The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations") have been amended (available here) and shall come into force on the 30th day from June 15, 2023 ("Effective Date"), unless specified otherwise. An overview of the key changes are set out hereunder:
Vacancy in the Office of Listed Entity
- Vacancies in the office of a listed entity is now required to be filled at the earliest and maximum within 3 months from the date of vacancy, for the following: (i) Compliance Officer; (ii) Chief Executive Officer ("CEO"); (iii) Managing Director ("MD"); (iv) Whole Time Director; (v) Manager; (vi) Chief Financial Officer; and (vii) Director.
Sale, Lease or Disposal of Undertaking outside Scheme of Arrangement (effective from June 15, 2023 for transactions where notice has not been dispatched to the shareholders)
- In the event of sale, lease or disposal of whole or substantially whole of any undertaking of the listed entity, a special resolution passed by the shareholders is required, and majority of the public shareholders are required to vote in favour of such resolution.
- The aforesaid is not applicable in case of sale, lease or disposal of an undertaking to the wholly owned subsidiary of the listed entity, subject to certain conditions.
Board of Directors
- From April 1, 2024, continuation of a director of a listed entity would require the approval of the shareholders, once in every 5 years, from the date of their appointment or reappointment, as the case may be.
- As on March 31, 2024, continuation of director of a listed entity without the approval of the shareholders for the last 5 years, is required to be approved by the shareholders in the first general meeting held after March 31, 2024.
- Exceptions: (a) Director appointed pursuant to the order of court or tribunal; (b) Reappointment of directors liable to retire by rotation under the Companies Act; (c) Nominee director of: (i) the Government of India (other than in case of PSUs); (ii) financial sector regulator; (iii) regulated financial institution pursuant a lending arrangement of the listed entity; (iv) debenture trustee under a subscription agreement for the debentures issued by the listed entity.
Cyber Security
- In the quarterly compliance report on corporate governance, listed entities are required to disclose the details of cyber security incidents or breaches or loss of data or documents.
Materiality of Events / Information
- Materiality threshold for determination of events/ information to be disclosed by a listed entity to the stock exchanges have now been prescribed by SEBI, to include omission of an event or information, whose value or the expected impact in terms of value, exceeds the lower of the following ("Materiality Threshold"):
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- 2% of turnover, as per the last audited consolidated financial statements;
- 2% of net worth, as per the last audited consolidated financial statements, except in case the net worth is negative;
- 5% of the average of absolute value of profit or loss after tax, as per the last 3 audited consolidated financial statements.
- Any continuing event/ information which now qualifies to be "material" as per the Materiality Thresholds, is required to be disclosed within 30 days from the Effective Date.
- The policy for determination of materiality approved by the board of directors, is required to adhere to the Materiality Thresholds and provide a mechanism for: (i) assisting the employees in identifying any potential material event/ information; and (ii) reporting the same to the relevant key managerial personnel.
Special Shareholder Rights
- Special rights granted to the shareholders of listed entities are now required to be approved in a general meeting by way of a special resolution, once in every 5 years, from the date of grant of such special right.
- Special rights available to the shareholders as on the Effective Date are required to be approved by shareholders by way of a special resolution within a period of 5 years from the Effective Date.
- Exceptions: Special rights granted to the following shareholder, if applicable: (i) regulated financial institution pursuant a lending arrangement of the listed entity; (ii) debenture trustee under a subscription agreement for the debentures issued by the listed entity.
Timeline for Disclosure of Material Events
- Listed entities are now required to disclose the material events/ information to the stock exchanges in terms of the LODR Regulations, within the following timelines:
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- 30 minutes from the closure of the board meeting where decision pertaining to the event/information has been taken;
- 12 hours from occurrence of any event or information emanating from within the listed entity;
- 24 hours from the occurrence of any event or information not emanating from within the listed entity.
Response to Reported Events / Information
- Listed entities are required to confirm, deny or clarify any reported event/ information in the mainstream media which indicates rumours of an impending specific material event/ information and is not general in nature, within 24 hours from such reporting. The aforesaid is applicable only to top 100 listed entities (with effect from October 1, 2023), and top 250 listed entities (with effect from April 1, 2024).
- The term "mainstream media" has been
defined to include:
Print or electronic mode of the following: (i) newspapers registered with the Registrar of Newspapers for India; (ii) News channels permitted by the Government of India; (iii) content published by the publisher of news and current affairs content, as defined under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021; and (iv) newspapers or news channels or news and current affairs content similarly registered or permitted or regulated, as the case may be, in jurisdictions outside India.
Disclosure of Communication from Authorities
- The listed entity is required to disclose the communication received from any regulatory, statutory, enforcement or judicial authority ("Authority"), along with the event/ information, if such event/ information is required to be disclosed by the listed entity as per the LODR Regulations, unless the disclosure of communication is prohibited by such Authority.
Disclosure of Agreements
- In the event the shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, employees of the listed entity, or of its holding, subsidiary or associate company ("Executing Parties") enter into any agreement, amongst themselves or with the listed entity, or with a third party, individually or jointly, which directly, indirectly or potentially: (i) impacts the management or control of the listed entity; or (ii) imposes restriction or creates liability on the listed entity; are required to be disclosed to the stock exchanges, even if the listed entity is not a party to the agreement ("Executed Agreements").
- The Executing Parties are required to inform the listed entity about the Executed Agreements to which the listed entity is not party, within 2 working days of entering into such agreements or signing an agreement to enter into such agreements.
- The Executing Parties are required to inform the listed entity about all Executed Agreements subsisting as on the Effective Date, and the listed entity is required to disclose all such subsisting Executed Agreements to stock exchanges and its website, as per the timelines to be specified by SEBI.
- In the Annual Report for FY 2022-23 or 2023-24, the listed entity is required to disclose the number, salient features, link to the webpage with complete details in relation to the subsisting Executed Agreements.
Disclosure of Material Events
The following key events/ information have been added in Paragraph A of Part A of Schedule III of the LODR Regulations, and are required to be disclosed to the stock exchanges without any application of materiality guidelines:
- Acquisitions by the listed entity (including agreement to acquire), if the cost of acquisition or the price at which the shares are acquired, exceeds the Materiality Threshold.
- (a) Sale or disposal of whole or substantially whole of any undertaking or subsidiary of listed entity; or (b) sale of stake in associate company, which includes an agreement to sell shares or voting rights in a company such that: (i) company ceases to be a wholly owned subsidiary, a subsidiary or an associate company of the listed entity; or (ii) amount of the sale exceeds the Materiality Threshold.
- Fraud or financial defaults by a listed entity, its subsidiary, promoter, director, key managerial personnel, senior management, or arrest of the aforesaid individuals, in India or abroad.
- Resignation of key managerial personnel, senior management, compliance officer or director (other than independent director) of the listed entity, along with the letter of resignation outlining the detailed reasons, to be disclosed within 7 days from the resignation coming into effect.
- Indisposition or unavailability of MD or CEO of the listed entity to fulfil the requirements of the role in a regular manner, for more than 45 days in any rolling period of 90 days, along with the reasons for same.
- Announcement or communication by directors, promoters, key managerial personnel or senior management of a listed entity made through social media intermediaries or mainstream media, in relation to any event/ information which is material for the listed entity, and the same has not already been made available in the public domain by the listed entity.
- Any action initiated or orders passed by any Authority against: (i) listed entity; (ii) its directors, key managerial personnel, senior management, promoter; or (iii) its subsidiary, in respect of: (a) search or seizure; (b) re-opening of accounts and investigation under the Companies Act; (c) suspension; (d) imposition of fine or penalty; (e) settlement of proceedings; (f) debarment; (g) disqualification; (h) closure of operations; (i) sanctions imposed; (j) warning or caution; or (h) any other similar actions, along with the requisite details.
- Voluntary revision of financial statements or board report of the listed entity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.