The Securities and Exchange Board of India (SEBI) on Thursday relaxed rules for related-party transactions in a bid to bring them in line with the new Companies Act.
The market regulator has amended the listing agreement norms to allow companies to approve any material related-party transaction by passing an ordinary resolution instead of a special resolution.
However, related parties must not vote on such resolutions.
So far, SEBI norms had stipulated a vote by two-thirds of minority shareholders on a special resolution to pass a related-party transaction. This will now be reduced to 50% to comply with the Companies Act.
A related-party transaction is defined as the transfer of resources, services or obligations between a company and a related party, which could be key managerial personnel or relatives of promoters.
A material related-party transaction is one whose value exceeds 10% of the company's annual revenue, or exceeds 20% of the company's net worth in the previous year.
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