Keeping an Eye on Insider Deals
Have you ever worried that the company you’re investing in might be doing business behind the scenes with its own promoters, relatives, or sister companies — and not always in a fair way?
That’s where Related-Party Transactions (RPTs) come in. These transactions are often legal, but if not monitored properly, they can be used to move money unfairly, inflate profits, or benefit a select few — at the cost of regular investors like you.
To fix this, SEBI has introduced new and stricter rules in June 2025 to ensure more transparency, stronger checks, and better protection for retail and minority shareholders.
What are Related-Party Transactions?
In simple terms, a related-party transaction is a deal between a company and a person or entity that has a close connection to it. This can include:
- Promoters
- Directors
- Subsidiary companies
- Relatives of key decision-makers
- Companies controlled or influenced by the promoter group
These deals aren’t always bad. For example, a company might lease an office from a promoter-owned building. But problems start when these transactions:
- Are done at inflated prices,
- Are not disclosed properly,
- Or benefit insiders more than the company or shareholders.
In such cases, investor money is at risk, and company ethics are compromised.
What Has SEBI Changed in 2025?
Here are the key changes SEBI announced to clean up the way RPTs are handled:
- CEO and CFO Must Personally Sign Off on Deals
From now on, both the CEO and CFO of a company must certify that:
- The related-party transaction is fair,
- It is necessary for business,
- And it doesn’t harm the interests of shareholders.
Why this matters: It creates personal accountability. Top executives can’t just say, “I didn’t know” if something shady happens.
- Promoter Approval Alone is Not Enugh
Earlier, a company could push through a deal just by getting a nod from shareholders — even if most of them were linked to the promoter group.
Now, SEBI wants to make sure that:
- Independent shareholders, like retail investors and mutual funds, get a real say in approving big transactions.
- This means promoters can’t approve deals that benefit themselves without outside approval.
Why this matters: It gives you, the small investor, more power and protects your interests.
- Greater Transparency in Disclosures
SEBI is also pushing for better disclosure rules, where companies must:
- Clearly explain who the related party is,
- Mention the purpose, pricing, and terms of the deal,
- Say whether the deal was evaluated independently.
Why this matters: It helps investors understand what’s really going on behind the scenes and ask the right questions.
How This Affects You as an Investor
| You Are | Impact of SEBI’s New Rules |
| A retail stock market investor | Safer investments, fewer chances of promoters misusing company money |
| A mutual fund SIP investor | Mutual funds may push for better transparency in companies they invest in |
| A corporate analyst or researcher | Cleaner. Clearer data in financial statements and disclosures |
| A new investor learning the ropes | More confidence in the market, knowing regulators are protecting yours |
What Should Investors Still Be Careful About?
Even with stricter SEBI rules:
- Some companies may still try to disguise related-party deals using layered structures.
- Not all RPTs are unfair — but it’s still important to check disclosures in annual reports and media alerts.
Smart tip: Always check the “Related Party Transactions” section in a company’s annual report before investing.
Conclusion: Stronger Rules = Safer Investments
SEBI’s 2025 update is another positive step toward making Indian capital markets more transparent, accountable, and investor-friendly.
With CEOs and CFOs now personally responsible, and promoters no longer able to dominate approvals, companies will have to act in the best interests of all shareholders — not just the insiders.
So whether you’re a beginner or an experienced investor, this rule change is good news. It means your money is better protected, and the companies you invest in are being held to higher ethical standards.
