The Securities and Exchange Board of India (SEBI) has fundamentally restructured the compliance architecture for listed entities through a series of progressive amendments spanning late 2025 and early 2026. The culmination of these reforms—primarily driven by the SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2025, and the subsequent 2026 Amendment Regulations—reflects a departure from the “one-size-fits-all” regulatory approach.

The regulatory intent is clear: to ease the compliance burden on large conglomerates by rationalizing materiality thresholds, while simultaneously tightening oversight on subsidiary-level transactions and accelerating the digitization of investor services. This publication provides a doctrinal and operational analysis of the revised SEBI LODR Regulations 2026 framework for corporate boards, compliance officers, and institutional stakeholders.

Overhaul Of Related Party Transactions (RPT): The Graded Materiality Framework

Prior to the recent amendments, Regulation 23(1) of the SEBI LODR mandated shareholder approval for any RPT exceeding the lower of 10% of the consolidated turnover or a fixed static threshold of ₹1,000 Crore. For massive conglomerates, this fixed ceiling resulted in an avalanche of routine operational transactions requiring shareholder approval, leading to acute compliance fatigue.

Effective December 2025, SEBI abolished the static ₹1,000 Crore threshold. Instead, the newly inserted Schedule XIIintroduces a graded, scale-based framework linked to the listed entity’s annual consolidated turnover:

• Turnover up to ₹20,000 Crore: Materiality is triggered at 10% of the annual consolidated turnover.
• Turnover above ₹20,000 Crore up to ₹40,000 Crore: Threshold is ₹2,000 Crore + 5% of the turnover in excess of ₹20,000 Crore.
• Turnover above ₹40,000 Crore: Threshold is ₹3,000 Crore + 2.5% of the turnover in excess of ₹40,000 Crore, subject to an absolute overall cap of ₹5,000 Crore.

Strategic Impact: This sliding scale significantly reduces the frequency of shareholder voting for routine commercial transactions of mega-corporations, capping the maximum regulatory threshold at ₹5,000 Crore rather than ₹1,000 Crore.

Subsidiary RPT Approvals: The “Lower Of” Doctrine And The Absolute Floor

The second proviso to Regulation 23(2) governs the jurisdiction of the listed parent entity’s Audit Committee over RPTs executed independently by its unlisted subsidiaries. To prevent regulatory arbitrage while avoiding micro-management, SEBI has refined the trigger limits:

1. The Absolute Floor: An Audit Committee’s prior approval is now only required for transactions exceeding ₹1 Crore. If a transaction is below ₹1 Crore, it is entirely exempt from the parent Audit Committee’s purview, even if it exceeds 10% of the subsidiary’s turnover.
2. The “Lower Of” Test: For transactions above ₹1 Crore, approval is required if the transaction value exceeds the lower of:
   • 10% of the annual standalone turnover of the subsidiary; OR
   • The materiality threshold prescribed for the listed parent entity under the new Schedule XII.

Clarification on Omnibus Approvals: The amendments explicitly codify the validity of shareholder omnibus approvals. Approvals obtained at an Annual General Meeting (AGM) are valid strictly until the date of the next AGM, ensuring annual scrutiny of recurring transactions.

Expanded Exemptions: KMP And Retail Purchases

In a pragmatic move to reduce administrative bottlenecks, SEBI has expanded the scope of exemptions for ordinary-course retail transactions.

Previously, the exemption from RPT approval for purchasing goods or services on uniform terms was limited only to directors and employees. Under the amended regime, this exemption expressly covers Key Managerial Personnel (KMPs) and the relatives of directors/KMPs. Consequently, if a spouse or dependent of a KMP purchases the company’s retail products or services at standard employee discount rates, the listed entity is no longer required to classify and report every single purchase as an RPT.

Investor Services And Mandatory Demat Credit Under SEBI LODR Regulations 2026

The SEBI LODR (Amendment) Regulations, 2026, notified in January 2026, overhaul the investor service mechanism by substituting Regulation 39(2).

• Direct Demat Credit: SEBI has mandated that listed entities and their Registrars to an Issue and Share Transfer Agents (RTAs) must effect the credit of securities strictly in dematerialised form for all investor service requests (such as split, consolidation, renewal, or issuance of duplicate securities).
• Abolition of Letter of Confirmation (LOC): The intermediate LOC mechanism has been completely removed. Upon processing a valid request within the statutory 30-day timeline, the securities will be directly credited to the investor’s demat account, massively reducing operational risks and transit delays.

Furthermore, Regulation 40(1) has been amended to provide a highly restricted, temporary special window (February 2026 to February 2027) allowing the registration of physical transfers strictly for transfer deeds executed prior to April 1, 2019, subject to the original share certificates being available.

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Introduction

The concept of materiality serves as a cornerstone in corporate governance, particularly concerning related party transactions (RPTs), where transparency and accountability are paramount. SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations mandate listed entities to formulate policies on the materiality of RPTs, providing clear thresholds approved by the board of directors. In this study, we delve into the materiality policies adopted by companies within the Nifty50 Index (‘Nifty Group’), aiming to unravel the nuances of how ‘material modifications’ are defined and interpreted across various sectors.

Observations – Study of Materiality Policies of Nifty Group

Materiality policies – companies in the banking sector

The banking sector, known for its complex financial transactions and regulatory scrutiny, places significant emphasis on defining material modifications within RPTs. Our analysis reveals varying approaches, from qualitative assessments of deviations from the ordinary course to quantitative thresholds based on percentage adjustments in transaction values. These policies reflect the sector’s commitment to transparency and accountability in its dealings.

Materiality policies – companies in information technology services and consulting sector

The IT services and consulting sector, characterized by innovation and agility, grapples with defining material modifications amidst rapid technological advancements. Our findings showcase diverse interpretations, ranging from percentage-based thresholds to qualitative assessments of financial impacts. This sector’s nuanced approach underscores the importance of contextual relevance and business impact in determining materiality.

Materiality policies – companies in the insurance sector

The insurance sector, known for its risk management practices and regulatory oversight, adopts a conservative approach to defining material modifications within RPTs. While some companies define materiality based on significant variations in pricing, others consider deviations from approved limits as material. These policies underscore the sector’s focus on safeguarding stakeholder interests while navigating regulatory complexities.

Materiality policies – companies in the steel sector

The steel sector, characterized by its cyclical nature and capital-intensive operations, grapples with defining material modifications amidst fluctuating market dynamics. Our analysis reveals a conservative approach, with companies defining materiality based on deviations from current limits approved by audit committees. These policies reflect the sector’s commitment to ensuring transparency and accountability in RPTs.

Materiality policies – companies in the automotive sector

The automotive sector, renowned for its innovation and technological prowess, adopts a holistic approach to defining material modifications within RPTs. From financial implications to deviations from the ordinary course, these policies encompass various factors influencing materiality determinations. The sector’s emphasis on transparency and accountability underscores its commitment to ethical business practices.

Materiality policies – companies in the pharmaceutical sector

The pharmaceutical sector, subject to rigorous regulatory scrutiny and research-intensive operations, grapples with defining material modifications amidst evolving market dynamics. Our findings reveal detailed criteria, including rebuttable presumptions and exclusions, aimed at ensuring transparency and accountability in RPTs. These policies reflect the sector’s emphasis on compliance and risk management.

Unified Compliance: Nifty Group Insights

In addition to sector-specific interpretations, commonalities emerge across the Nifty Group, including exclusions for changes beyond parties’ control and emphasis on regulatory compliance. These observations underscore the overarching emphasis on transparency, accountability, and regulatory compliance within the Nifty Group.

Conclusion 

Our analysis highlights the diverse approaches adopted by companies in defining and interpreting material modifications within RPTs across sectors. While each sector grapples with unique challenges, common themes of transparency, accountability, and regulatory compliance prevail. Moving forward, continuous monitoring and periodic reviews of materiality policies will be essential to ensure alignment with changing business practices and regulatory mandates, thereby reinforcing the foundations of corporate governance and regulatory compliance.

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