Gold and Social Stock Exchanges- Key Facts

The markets regulator, Securities and Exchange Board of India (SEBI) tightened norms for related-party transactions on September 28, 2021 in order to boost corporate governance standards. It approved a framework of spot trading in gold.

Key facts

  • With this approval, SEBI has made it easier for start-up founders to retain control.
  • SEBI also eased merger and acquisitions (M&A) norms for listed companies.

Which entities would be counted?

According to SEBI, following entities would be counted as related parties:

  1. People or entities that are part of promoter group
  2. Entity withholding of 20% or more in a listed entity, either as beneficia; owner or directly during the preceding fiscal.
  3. Entities withholding of 10% or more starting April 1, 2023.

Definition of RPTs

Definition of related party transactions (RPTs) will comprise of deals between listed entities or any of the units of entities with a related party.

Approval of shareholder

  • As per SEBI norms, approval of shareholders will be required in advance for material RPTs or for the deals which have a threshold value of either Rs 1,000 crore or 10% of the consolidated annual revenue of company, whichever is lower.
  • Any transaction, which is benefiting a related party directly or indirectly, would require approval of audit committee and shareholders of the listed firm.

Spot trading of gold

SEBI also approved the framework for spot trading of gold in India. It allows vault managers to accept gold deposits and issue securities called “electronic gold receipts (EGRs)”. These EGRs can be traded on exchanges and will have clearing and settlement features like other securities.

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