For a decade, the test for whether a related party transaction was significant enough to need shareholder approval was the same flat rule for every listed company in India, regardless of size. That single-rule approach quietly stopped applying in November last year, replaced by a graded system that scales with a company's own turnover — a change worth understanding well before your next board meeting, not after an auditor flags a transaction you assumed was routine.
Related party transactions — deals between a listed company and its promoters, directors, key managerial personnel, or entities connected to them — sit at the intersection of ordinary business necessity and a genuine, well-documented governance risk: the potential for insiders to extract value from a company at the expense of minority shareholders. SEBI's Listing Obligations and Disclosure Requirements Regulations have long required every RPT, regardless of size, to receive prior audit committee approval, with transactions crossing a "materiality" threshold requiring shareholder approval as well.
What Changed, Specifically, on 19 November 2025
Until the SEBI (LODR) (Fifth Amendment) Regulations, 2025, materiality was a single flat test applied uniformly: the lower of Rs 1,000 crore or 10% of the company's annual consolidated turnover. From 19 November 2025, this has been replaced by a graded, turnover-linked framework set out in a newly inserted schedule — smaller listed companies now face proportionally lower absolute thresholds calibrated to their actual scale, rather than being measured against the same Rs 1,000 crore ceiling that a company many times their size would use. Alongside this headline change, the framework for related-party transactions undertaken by a listed company's unlisted subsidiaries — where the listed entity itself isn't a direct party — was also revised, moving to the lower of the new scale-based threshold or 10% of the subsidiary's own standalone turnover, extending the graded logic down through corporate groups rather than leaving subsidiary-level transactions governed only by the older flat test.
A Few Genuinely Useful Compliance Simplifications Bundled In
The same amendment package brought several practical clarifications worth knowing. Retail purchases from a listed entity or its subsidiaries by directors and employees — provided they're made on the same terms uniformly offered to everyone, with no special business relationship involved — are now explicitly excluded from RPT classification altogether, and this exemption has been extended to also cover key managerial personnel and relatives of directors, closing an inconsistency in the earlier framework. Omnibus RPT approvals — a single shareholder approval covering a category of recurring transactions rather than requiring approval for each one individually — now have explicit validity periods clarified: until the next AGM if approved at an AGM, or one year from the date of approval otherwise, removing ambiguity that previously existed around exactly how long such approvals remained valid.
Why This Is Genuinely Good Regulatory Design, With One Caveat
We think the shift to a graded, scale-based threshold is a clear improvement over the old flat test, and for a specific reason: a Rs 1,000 crore threshold applied uniformly effectively gave much larger companies considerably more room, proportionally, to route transactions below the shareholder-approval line than smaller companies had — the same absolute rupee threshold represents a vastly different share of a large conglomerate's business than a mid-sized listed company's. A framework that scales with actual company size closes that proportionality gap and applies genuinely comparable scrutiny across companies of different scale, which is a more coherent way to protect minority shareholders regardless of which company they've invested in. The caveat worth flagging is transitional: any board or audit committee still evaluating transactions purely against memory of the old flat threshold risks either under- or over-classifying a transaction relative to where their specific company's turnover now places them under the new graded schedule.
What This Means for Your Board and Audit Committee Right Now
If you sit on a board or audit committee of a listed company, or advise one, this is genuinely worth a fresh, deliberate review rather than an assumption that "we've always applied the Rs 1,000 crore rule." Calculate your company's specific materiality threshold under the new graded schedule, and re-examine any transaction currently being treated as non-material under the old flat test — some transactions that previously sat comfortably below the shareholder-approval line may now sit above it, or vice versa, purely because the underlying test itself has changed shape.