The markets regulator, Securities and Exchange Board of India (SEBI) tightened norms for related-party transactions on September 28, 2021 in order to boost corporate governance standards. It approved a framework of spot trading in gold.

• With this approval, SEBI has made it easier for start-up founders to retain control.
• SEBI also eased merger and acquisitions (M&A) norms for listed companies.

According to SEBI, following entities would be counted as related parties:

1. People or entities that are part of promoter group
2. Entity withholding of 20% or more in a listed entity, either as beneficia; owner or directly during the preceding fiscal.
3. Entities withholding of 10% or more starting April 1, 2023.

Definition of related party transactions (RPTs) will comprise of deals between listed entities or any of the units of entities with a related party.

• As per SEBI norms, approval of shareholders will be required in advance for material RPTs or for the deals which have a threshold value of either Rs 1,000 crore or 10% of the consolidated annual revenue of company, whichever is lower.
• Any transaction, which is benefiting a related party directly or indirectly, would require approval of audit committee and shareholders of the listed firm.