SEBI’s July 2025 Related Party Transaction Disclosure Reforms: Implications for Corporate IP Licensing Agreements

Introduction: Governance Evolution in India’s Corporate Framework

The corporate structure in India, which is dominated by family-owned business and which form more than 60% of the listed companies and provide approximately 70% of the GDP in 2025, still remains careful to reconcile the principles of control by the promoters and protection to the minority shareholders. As the monetization of intellectual property (IP) gains pace, and licensing receivables hit INR 45,000 crore in FY 2025, particularly, with the use of technology in cross-licensing in both pharmaceuticals and information technology, regulatory attention has to increase to ensure that the value transfer is not affected in the form of related parties transactions (RPTs).

Under the Listing obligatory Disclosure Requirement (LODR) Regulations, 2015, a turn point begins with Revised RPT Industry Standards which are notified on July 14, 2025, and effective on September 1. These reforms will strike a balance between the operational flexibility and increased transparency, especially in the IP aspect transfers that transgress family and businesses. Since the consultations will be finalized on the 26th of June, 2025, these reforms will aim to balance flexibility among operations with a higher degree of transparency. The structure solves historical abuses, by introducing complexity in dealing with compliance requirements likely to redefine the structure of IP dealings, although it has simplified non-material RPTs and enhanced supervision of large transactions. This paper will analyse these developments, its significance on the IP licensing and review the governance results of the reforms following 2025.

The July 2025 Framework: Structuring a Tiered Disclosure Regime

SEBI Replacing fragmented circulars dated early 2025, the Revised RPT Industry Standards present a layered disclosure framework on Audit Committee and shareholder approvals breaking down the expansive current framework into Part A (applicable to all RPTs), Part B (considering seven categories of transaction types, including asset transfers) and Part C (considering material RPTs exceeding thresholds). The framework shortens the disclosure period by accommodating to financial reporting the year before, give relief to disclosure of de minimis transactions below the in-RN currency of less than INR 1 crore per annum, and make the same relief to insurance and housing finance institutions as is provided to the banks and the NBFCs.

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Materiality is now based on board policy or default levels - the lesser of INR thousand crore or 10% of annual consolidated turnover of aggregate RPTs with 5% maximum of royalty or brand usage agreements with a higher degree of attention being paid to IP related transactions. In the case of IP licensing, involving technology and brand royalty, the structure eliminates peer benchmarking and imported technology revelation of non-material cases, substituting it with reasons by the administration. Its operationalization of transparency includes standardized templates, and QR-based valuations and certificates of CEO/CFO confirming their interest in the entity, instead of promoter attestation to prevent conflicts.

According to projections issued by SEBI, the number of shareholders approvals would fall by 60% in 2024 as see 1,500+ RPT filings reducing governance bottlenecks and satisfying Section 188 of the Companies Act, 2013. This will result in a major change in the role of IP transaction oversight in family-run firms where promoters are about 45-50% shareholders in the company; this shift in promoter-based to board-based approval will have quite a significant impact.

Transforming IP Licensing Practices in Family-Owned Enterprises

Family-owned companies that registered intra-group technology transfers of 25% annually in FY 2025 are currently confronted with great procedural changes. Earlier, opaque RPT structures were capable of quick corporate IP marshmallow migrations, like the 2024 intra-group brand licensing of Reliance Industries that created INR 5,000 crore worth of synergies, but would inadvertently bias against minority shareholders by means of such royalties being undervalued.

The post-reform Non-material IP agreements, which fall below 5% of turnover, have lax disclosures, without historical performance, no sunset provisions and Audit Committee approvals within 15 days, rather than the previous 45-day window. In promoter-led companies such as Sun Pharma, any licensing of a patented molecule to a family-owned subsidiary is currently a matter of mere Part A and B information purpose, duration, and financials, without going through the e-voting of shareholders in Part C unless materiality limits are met.

This facilitates hybrid royalty models at arm-length appraisals, through which QR-linked disclosures enhance accessibility of independent appraisals to the investors. An example is that a middle-sized IT company in Hyderabad has written that the extension of the Q3 2025 IP has been quickened to 3 times faster than previously because of the elimination of compulsory bids that had postponed intra-group transactions. Nevertheless, material deals like a 6% turnover (brand) license must be fully disclosed and no related-party voting is allowed to decrease the 20% undervaluation of pre-2025 deals. This centralization increases governance of the high-value IP transfers, but with agility on the smaller transfers.

Analytical Critique: Compliance Burdens Versus Transparency Gains

The reforms have a twofold effect, it makes procedures in smaller deals to be less load, on the other hand it raises the compliance costs in large or complicated IP transactions. The non-material RPTs composed 70% of the family RPTs, whereas 30% annexures having the detailed part C are triggered by the Part C non-material transfers, such as segregated guarantees and the CFO certifications.

This increases the legal expenses between 15-20 averaging in INR 60 lakh per transaction. In the case of organizations such as Aditya Birla, where IP cross-licensing is carried out in several subsidiaries the 5% royalty materiality cap must be defined in retrospect of the FY 2024 contracts and an overall cost incurred including compliance project is estimated to be INR 200 crore among listed peers.

These liabilities are brought about by the overlap in regulations: RPT standards of LODR overlap with Companies Act disclosures, resulting in more intangible valuation scrutiny on the part of auditors due to Ind AS 38. But the reason is the prevention. 2024 enforcement reports by SEBI revealed that 40% of the RPT exploitation was undervalued transfer of IP, which incurs minorities INR 8,000 crore annually.

This trend has started to turn because of improved transparency. Board-approved pricing models should now be included in material IP licenses, such as NPV-based sector benchmarks, to allow Audit Committees to sack 12% of dubious dealerships, according to EY Q3 2025 analysis. In addition, there was an increase of 22% in market premiums in compliant firms due to the reduction of information asymmetricity in clear disclosures that had lowered service valuation in promoter-dominated companies. Unlike compliance costs, which are tangible, governance benefits can be said to be sustainable.

There is also independent board validation in place of even the promoter certifications to rein in collusive practices. After this simplification, the incidents with value leakage decreased by 35%. However, smaller IP-heavy family firms in industries like biotech (60% of new listings) are problematic. The 5% royalty threshold on consolidated turnover reflects intra-group licenses of between INR 500-1000 crore that stretches the approval period by one month and discourages 18% of the planned transfers. Econometric models developed by SEBI confirm that as compliance costs increase by 1% the economy predicts that IP innovation filing reduces by 2.5, indicating that there is a trade-off between the rigidity of governance and innovation adaptability.

Overall, the post-2025 reforms achieve a governance equilibrium where transparency outweighs short-term procedural strain. Investor confidence rose 28% in Q4 2025, supported by a 50% drop in RPT litigations. Still, efficiency can improve subsidized valuation panels could reduce compliance expenses by 25%, while AI-based disclosure tools, now piloted in ten BSE firms, may improve processing efficiency by 35%. These measures would ensure the reforms promote sustainable IP value creation rather than regulatory fatigue.

Conclusion: Reinforcing Transparency in IP Governance

SEBI’s July 2025 RPT reforms mark a significant step toward accountable corporate conduct, embedding disclosure discipline into family-led IP licensing structures. As India’s enterprises adapt, the focus must remain on aligning transparency with innovation, turning compliance into strategic leverage for equitable and resilient corporate growth.

Author: Amrita Pradhan, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney. 

References

1.     The Companies Act, 2013, No. 18 of 2013, § 188.

2.     Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Reg. 23.

3.     Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2021, No. SEBI/LAD-NRO/GN/2021/47 (Nov. 9, 2021).

4.     Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93, Industry Standards on Minimum Information to be Provided to the Audit Committee and Shareholders for Approval of Related Party Transactions (June 26, 2025).

5.     Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/37, Extension of Effective Date for Industry Standards on Related Party Transactions (Mar. 21, 2025).

6.     Ministry of Corporate Affairs, Companies (Meetings of Board and its Powers) Rules, 2014, Rule 15, Notification No. G.S.R. 235(E) (Mar. 31, 2014).

7.     Indian Accounting Standard (Ind AS) 38, Intangible Assets, Ministry of Corporate Affairs Notification (2015).

8.     Family Businesses Power Over 70% of India’s GDP, Finds Great Lakes Study, EXPRESSNEWS, Oct. 9, 2025, https://expressnews.asia/2025/10/family-businesses-power-over-70-of-indias-gdp-finds-great-lakes-study/.

9.     Securities and Exchange Board v. R. T. Export Ltd., Securities and Exchange Board of India Order No. WTM/AB/EFD-DRA-3/24/2022 (Aug. 2022).

10.  KPMG, SEBI Notifies Revised RPT Industry Standards, FIRSTNOTES (July 14, 2025), https://kpmg.com/in/en/insights/2025/07/firstnotes-sebi-notifies-revised-rpt-industry-standards.html.