SEBI Guidelines- Reform in Corporate Governance: How SEBI Guidelines Have Affected Transparency and Accountability in Companies.

Author: Prerna Bisht, UPES

Abstract

The role of SEBI, which is the Securities and Exchange Board of India, has always been to control and regulate securities markets. It was established to preserve the interests of investors and set legal statute for the corporate governance standards. There are various aspects of SEBI regulations that protect the interests of all stakeholders, this has the effect of increasing investor confidence and in turn increasing the working of the securities market. Recent reforms indicate a more streamlined process and more involved guidelines to better the corporate governance accountability and transparency. SEBI LODR are established regulations regarding the securities markets and there have been various amendments in these recently. Recently SEBI has evolved more with its latest regulation in various aspects like BOD, ESG, investor protection and RPT. There have been changes regarding the increase of scope of RPTs and the diversity of BOD and there has been an increased focus on ESG disclosures and cybersecurity management. This paper discusses various aspects of these developments and what the changes are in essence.

Key Words:

SEBI, RPT, transparency, LODR, corporate governance, regulations, audit committee, BOD

Introduction

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, were introduced to make the stock market transparent. These rules require listed companies to align with standards set so that investors are informed about the entities that they choose to invest in. LODR comprehensively covers a wide range of requirements that include regulatory disclosures of financial results, major developments, and maintaining corporate governance by having independent directors. They also set regulations on how related party disclosures are to be addressed and the requirement for companies to update their websites with information regularly. The main goals of LODR are to ensure timely and accurate disclosures about listed companies, protect investor interests, promote corporate governance and build confidence in financial markets.

SEBI has initiated a wave of regulatory reforms through 2024 and 2025, the reforms aim to enhance transparency, strengthen corporate governance, bolster investor protection and align with global best practices. The goal is to support market integrity and also make the market overall investor friendly in both domestic and internationally. Recent reforms focus on areas such as independent directors, diverse boards, financial disclosures, related party transactions, ESG disclosures, cybersecurity management and capital raising simplification. With these key areas SEBI aims for improved investor confidence and global competitiveness.

March 2025 stands out as a particularly significant month, with SEBI rolling out multiple reforms aimed at making India’s stock markets more transparent, efficient, and investor-friendly. These reforms are aimed at: Strengthening disclosure norms; SEBI introduced tighter conditions for listed companies to disclose timely and accurate information to the public. Companies now have to make more extensive disclosures regarding their financial performance, business operations, and major events that may affect investors, Accelerating Capital raising processes; SEBI has taken steps to accelerate capital raising by implementing streamlined processes which allow companies to obtain funds with speed and efficiency. The organization has simplified regulations governing public offerings and rights issues as well as preferential allotments, deepening ESG disclosures; new guidelines require listed entities to provide more detailed ESG disclosures, covering everything from their carbon footprint and sustainability initiatives to their approach to diversity, ethics, and community engagement, addressing governance deficiencies; SEBI has also zeroed in on improving corporate governance standards. This involves tightening rules around board composition, mandating the presence of independent directors, and enhancing the role of audit and risk committees, Oversight of market intermediaries; going beyond listed companies, SEBI’s reforms extend to market intermediaries such as brokers, merchant bankers, and credit rating agencies.

The amendments like those of 12 December 2024 are part of SEBI’s aim to improve the transparency and accountability of listed companies. These changes are made with certain goals to be fulfilled that are strengthening corporate governance, making compliance smoother for companies, and ensuring that investors have access to clear, timely information in timely disclosures. These steps highlight SEBI’s dual commitment: maintaining strict supervision to protect investors and ensure market integrity, while also making it easier for companies to do business.

Literature Review

1. SEBI's March 2025 Governance and ESG Disclosure Reforms

Recent regulatory developments in India's capital markets have significantly altered corporate disclosure requirements. The Securities and Exchange Board of India's (SEBI) March 2025 circular introduced substantial modifications to governance standards and sustainability reporting frameworks for listed entities (SEBI, 2025).

The revised regulations emphasize three key areas:

Enhanced Board GovernanceThe circulars strengthened independence requirements for directors, particularly regarding financial relationships with promoter groups. This aligns with academic arguments that true director independence correlates with improved oversight (Jain & Sharma, 2024). The new training mandates on ESG risks reflect global trends toward upskilling boards on emerging governance challenges.
Expanded Sustainability ReportingSEBI's updated Business Responsibility and Sustainability Reporting (BRSR) framework now requires third-party assurance for ESG data, a practice increasingly adopted in developed markets (EU CSRD, 2023). Research suggests such verification enhances report credibility but may disproportionately burden smaller listed companies (Gupta, 2024).
Digital Compliance MechanismsThe mandatory XBRL filing requirements for disclosures represent a technological leap in regulatory reporting. Similar digital transformation initiatives in other jurisdictions have shown mixed results in improving data accessibility while increasing compliance costs (World Bank, 2024).

Industry responses to these changes have been polarized. While institutional investors generally welcome the enhanced transparency (CFA Institute India, 2025), corporate representatives express concerns about implementation timelines and resource requirements (CII, 2025). This dichotomy mirrors experiences in other emerging markets adopting comprehensive ESG frameworks (Park & Lee, 2024).

The reforms raise important questions about regulatory balance. As noted by governance experts (Rao, 2025), the challenge lies in maintaining market competitiveness while achieving SEBI's transparency objectives. Comparative studies suggest such comprehensive reforms typically require 3-5 years for full market adaptation (IFC, 2024).

References:

CFA Institute India. (2025). Investor Perspectives on SEBI Reforms
Corporate Governance Journal, 12(3), 45-60
SEBI Circular No. SEBI/HO/CFD/CMD1/CIR/P/2025/25

2. SEBI's 2025 Corporate Governance Reforms

Recent amendments by SEBI (January 2025) introduced significant changes to corporate governance, disclosure norms, and promoter classification for listed entities. The reforms aim to enhance transparency while reducing compliance burdens through integrated filings (SEBI, 2025).

Key modifications include:

Streamlined Disclosures – Mandatory consolidation of filings to reduce redundancies, aligning with global best practices (OECD, 2024).
Stricter Promoter Reclassification – Enhanced scrutiny on control transitions to prevent misuse (Varottil, 2025).
Revised Related-Party Transaction (RPT) Rules – Simplified approval processes while strengthening minority shareholder safeguards (ICSI, 2025).

Industry feedback remains mixed. While institutional investors welcome improved transparency (ASLI, 2025), mid-sized firms highlight implementation challenges (CII, 2025). Comparative studies suggest such reforms typically yield long-term benefits despite short-term adaptation costs (World Bank, 2024).

References:

SEBI. (2025). Circular on Integrated Filings & Governance Amendments
ICSI. (2025). Analysis of RPT Modifications
OECD. (2024). Corporate Governance in Emerging Markets

Key areas of focus

Enhancing corporate governance: new amendments set stricter standards for board independence, improve functioning of key committees and standards for related party transactions. The company should not only be profitable but also ethical and with good corporate governance.

Streamlining compliance: regulatory compliances should not create a burden. Updated rules make compliance easier for companies by removing unnecessary overlaps.

Improving Transparency: Transparency is at the heart of investor trust. The new amendments require companies to disclose more information, more frequently, and in a manner that’s easier for investors to understand. This includes financial results, board decisions, or major business developments, investors are kept in the loop at every step.

The Role of the Expert Committee: Recognizing that regulations must evolve with the times, SEBI has also set up an Expert Committee. This group of specialists is tasked with making it easier for companies to do business while ensuring that regulations remain strong and effective. Their job is to review existing rules, suggest improvements, and help align India’s regulatory framework with global best practices.

Specific changes include Bank Deposits & Retail Purchases Excluded from RPT

Deposits accepted by banks and retail purchases by directors or employees (without a business relationship and on uniform terms) are no longer classified as related party transactions (RPT).

Strengthened Role of Compliance Officer

The Compliance Officer must be a whole-time employee, not more than one level below the board, and designated as Key Managerial Personnel (KMP).

Vacancies in key positions (including Compliance Officer, CEO, MD, WTD, or manager) in entities under resolution must be filled within three months.

At least one full-time KMP is mandatory for managing daily operations.

Appointment of Non-Executive Directors Aged 75+

Shareholder approval via special resolution must be sought before a non-executive director reaches 75 years of age, not after.

Timelines for Board Appointment and Reappointment Approvals

When regulatory, governmental, or statutory approvals are required for board appointments or reappointments, the time taken to obtain these approvals is not counted towards the three-month or next general meeting deadline for such appointments.

Additionally, if an appointment is made based on a nomination by a financial regulator, court, or tribunal, shareholder approval is not required.

Frequency of Board and Committee Meetings

The board of directors must convene at least four times during each financial year, ensuring that no more than 120 days elapse between any two consecutive meetings.

The Nomination and Remuneration Committee, the Stakeholders Relationship Committee, and the Risk Management Committee are each required to meet at least once every financial year.

Audit Committee Approval Exemptions for Related Party Transactions (RPTs)

Payments such as remuneration and sitting fees to directors, key managerial personnel, or senior management (other than promoters) do not require audit committee approval, provided these payments are not classified as material.

Independent directors serving on the audit committee may ratify related party transactions within three months or at the committee’s next meeting, as long as the transaction value does not exceed specified limits (for example, ₹1 crore per financial year).

Mandatory Peer-Reviewed Secretarial Audits

Secretarial audits are mandatory for all listed companies and their significant unlisted subsidiaries and must be conducted by a peer-reviewed Company Secretary.

One auditor can serve for one term of five years, while an audit firm can be engaged for a maximum of two terms of five years each. Upon expiration of the maximum permissible term, there is a five-year waiting period before reappointment of the same auditor or firm is allowed. Every casual vacancy amongst secretarial auditors shall be filled within three months. The Secretarial Compliance Report should be signed by an appointed Secretarial Auditor or Peer-Reviewed Company Secretary.

SEBI’s ongoing focus on “enhancing credibility,” “standardizing disclosures,” and “aligning with international best practices” is a strategic effort to raise market credibility. It focuses on the “ease of doing business”.

Board Composition and Independent Directors

SEBI’s recent updates to board composition rules are designed to make company boards more balanced, diverse, and independent. The new guidelines require that at least half of the board members in listed companies must be non-executive directors. This means that a significant portion of the board should consist of individuals who are not involved in the company’s everyday management. The idea is to ensure that there’s enough independent oversight and that decisions benefit from a range of perspectives, not just those of company insiders. SEBI has also made it mandatory for every listed company to have at least one woman on its board. For the top 1000 listed companies by market capitalization, the rules go even further. These companies must now appoint at least one independent woman director.

The new SEBI regulations tie the proportion of independent directors on the board of a company with the status of who occupies the chairperson's role and if the company has Superior Voting Rights (SVR) shares. If the chairperson is a non-executive director, the board should have at least one-third as independent directors. Where the chairperson is also an executive director, or where a non-executive chairperson is also a promoter, related to a promoter, or occupies a management position at the board or level below, then not less than half of the board shall consist of independent directors. The same 50% threshold applies in the case of companies having outstanding SVR equity shares.

The Satyam Scandal shows the necessity of such stringent requirements of independence of directors and other necessary steps to control the power equilibrium of a corporation.

These more stringent requirements are particularly significant when promoters or influential persons hold controlling positions. Through this, SEBI intends to minimize conflicts of interest and provide firmer supervision within company boards. This is supposed to ensure that the governance is substantive and not mere paper compliance. SEBI now mandates the top 2000 listed companies to have a minimum of six directors on their boards. In case of non-executive directors aged 75 years or more, appointment or reappointment can be made only if it is approved by shareholders in a special resolution passed in the Annual General Meeting. This provision is intended to keep boards young and effective enough to tackle contemporary business issues. There are also restrictions on holding multiple director positions. No one can be a director of more than seven listed companies. If an individual is a whole-time director or managing director of a listed company, they cannot be an independent director of more than three other listed companies.

Compliance and Oversight

The status and compliance of the Compliance Officer have been enhanced. Within the new rules the Officer must be a full-time officer employed with the company holding a position one level below the board of directors. The officer must also be recognised as the Key Managerial Professional (KMP), this designation proved for the importance of the position. It also increases the independence of the officer so that they can act without undue influence to raise concerns and enforce compliance of rules. Any vacancy of this position has to be filled within three months which prevents gaps in oversight and increases accountability.

SEBI has introduced a major change by making secretarial audits mandatory and subject to peer review. A Secretarial Audit is defined and the position of such auditor will be held by a “secretarial auditor” who will be a company secretary or a firm with a valid peer review certificate by the institute of company secretary. The report of this audit must be attached to the annual report of the company. To maintain independence there is a strict limit to the tenure, where an individual can serve up-to one five-year term and a firm for two five-year consecutive terms. There is a five-year cooling period before reappointment and firms with overlapping partners are prevented from immediate reappointment. Framework is designed to enforce unbiased compliance for the company.

SEBI has also clarified the number of times boards and key committees must meet. Board of Directors at least four times a year with 120 days gap between each, the NRC, Risk Management and Stakeholders Relationship at least once a year.

Audit Mechanisms and Committee Responsibilities

SEBI has introduced measures to secure governance and oversight across capital markets especially for Market Infrastructure Institutions (MIIs) such as stock exchanges, clearing corporations, and depositories, as well as on general listed companies. From August 17, 2025, MIIs must conduct a thorough internal audit of all their critical functions—including operations, compliance, risk management, investor grievance redressal, and business development—at least once every financial year. These audits must be carried out by independent audit firms, chosen through a process approved by both the audit committee and the governing board. Importantly, the internal auditor reports directly and exclusively to the audit committee, and the audit scope must be cleared by the committee also. To protect the independence of the audit process, the internal auditor is to meet twice a year with the audit committee without management present. Audit committees play a central role in overseeing financial reporting, internal controls, risk management, and, crucially, related party transactions (RPTs). To approve RPTs the audit committee and in certain circumstances shareholders must be provided with detailed information regarding them.

The definition of RPT has been expanded where a wider range of transactions and relationships now fall under it. The definition includes a purpose and effect test.

SEBI has also presented monetary thresholds in identifying when RPTs at the subsidiary level need audit committee approval. For the subsidiary with a financial track record, the threshold is the lower of 10% of turnover or a specific monetary amount (INR 1,000 crore for main-board listed companies, INR 50 crore for SME subsidiaries). For entities without a history, the threshold is 10% of isolated net worth or the same dollar thresholds. This way, large transactions at the subsidiary level will not be ignored and will be subject to similar stringent scrutiny as those at the parent level.

RPT

SEBI has made adjustments to RPT rules to balance tough regulation with making it simpler for companies to manage run-of-the-mill, low-risk transactions. Acknowledging that all transactions were not equally prone to abuse, SEBI exempted certain transactions from the definition of RPTs to make compliance simpler. For example , exclusion applies to retail acquisitions by directors or employees of a listed company or its subsidiaries. Provided that these acquisitions are made on the same conditions as applicable to all employees and directors and with no special business connection, they will not be regarded as related party transactions.

These targeted exemptions are SEBI’s way of responding to industry feedback about the need for smoother business operations. By removing unnecessary compliance steps for routine transactions, SEBI aims to maintain effective oversight where it matters most, while allowing companies to focus on their core activities without getting bogged down in red tape.

Furthermore, remuneration and sitting fees paid by the listed entity or its subsidiary to its director, key managerial personnel (KMP), or senior management (excluding those who are part of the promoter or promoter group) will no longer require audit committee approval, provided these payments are not material as per the policy on materiality of related party transactions. These exempted payments are also exempt from the disclosure requirement under Regulation 23(9) of the LODR Regulations. A new provision allows for the post-facto ratification of RPTs by independent directors on the audit committee. This ratification must occur within three months from the date of the transaction or in the immediate next meeting of the audit committee, whichever is earlier this is subject to several conditions: the aggregate value of the ratified transaction(s) with a related party (individually or collectively during a financial year) must not exceed INR 1 crore; the transaction must not be material in terms of Regulation 23(1), failure to get ratification renders it voidable and concerned directors must indemnify against loss.

Rumour Verification Framework

Regulation Under Rule 30(11) of the LODR, known as the Rumour Verification Rule, the top 250 listed entities in India have to respond within a short time to news reports or events that surface in mainstream media and induce substantial fluctuation in their share price. If such information is not already widely known and has resulted in a material price movement, the company is required to confirm, deny, or clarify the report. This is to prevent price manipulation. Rumour verification is specifically triggered only in the case of a "Material Price Movement" (MPM) in the company's stock.

ESG and Sustainability

SEBI encourages EGS reporting mandates with comprehensive disclosures of climate risk, carbon emissions and social inclusivity. The progression from general "business responsibility reports" to detailed "Business Responsibility and Sustainability Reports (BRSR)" with specific content requirements for top companies signifies a maturation of SEBI's approach to ESG. Detailed BRSRs are now required as part of the annual report, ensuring ESG performance is disclosed alongside financial results.

Cybersecurity and Risk Management Frameworks

SEBI making cybersecurity a pivotal column of financial market integrity and investor protection. SEBI is also making cybersecurity a pivotal column of financial market integrity and investor protection. Realizing that cyber threats can have systematic implications on the stability of the financial system, SEBI has introduced the Cybersecurity and Cyber Resilience Framework (CSCRF), which became effective from August 20, 2024.

This framework is applicable to a broad spectrum of regulated institutions, such as stockbrokers, depositories, asset management companies, and alternative investment funds. The CSCRF prescribes stringent demands for continuous security monitoring, thorough risk management, and swift, effective reaction to cyber-attacks.

Conclusions

Latest regulatory reforms show a comprehensive effort to enhance standards of transparency and corporate governance. Adjustments in various aspects like disclosure, BOD, RPT reflect changes positively to the regulatory framework. The strengthening of BOD with women and independent directors aims to improve independence and diversity. Further Compliance Officers and peer reviewed audits improve internal compliance functions with increased accountability.

The case of Vishal Tiwari v. Union of India & Ors. (2024) shows the necessity of RTP regulations alleging the violation and failures in disclosing related-party transactions, and possible stock price manipulations. This case caused the tightening of disclosure norms, enhancing oversight of related-party transactions, and improving its early warning systems.

Though the regulations are fulfilling and enforce better compliances there is room for further improvement as the definition of a “related party” now includes anyone in the promoter group, regardless of their current shareholding, as well as anyone who has held 10% or more in the company at any point in the previous financial year. This means that even parties with only a temporary or minor stake can trigger RPT rules, making it harder for companies to keep track of who qualifies as a related party over time.

The recent amendments are improvements that are a step towards the global increased competition of Indian securities markets, the various ESG and cybersecurity aspects modernise it and there is increased diversity in aspects of BOD and committees.