Sebi may soon tighten its norms for ‘related party transactions’ of listed companies, by mandating greater disclosures and barring concerned parties from voting for shareholder approvals to such deals. The regulator also plans to widen its definition of ‘related party transactions (RPTs)’, while making it tougher for promoters and others to use such deals for personal gains. The market watchdog has suggested that boards of listed companies should prepare a policy on dealing with RPTs and the same should be disclosed on its website as well as the annual report. The proposals on RPT are part of the watchdog’s new set of corporate governance norms which are expected to come into effect from October 1. Besides, listed companies would soon be required to get RPTs approved by their shareholders through a special resolution but the related parties should abstain from the voting. A transaction with a related party that is entered into individually or taken together with previous dealings during a financial year, exceeds five per cent of the listed company’s annual turnover would be considered as a material RPT. Even if such transactions account for 20 per cent of the listed entity’s net worth in a financial year, still they would be considered as material ones. RPTs would be considered as material depending on which ever (annual turnover or net worth criteria) is higher.

(Economic Times)