Related-party transactions (RPTs) occupy a governance grey zone: they can make businesses run more smoothly, but they can also become vehicles for expropriating minority shareholder wealth, a practice known as tunnelling. To curb tunnelling risks, the Securities and Exchange Board of India (Sebi) has increasingly enforced the requirement of a material transaction—an RPT with a related party that crosses a prescribed value threshold and must therefore be placed before shareholders for approval.

Post-Satyam, India steadily tightened oversight—from the Companies Act, 2013, to Sebi’s 2015 Listing Obligations and Disclosure Requirements norms and the 2021 rule which treated any RPT above Rs 1,000 crore or 10% of the turnover as material. This uniform threshold of Rs 1,000 over-regulated routine intra-group flows of large firms. Sebi’s 2025 proposal introduces scale-based thresholds instead: 10% of turnover for firms up to Rs 20,000 crore; Rs 2,000 crore plus 5% of the turnover above that level up to Rs 40,000 crore; and for the largest firms, Rs 3,000 crore plus 2.5% above Rs 40,000 crore, capped at Rs 5,000 crore.

The goal is to preserve investor protection while replacing a blunt, one-size-fits-all regime with a more proportionate framework. The intent may be pragmatic, but the........

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