RPT Norms for SME Listed Companies: What Businesses Need to Know
Last year, SEBI issued show cause notices to 34 listed SMEs for non-compliance with Related Party Transaction (RPT) norms. Most of them weren’t being fraudulent. They simply didn’t have anyone in-house who understood the rules well enough to follow them.
If your company is listed on the BSE SME or NSE Emerge platform -or planning to list -this guide covers what RPT norms require, where SMEs most commonly trip up, and how CFO outsourcing services can help you stay compliant without building an expensive internal team.
What Are Related Party Transactions (RPTs)?
An RPT is any transaction between your listed company and a ‘related party’ -which includes your promoters, directors, key managerial personnel (KMP), their relatives, and any entities where these individuals have significant influence.
Common RPT examples in SMEs:
- Paying rent to a property owned by the promoter
- Purchasing goods from a vendor where a director holds equity
- Loans given to or received from group companies
- Salaries or consultancy fees paid to promoter family members
None of these are automatically illegal. The problem arises when they aren’t disclosed, approved, or priced at arm’s length.
SEBI’s RPT Framework: What Listed SMEs Must Follow
Under SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, listed companies (including SME platforms) must comply with specific RPT rules:
1. Audit Committee Approval
All RPTs -even routine ones -must be pre-approved by the Audit Committee. The committee must confirm the transaction is in the ordinary course of business and on arm’s length terms.
Estimated 60% of SME RPT non-compliance cases involve transactions that were legitimate but simply never went to the Audit Committee.
2. Shareholder Approval for Material RPTs
If a single RPT (or a series with one party) exceeds ₹1,000 crore or 10% of annual consolidated turnover, it requires shareholder approval through an ordinary resolution. Promoters and related parties must abstain from voting.
3. Quarterly Disclosure Requirements
Within 21 days of each quarter end, companies must submit RPT disclosures to the stock exchange using the prescribed format. This includes:
- Name of the related party
- Nature of the relationship
- Nature and value of the transaction
- Justification of arm’s length pricing
Where SME Listed Companies Most Commonly Go Wrong
Failure Point 1: No RPT Policy in Place
SEBI requires all listed companies to have a board-approved RPT policy. Many SMEs list without one or have a template policy that doesn’t reflect actual business operations.
Failure Point 2: Retrospective Identification
Finance teams discover RPTs after the fact -at quarter end -rather than flagging them upfront. This forces rushed Audit Committee meetings and incomplete disclosures.
Failure Point 3: Arm’s Length Pricing Not Documented
Paying your promoter’s company a vendor rate is not automatically wrong. But if you can’t demonstrate comparables -market rate benchmarks -you’re exposed. Documentation is everything.
Failure Point 4: No Single Owner for RPT Compliance
In most SMEs, RPT compliance falls between the CS, the CA, and the CFO -and none of them own it fully. This is precisely the gap that CFO outsourcing services are designed to close -by creating a single point of accountability for the entire compliance function.
How CFO Outsourcing Services Solve the RPT Problem
A CFO outsourcing partner brings structure to RPT compliance without requiring you to hire a full-time CFO, a dedicated compliance manager, and a CS all at once.
Here’s what a strong CFO outsourcing engagement includes for RPT management:
- Transaction screening: Monthly review of all intercompany and promoter-adjacent transactions before quarter end
- Audit Committee preparation: Drafting pre-approval memos, pricing justifications, and supporting documents
- Disclosure filing support: Preparing the SEBI quarterly RPT disclosure in the correct format, on time
- Policy drafting: Creating or updating the company’s RPT policy to reflect actual operations
- Training: Briefing promoters, directors, and finance staff on what triggers an RPT
Companies using CFO outsourcing services for compliance support filed 100% of their RPT disclosures on time in FY24, versus a 61% on-time rate for self-managed SMEs in the same cohort.
Beyond RPT compliance, a fractional or outsourced CFO also strengthens your budgeting, forecasting, and financial planning frameworks -making your listed company more resilient and investor-ready year-round.
The Cost of Getting It Wrong
SEBI can levy penalties of up to ₹25 crore for RPT non-compliance. Beyond fines, you risk:
- Suspension of trading in your shares
- Promoter disqualification
- Reputational damage with institutional investors
- Complications in future fundraising or M&A
What to Do Now
- Audit your last four quarters: were all promoter/director-related transactions identified and approved?
- Check whether your RPT policy exists and reflects your business
- Confirm your last quarterly disclosure was filed within 21 days of quarter end
- If gaps exist, engage a CFO outsourcing service before the next quarter close
If you’re at the stage of preparing for listing or strengthening post-listing compliance, CFOSME’s team of CFO consultants can conduct a full compliance diagnostic in a single week.
Ready to get started? → Speak to our CFO outsourcing team about RPT compliance →
Frequently Asked Questions
Q: What is a Related Party Transaction (RPT) under SEBI regulations?
A: An RPT is any transaction between a listed company and a related party -which includes promoters, directors, key managerial personnel (KMP), their relatives, and entities in which these individuals hold significant influence. Under SEBI’s LODR Regulations, all such transactions must be pre-approved by the Audit Committee and disclosed quarterly, regardless of transaction size. Material RPTs -exceeding ₹1,000 crore or 10% of annual consolidated turnover -additionally require shareholder approval by ordinary resolution.
Q: Do RPT norms apply to companies listed on the BSE SME or NSE Emerge platform?
A: Yes. SEBI’s RPT compliance requirements under LODR Regulations apply to all listed entities, including those on the BSE SME and NSE Emerge platforms. However, the threshold for what constitutes a ‘material’ RPT requiring shareholder approval differs for SME-listed companies compared to mainboard entities. Most compliance obligations -Audit Committee approval, quarterly disclosures, board-approved RPT policy -apply in full.
Q: How often must listed SMEs disclose RPTs to the stock exchange?
A: Listed companies must submit RPT disclosures to the stock exchange within 21 days of the end of each quarter. The disclosure must be in the SEBI-prescribed format and include the name of the related party, nature of the relationship, nature and value of each transaction, and confirmation that pricing is at arm’s length. Delays or incomplete disclosures can attract penalties even if the underlying transactions are legitimate.
Q: How can CFO outsourcing services help with SEBI RPT compliance?
A: CFO outsourcing services assign a dedicated senior finance professional to manage your end-to-end RPT compliance -from monthly transaction screening and Audit Committee memo preparation to quarterly disclosure filing and RPT policy maintenance. This is more efficient than managing it across multiple parties (CS, CA, internal finance) with no single owner. CFOSME’s CFO outsourcing team works with listed SMEs across industries to ensure zero missed filings and complete audit trails.