Top business firms of India have urged the markets regulator Securities and Exchange Board of India (Sebi) to reconsider implementing related party norms, Mint reported quoting three people with knowledge of the matter.
On 23 March, the Confederation of Indian Industry, on behalf of conglomerates such as Tata Group, Adani Group and Mahindra Group, suggested that Sebi change the norms, that mandate a group’s holding company to secure shareholders’ consent for deals above ₹1,000 crore and auditors’ approval for all related-party transactions, and defer the amendments for at least six months, the report further said.
The CII presentation suggested that the markets regulator either increase the materiality threshold from ₹1,000 crore to ₹10,000 crore or just continue with the 10 percent of turnover clause rather than an absolute value, the report said.
In response to the concerns raised by the conglomerates, Sebi said that there is a provision in the new norms for an omnibus resolution mechanism through which companies can take shareholders’ approval once a year for multiple resolutions rather than approaching them every time a transaction exceeds the ₹1,000 crore threshold, Mint quoted a person close to the markets regulator saying so.
In November, Sebi had proposed amendments to the norms on related-party transactions, some of which are effective from 1 April 2022 to enhance corporate governance standards among publicly traded companies. Sebi had said any transaction worth ₹1,000 crore or 10 percent of the company’s consolidated turnover would be considered a material transaction, and it should be done only after securing shareholders’ approval.