SEBI LODR Regulation and its Impact on Related Party Transactions

May 11, 2022

Start Date : Wednesday, May 11, 2022

End Date : Wednesday, May 11, 2022

Time (IST) : 04:30 PM - 05:30 PM

Time (UTC) : 05:00 AM - 06:00 AM

Services Offered :

Speaker(s) : Sameet Gambhir, Jaykumar Shah, A.K. Viswanathan, Maulik Doshi

Maulik Doshi - Deputy Managing Director, Transfer Pricing and International Tax, Nexdigm set the tone of the webinar by reminding the viewers how the Related Party Transactions (RPT) have been the crux of a lot of various controversies from various governments of different countries, and how companies can seek clarity for the same. Maulik goes on to talk about how RPTs are a common focus when it comes to Tax and Corporate Governance.

Next, Maulik gives an expanded definition of the term ‘Related Party’ with a comparison of what it meant pre and post amendment. Along with detailed examples, Maulik explains the expanded list of RPTs that need to be reported and also explains the different materiality thresholds of RPTs as per previous laws as well as amended laws.

Moving on, Maulik continues to talk about the enhanced role of audit committee members with regards to the changes that have been brought about to the roles in light of the new amendments. He goes on to talk about the new norms for disclosure and the documents required to be presented before the approving authority, the timelines of the enhanced disclosure requirements, the requirements under the companies act in contrast to the requirements as per the Securities and Exchange Board of India (SEBI) LODR Regulations, and lastly, the post amendment challenges and the way forward.

The panelists were then asked to shed light on the impact on the audit committee proceedings with regard to the recent media reports on the corporate governance related issues. To this, A.K. Viswanathan - Managing Director, Tax, Nexdigm addresses his views on why the regulations have to make such drastic regulations. Viswanathan mentions that the size of the organization and whether it is listed or not are some of the key factors that play into the extent of the corporate governance issues. Due to this, Viswanathan mentions that he has advised companies in the USA to delist themselves to lower the costs and challenges.

To the same question, Jaykumar Shah - CFO, HDB Financial Services Ltd. adds that the main reason behind such challenges is a lack of disclosure and transparency. Jaykumar further adds that one way to make the audit reports concise is by being critical, which is how things were done traditionally. This saves the readers’ as well as the auditors’ time.

Then, the panelists were asked to highlight the challenges they have faced in terms of the expanded definition of related party. To this, Sameet Gambhir - Senior Company Secretary, DCM Sriram Ltd. mentioned that the challenges are not too severe as the related party definition is only applicable to listed entities where the promoter and promoter groups are known, and the new definition is welcomed. Sameet then states that the challenge occurs when keeping track of small and routine transactions and getting them approved. He states that one should focus on creating a system of having a control mechanism in place to make tracking transactions simpler.

The panelists then discuss the typical data points that are looked at for RPTs with the approach of the audit committee, the importance of the PAN number when establishing a link between the promoters and the payments, the seemingly operational role of the audit committee post the amendments, the synergy of using the globally recognized documentation, and the concept of the arm’s length pricing when looking at a transaction before the audit committee.

Before concluding, the panelists responded to listener’s questions seeking clarity on the panel answered audience questions which asked to make clear the group purchase agreement with third parties and whether this kind of transaction will be covered under the RPT, as well as whether it is legally valid for the audit committee to ratify or disown certain transactions if they are not satisfied.

In conclusion, there is some gray area when it comes to interpreting the RPTs which increases the efforts to be made by the audit committee. This process can become much more streamlined with further clarity, transparency, and incorporation of detailed systems.

Past Events

05 Apr 2023
Wednesday, 04:30 PM

Services Offered : Professional Services,

Speaker(s) : Maulik Doshi, Nishit Parikh

23 Mar 2023
Thursday, 09:30 AM

Services Offered : Professional Services,

Speaker(s) : Maulik Doshi, Abhay Saboo

17 Mar 2023
Friday, 09:30 AM

Services Offered : Professional Services,

Speaker(s) : Prashant Chikal

16 Mar 2023
Thursday, 09:30 AM

Services Offered : Business Services,

Speaker(s) : Alpana Shirgaonkar, Kartik Nagarajan

15 Mar 2023
Wednesday, 09:00 AM

Services Offered : Taxation, Professional Services,

Speaker(s) : Haroon Qureshi, Pushpendra Dixit, Sanjay Chhabria

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