Sebi eases related party transaction norms for PSUs

With Sebi relaxing corporate governance norms, listed government companies may now be able to carry out related party transactions, including subsidy payments, without prior nod from minority shareholders.

In the wake of representations and demands from stakeholders, the Securities and Exchange Board of India (Sebi) has relaxed various provisions of the new law, especially for smaller companies, and extended the deadline for appointing at least one woman director to April 1, 2015.

Under the revised rules, transactions entered into between two government companies are exempted from getting shareholders approval through a special resolution. As per Sebi’s circular, dated April 17, all related party transactions would require prior approval of the Audit Committee.

Special resolution
Besides, all material related party transactions should get shareholders approval through special resolution while the concerned parties are required to abstain from voting on such resolutions.

Now, Sebi has exempted government entities from both these requirements. According to experts, the relaxation would allow public sector enterprises to transact matters, such as subsidy payments, without needing to get prior shareholders approval through special resolutions.

At least 75 per cent of the total shareholders should vote in favour to get special resolutions passed.

Meanwhile, Sebi has also exempted “transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval” from the special resolution approval requirement.