Related-party approvals: why better board information matters more than more paperwork

Related-party governance often fails before the meeting starts: incomplete commercial rationale, unclear benchmarking and inconsistent numbers leave decision-makers approving a form rather than understanding a transaction.

The updated information standard

SEBI’s circular requires listed entities to provide information specified in the industry standards when related-party proposals are placed before the audit committee and, where applicable, shareholders.

It also introduces proportionate minimum-information requirements for transactions within stated turnover or rupee thresholds, while carving out very small transactions below the specified level. The detailed applicability should be checked against the circular and current LODR requirements.

The real governance opportunity

The purpose is not merely to produce a longer approval pack. Decision-makers need a coherent explanation of the counterparty, commercial need, pricing logic, alternatives, financial impact and conflicts.

Finance teams can improve reliability by using one controlled data set for the proposal, audit-committee materials, shareholder notice, accounting treatment and later disclosures.

BOARDROOM CHECKLIST

What leaders should do now

1. Maintain a live related-party universe linked to contracts, ownership and transaction ledgers.
2. Document commercial rationale, pricing benchmarks and alternatives before the approval cycle begins.
3. Use a threshold tracker that aggregates transactions through the financial year.
4. Reconcile approved terms with invoices, accounting entries and public disclosures after approval.

CFO PERSPECTIVE

Good governance turns an approval pack into a decision document. The audit committee should be able to see value, risk, pricing, conflicts and monitoring responsibility without rebuilding the analysis from scattered files.

CA Jigarkumar Shah

VERIFIED SOURCE

Read the original material

SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/135

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Important: This article is general information and a business perspective based on the cited source. It is not legal, tax, accounting or investment advice. The law and official guidance may change; obtain advice for your facts before acting.