The threshold for a material related party transaction now rises with the size of the listed entity

From 19 December 2025 a related party transaction of a listed entity is material, and needs the prior approval of shareholders, only above a threshold that rises with the entity's annual consolidated turnover. Schedule XII to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the Listing Regulations) sets it at 10 per cent of turnover up to INR 20,000 crore, then on a sliding scale to a ceiling of INR 5,000 crore. The fixed ceiling it replaced was INR 1,000 crore, so the higher materiality threshold reaches only entities with turnover above INR 10,000 crore.

What changed, and from when?

The Securities and Exchange Board of India (the Board) made the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2025 by notification F. No. SEBI/LAD-NRO/GN/2025/273. The Gazette of India Extraordinary issue that carries it is dated 18 November 2025; the Board's consolidated text of the Listing Regulations records the amendment as made on 19 November 2025.

Regulation 2 of the amendment brought it into force on publication, except sub-regulations I, III and VII of regulation 3, which came into force "on the thirtieth day from the date of their publication in the Official Gazette". Those three are the related party provisions: the definition in regulation 2(1)(zc), the change to regulation 23, and the new Schedule XII. The consolidated text dates each of them from 19 December 2025.

The core change is a single substitution in the first proviso to regulation 23(1). Before it, a transaction with a related party was material if, alone or taken together with previous transactions during a financial year, it exceeded "rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower". Those words were replaced by "the thresholds specified in Schedule XII of these regulations".

What does Schedule XII say?

Schedule XII has three bands, each keyed to the annual consolidated turnover of the listed entity:

• up to INR 20,000 crore: 10 per cent of annual consolidated turnover;
• more than INR 20,000 crore and up to INR 40,000 crore: INR 2,000 crore plus 5 per cent of the turnover above INR 20,000 crore;
• more than INR 40,000 crore: INR 3,000 crore plus 2.5 per cent of the turnover above INR 40,000 crore, "or ₹5000 Crores, whichever is lower".

The Explanation fixes the turnover figure: it is "determined based on the last audited financial statements of the listed entity". The Schedule carries three illustrations of its own. Turnover of INR 30,000 crore gives a threshold of INR 2,500 crore. Turnover of INR 50,000 crore gives INR 3,250 crore. Turnover of INR 1,50,000 crore gives a computed INR 5,750 crore, which the cap brings down to INR 5,000 crore.

The bands join without a step: the first gives INR 2,000 crore at INR 20,000 crore of turnover, where the second starts, and the second gives INR 3,000 crore at INR 40,000 crore, where the third starts. The cap binds from INR 1,20,000 crore of turnover, where INR 3,000 crore plus 2.5 per cent of the excess reaches INR 5,000 crore.

Who sees a change, and who does not?

Under the old text, 10 per cent of turnover was no higher than INR 1,000 crore for any entity with turnover up to INR 10,000 crore. For those entities the old test and the first band of Schedule XII give the same answer. The change reaches only entities whose last audited consolidated turnover exceeds INR 10,000 crore, and for them the threshold rises, up to five times the old ceiling.

Entities that have listed their specified securities on an SME Exchange, as defined in regulation 2(1)(zj), the exchange for small and medium enterprises, sit outside the comparison. The further proviso to regulation 23(1), in force from 1 April 2025, makes their related party transactions material above "Rupees fifty crore or ten per cent. of the annual consolidated turnover", whichever is lower. The Fifth Amendment did not touch that proviso.

Nor did it touch regulation 23(1A). A payment to a related party for brand usage or royalty is still material, "Notwithstanding the above", if it exceeds 5 per cent of annual consolidated turnover.

What else moved inside regulation 23?

Materiality decides when shareholders vote, not whether the audit committee approves. Regulation 23(2) still requires the audit committee's prior approval for related party transactions and subsequent material modifications, given only by its members who are independent directors, subject to the exceptions in its provisos, such as clause (e) on remuneration and sitting fees, and in regulation 23(5).

What changed is the test for a transaction to which a subsidiary is a party and the listed entity is not. Under the substituted clause (b) of the second proviso to regulation 23(2), such a transaction "above rupees one crore" needs the prior approval of the listed entity's audit committee if its value exceeds the lower of 10 per cent of the subsidiary's annual standalone turnover, on its last audited financial statements, and the Schedule XII threshold for the listed entity. Before the amendment, clause (b) measured such a transaction against 10 per cent of the listed entity's consolidated turnover, and clause (c), from 1 April 2023, against 10 per cent of the subsidiary's standalone turnover. The new clause adds a floor of INR 1 crore and replaces the parent's 10 per cent of consolidated turnover with the parent's Schedule XII threshold, which is the same figure up to INR 20,000 crore of consolidated turnover and lower above it.

Substituted clause (c) deals with a subsidiary that "does not have audited financial statements for a period of at least one year". There the measure is 10 per cent of the aggregate of its paid-up share capital and securities premium account, again capped by the Schedule XII threshold. The capital and premium are taken as on a date "not older than three months" before the audit committee's approval is sought.

Two new provisos to regulation 23(4) limit shareholders' omnibus approvals for material related party transactions. An omnibus approval given at an annual general meeting is valid "till the date of the next annual general meeting held within the timelines prescribed under Section 96 of the Companies Act, 2013". One given at any other general meeting may not run beyond one year from the date of approval.

An Explanation to regulation 23(5) clarifies that "holding company" in clause (b), the exemption for transactions between a holding company and its wholly owned subsidiary, "refers to and shall be deemed to have always referred to a listed holding company".

Finally, clause (e) of the first proviso to regulation 2(1)(zc), which takes certain retail purchases out of the definition of related party transaction, used to cover purchases by the listed entity's "directors or its employees". It now covers "the directors or key managerial personnel of the listed entity or its subsidiary, and relatives of such directors or key managerial personnel", on terms uniformly offered to "all employees, directors, key managerial personnel and relatives of directors or key managerial personnel".

How does the arithmetic work on one group?

An illustration. The company and the figures below are hypothetical. The thresholds are the ones in regulation 23 and Schedule XII.

Listed parent
  Annual consolidated turnover, last audited      INR 64,000 crore
  Band                                            (III), above INR 40,000 crore
  Turnover above INR 40,000 crore                 INR 24,000 crore
  2.5 per cent of that excess                     INR 600 crore
  Schedule XII threshold, INR 3,000 crore
    + INR 600 crore                               INR 3,600 crore
  Old threshold, lower of INR 1,000 crore or 10   INR 1,000 crore
    per cent of turnover
  Brand or royalty threshold, regulation 23(1A),  INR 3,200 crore
    5 per cent of turnover

Unlisted subsidiary with audited accounts
  Annual standalone turnover, last audited        INR 4,000 crore
  10 per cent of standalone turnover              INR 400 crore
  Lower of INR 400 crore and INR 3,600 crore      INR 400 crore
  Supply contract with a promoter entity          INR 450 crore
  Parent's audit committee approval needed?       Yes, above INR 400 crore

Subsidiary incorporated eight months ago, no audited financial
statements yet
  Paid-up capital and securities premium          INR 150 crore
  10 per cent of that aggregate                   INR 15 crore
  Lower of INR 15 crore and INR 3,600 crore       INR 15 crore

On these figures the parent takes a related party transaction to its shareholders only once the year's aggregate with that party exceeds INR 3,600 crore, against INR 1,000 crore before the amendment. Its audit committee still approves them in advance under regulation 23(2), subject to the exceptions in that regulation and in regulation 23(5). The subsidiary's INR 450 crore contract would have reached the parent's audit committee under old clause (c) as well; under the new clause it does so because INR 400 crore is the lower of the two measures, where the parent-side measure has fallen from INR 6,400 crore to INR 3,600 crore.

What does it mean for listed companies and their groups?

For an entity above INR 10,000 crore of turnover, fewer transactions reach a shareholder vote. The threshold rests on a single audited figure, so it moves each year with the last audited consolidated accounts.

On the text of clause (b), the INR 1 crore floor takes the smallest transactions off the parent audit committee's agenda, and the parent's Schedule XII threshold caps the measure for the largest subsidiaries. A subsidiary without a year of audited financial statements now has a measure of its own, drawn from its capital and premium, where old clause (c) had no audited standalone turnover to work on and only the parent's 10 per cent of consolidated turnover applied.

What remains unsettled?

Four points.

Which threshold governs the financial year in which the change fell. Regulation 23(1) aggregates a transaction "with previous transactions during a financial year", and Schedule XII came into force on 19 December 2025, in the ninth month of financial year 2025-26. The amendment carries no transition rule for a year whose earlier transactions were tested under the old ceiling. Regulation 23(6) says the provisions apply "to all prospective transactions", which addresses new transactions but not how earlier ones count towards an aggregate.

What becomes of omnibus approvals already given. The text does not say whether the new validity provisos in regulation 23(4) reach omnibus approvals granted before 19 December 2025.

How the royalty rule interacts with Schedule XII for the largest entities. Regulation 23(1A) opens with "Notwithstanding the above" and fixes 5 per cent of turnover for brand usage and royalty. That figure meets the general threshold at INR 80,000 crore of turnover, where both come to INR 4,000 crore, and exceeds it above. One reading is that regulation 23(1A) alone governs royalty payments; another is that a royalty payment above the general threshold is material under both. The old ceiling of INR 1,000 crore raised the same question for any entity above INR 20,000 crore of turnover, and the amendment does not answer it.

The date of publication. The Gazette issue is dated 18 November 2025. The Board's consolidated text records 19 November 2025, and the Gazette's own identifier, CG-MH-E-19112025, carries the same date; the consolidated text dates the provisions that took effect on publication from 19 November 2025 and the deferred provisions from 19 December 2025. The thirtieth day runs from publication, so the one day of difference moves the start of Schedule XII by a day.