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.