The transaction had already been reviewed once and cleared through the company's normal audit committee process, comfortably below the threshold that would have triggered shareholder approval. When the same transaction was checked again under the new rules that took effect midway through the year, it landed on the opposite side of that line entirely — not because anything about the deal had changed, but because the underlying measuring stick had.
A mid-sized listed company had entered into a services arrangement with an entity connected to one of its promoters — a genuine, arm's-length commercial arrangement, priced fairly, and entirely typical of the kind of related-party dealing that happens routinely across listed companies. Under the flat materiality test that applied when the transaction was first approved — the lower of Rs 1,000 crore or 10% of consolidated turnover — the transaction sat comfortably within the range requiring only audit committee approval, well below the threshold that would have additionally required a shareholder vote.
Where the Company's Own Governance Review Caught the Shift
As part of a routine compliance review following the SEBI (LODR) (Fifth Amendment) Regulations, 2025 taking effect, the company's company secretary re-ran every currently active or recently approved related-party transaction against the new graded, turnover-linked materiality schedule rather than assuming the old approvals remained automatically valid indefinitely. Because this particular company sat in a turnover band where the new graded threshold worked out to a meaningfully lower absolute rupee figure than the old flat Rs 1,000 crore test had represented for a company of its specific size, the same transaction — unchanged in every material respect — now technically exceeded the new materiality threshold and would, if entered into today, require shareholder approval it had never actually received.
The Genuine Question This Raised
This created a real, if narrow, governance question: did a transaction properly approved under the rules in force at the time it was entered into need to be revisited purely because a subsequent regulatory change altered the materiality calculation, or did the original approval remain valid on a "rules in force at the time" basis? This is precisely the kind of transitional question that a graded threshold change, however well-designed, inevitably raises for transactions that straddle the effective date.
How the Company Actually Handled It
Rather than simply asserting the earlier approval remained valid and moving on, the company's approach was to seek formal legal advice on the transitional position, document that advice clearly, and — out of genuine governance caution rather than strict legal necessity — proactively bring the transaction to shareholders for ratification at the next scheduled general meeting, framed transparently as arising from the regulatory threshold change rather than any defect in the original transaction or approval. This was, in the company's own assessment, the more conservative path, but one that removed any ambiguity for minority shareholders and avoided the reputational cost of appearing to rely on a technical transitional argument to avoid a vote the new rules would otherwise call for.
The Lesson for Any Listed Company's Governance Team
This case is a useful, concrete illustration of exactly the caveat we flagged in our piece on SEBI's RPT overhaul — a regulatory threshold change doesn't just affect future transactions; it can retroactively change how existing, previously-cleared transactions should be viewed and disclosed going forward. If your company is listed, a genuine, transaction-by-transaction re-check against the new graded schedule — rather than an assumption that prior approvals remain untouched by the rule change — is worth doing now, and where a transaction does land differently under the new framework, transparent, proactive disclosure and ratification is generally a considerably better position than waiting for a regulator or an activist shareholder to raise the question first.