In February 2025, Mumbai (Maharashtra)-based market regulator, Securities and Exchange Board of India (SEBI) has introduced new industry standards under which listed entities are required to provide minimum information to the audit committee and shareholders when seeking approval for the Related Party Transactions (RPT).
- The new disclosure rule will come into effect from April 01, 2025.
- These new industry standards were issued by SEBI through a circular in exercise of powers given under Section 11 (1) and 11A of SEBI Act, 1992 read with regulation 101 of Listing Obligations and Disclosure Requirements (LODR) Regulations.
Key Points:
i.The new industry standards were developed by the Industry Standards Forum (ISF) which comprises representatives from Associated Chambers of Commerce and Industry of India (ASSOCHAM), Confederation of Indian Industry (CII), and Federation of Indian Chambers of Commerce & Industry (FICCI), under the aegis of stock exchanges and in consultation with SEBI.
ii.As per SEBI, the industry associations and stock exchanges will publish these new standards on their respective web portals to provide a uniform approach and assist listed entities in complying with requirements.
iii.According to the Regulation 23 (2) and (4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), it is mandatory to receive approval from audit committee as well as from the shareholders, if material, for RPTs.
iv.As per new rules, SEBI has mandated the listed entities to provide the audit committee with the information as outlined in the industry standards while submitting any proposal for review and approval of a RPT.
v.SEBI has further clarified that the explanatory statement comprising notices sent to the shareholders seeking approval for any RPT will include the information in addition to requirements under the Companies Act, 2013.
SEBI Relaxed Timeline for AIFs to Hold Investments in Demat Form
In February 2025, SEBI issued a circular in exercise of powers given under Section 11(1) of SEBI Act, 1992 read with Regulation 15 (1) (i) and Regulation 36 of AIF Regulations, 2012 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
- As per the circular, SEBI has relaxed the timeline for Alternative Investment Funds (AIFs) to hold investments in dematerialized (demat) form.
- All the provisions of SEBI’s circular came into force with immediate effect.
Key Points:
i.SEBI has mandated that any investment made by AIF on or after July1,2025 will be held in demat form only, irrespective of the fact that whether the investment is made directly in an investee company or is acquired from another entity.
ii.However, SEBI has clarified that any investment made by AIF before July 1, 2025 are exempted from the requirement of being held in demat form, except in specific cases, such as: where, the investee company is legally mandated to dematerialize its securities or,
- Where, AIF has control over the company alongside SEBI-registered intermediaries.
- SEBI has further mentioned that all investments made by AIF prior to July 1, 2025 are required to be converted into dematerialized form before October 31, 2025.
iii.SEBI has also extended exemptions to schemes of AIFs whose tenure, excluding permissible extension of tenure concludes on or before October 31, 2025, as well as schemes already in an extended tenure as of February 14, 2025.
iv.The trustee/sponsor of AIF, as the case may be, is required to ensure compliance with these revised provisions through the ‘Compliance Test Report’ prepared by the manager.
Important Term:
AIF: It is a privately pooled investment vehicle that collects funds from sophisticated investors, whether Indian or foreign which invests in alternative asset classes such as private equity, venture capital (VC), hedge funds, among others.
