SEBI Introduces Turnover-based Framework for Material Related-party Transactions

Moneylife Digital Team 25 November 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has introduced a new turnover-linked framework to determine what qualifies as a material related-party transaction (RPT), replacing the earlier fixed cap-based approach. The change aims to eliminate ambiguities and streamline compliance under the listing obligations and disclosure requirements (LODR) framework.

The revised norms aim to strike a balance between investor protection and ease of doing business. SEBI’s decision follows long-standing concerns from companies that the previous thresholds imposed a ‘one-size-fits-all’ burden, especially on large entities whose operational scales varied significantly.

As per the notification issued on 18 November 2025, companies with an annual consolidated turnover of up to ₹20,000 crore must now treat a transaction as material if its value exceeds 10% of their turnover. This marks a shift from the earlier uniform materiality trigger.

For entities with a turnover between ₹20,001 crore and ₹40,000 crore, a transaction becomes material once it exceeds ₹2,000 crore plus 5% of the turnover exceeding ₹20,000 crore. This adjustment aims to bring more proportionality to compliance requirements.

Companies with turnover above ₹40,000 crore will classify transactions as material at ₹3,000 crore plus 2.5% of the turnover beyond ₹40,000 crore, or ₹5,000 crore, whichever is lower. To protect minority investors, SEBI has capped the maximum threshold at ₹5,000 crore.

Under the previous rules, any RPT exceeding ₹1,000 crore or 10% of annual consolidated turnover, whichever was lower, was considered material. According to stakeholders, this uniform approach failed to reflect the differences in business size and models, resulting in excessive compliance obligations for larger corporations.

SEBI has also eased disclosure requirements for smaller transactions. If the total RPTs with a related party, including those ratified, do not exceed 1% of the annual consolidated turnover or ₹10 crore, whichever is lower, companies may now submit a simplified disclosure format.

Additionally, SEBI has clarified the validity of omnibus approvals. Approvals granted at an annual general meeting will be valid until the next AGM, while approvals given at other general meetings will remain effective for up to one year from the date of approval.

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