vide its Circular has prescribed a set of disclosures required to be placed before the audit committee and shareholders for approval of RPTs, the value of which do not exceed 1% of annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity or Rupees Ten Crore, whichever is lower (‘Moderate value RPTs’).

This threshold has been introduced to facilitate ease of compliance with Industry Standards Note (‘ISN’) for RPTs over Rs 1 crore [para 5.3.2 of SEBI BM agenda dated September 12, 2025]. 

In this article, the author analyses the interplay of these distinct disclosure norms and also points out the impractical inclusion of shareholders for placing this information. 

Interplay with ISN on RPT dated July 26, 2025 

Since, the circular has been rolled out in furtherance of ISN, the RPTs can now be classified as follows for the purpose of checking their applicability under ISN- 

Particulars	Threshold	Applicability of ISN	Disclosures
Small value RPTs	< INR 1 crore	NA	As per rule 6A of the MBP Rules and Reg 23(3) of LODR
Moderate RPTs	Lower of < 1% of annual consolidated turnover or 10 crores but exceeding 1Cr	NA	As per SEBI Circular dated October 13, 2025
Other RPTs	> 1% of annual consolidated turnover or 10 crores	Applicable	As per para A, B, C of ISN, as may be applicable

Therefore, the minimum information required to be placed before the audit committee and shareholders (in case of material RPT) should be as per the disclosures stated above.

Effective date for compliance with the Circular

The Circular is effective from 13th October, 2025 (‘Effective Date’) and hence, any Moderate value RPTs placed for consideration on or after the effective date will require placing of the information provided in the Circular.

Further, it is also important to understand that this Circular applies for both approval as well as modification or ratification of Moderate Value RPTs, hence, in cases where the original transaction has already been approved and further modifications are intended, the instant Circular comes into action. 

Original Approved Transaction Value (INR in crs)	Approved on	Value of Modification post Effective Date(INR in crs)	Applicability of ISN	Applicability of Circular
500	August, 2025	100	Yes	No
100	July, 2025	9	No	Yes*
70	September, 2025	0.75	No	No

Analysis w.r.t Material RPTs 

Pursuant to reg 23, a transaction with a related party is considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity. The identification of material RPTs is thus, based on all transactions, regardless of the nature of such transactions, taken together, for determining the value of transactions done with a related party, as material.

Similarly, in the present circular, the threshold for Moderate value RPTs is capped at lower of 1% of the annual consolidated turnover or 10 crores on an aggregate basis with the same related party in a financial year.

Provided that if a transaction with a related party, whether individually or taken together with previous transaction(s) during a financial year (including transaction(s) which are approved by way of ratification). 

Such aggregation and capping of transactions at 10 crores creates an impractical scenario of such RPTs crossing the materiality threshold (under Reg 23) and warranting disclosures under this Circular as far as information before shareholders are concerned. The following scenarios illustrate the impractability.

Case	Consolidated Turnover	Materiality threshold under Reg 23	Threshold for Moderate value RPTs	Value of RPTs proposed to be undertaken on aggregate basis	Whether shareholders approval is required?	Applicability of Circular / ISN?
Company X	500 crores	50 crores	5 crores	4 crores	No	Circular, but only limited to AC disclosures
				15 crores	No	ISN (Part A & B)
				60 crores	Yes	ISN (Part A & B); (Part C applies only if any particular transaction amongst the 6 items in itself is material)
Company Y	1500 crores	150 crores	10 crores	6 crores	No	Circular, but only limited to AC disclosures
				13 crores	No	ISN (Part A & B)
				170 crores	Yes	ISN (Part A & B); (Part C applies only if any particular transaction amongst the 6 items in itself is material)
Company Z	150 crores	15 crores	1.5 crores	1 crore	No	No- small value RPT
				3 crores	No	ISN (Part A & B)
				18 crores	Yes	ISN (Part A & B); (Part C applies only if any particular transaction amongst the 6 items in itself is material)
Company Q	50 crores	5 crores	0.50 crores	2 crores	No	ISN (Part A & B)

It is imperative to highlight that while the Circular requires presenting information before the shareholders in case of material RPTs, given the ambit of transaction value for which this Circular has been rolled out i.e. lower of 1% of consolidated turnover or 10 crores, it will have no relevance as can also be seen from the table above. Therefore, it is an unlikely situation where the information prescribed under Para B of Annexure 13A of the Circular will be actually required to be placed before the shareholders.

Conclusion

SEBI, in its Board Meeting (para 5.4 of BM agenda), has indicated its intent to grant relaxation to entities with lower turnover in respect of the information to be furnished for approval of RPTs to the Audit Committee only. The Circular, however, prescribes the list for shareholder’s information also. As discussed above, given the threshold, the same becomes irrelevant. It is important to bring this to the knowledge of the regulators so that appropriate changes are carried out.  

Our RPT resource center may be accessed here- https://vinodkothari.com/article-corner-on-related-party-transactions/

FAQs on Industry Standards Note on RPTs: https://lnkd.in/gNER8UQD