Sebi proposes bondholders' nod for related party transactions for companies

By Jayshree P Upadhyay

MUMBAI (Reuters) -India's market regulator on Wednesday proposed that bondholders should have the right to object to related party transactions proposed by companies, which have listed high value debt securities.

The regulator has asked for comments till Feb. 22.

The Securities and Exchange Board of India (SEBI) said the proposal will be applicable in cases where more than 90% of the company's shareholding is with entities defined as related parties. If more than 75% of bondholders object to a transaction, then the board will have to withdraw it.

The norms will be applicable to only listed non-convertible debt securities, according to SEBI.

At present, SEBI applies governance norms if the outstanding debt through bonds is more than 5 billion rupees, and the regulator is proposing a tweak that the governance norms will be applicable for three consecutive fiscal years even after the debt goes down below that limit.

SEBI's proposals come after instances where companies circumvented related party transaction rules by getting approvals for lending to group companies.

(Reporting by Jayshree P. Upadhyay; Editing by Shounak Dasgupta)