Understanding Latest Amendment of SEBI LODR Regulations
Date: 31 July 2023
Category Tagging: SEBI-Regulations, Public-Companies
SEBI has introduced the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023 to further amend the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
While the Amendment Regulations 2023 were passed on June 14, 2023, majority of these amendments shall be effective from July 14, 2023 (i.e., 30 days from the date of their publication within the official gazette).
This Amendment brought extensive changes to the disclosure requirements currently applicable to listed companies. The Amendment Regulations 2023 implement key proposals which were adopted by SEBI in its Board Meeting dated March 29, 2023 with an intent to increase transparency and accountability of listed companies, and its major shareholders, towards all stakeholders.
Let’s analyse some important changes to the LODR through the Amendment Regulations 2023.
New Definition of ‘Mainstream Media’ and about any specific event or information reported in the mainstream media
The amendment introduced the definition of ‘Mainstream Media’, which includes newspapers registered with the Registrar of Newspapers for India, news channels permitted by the Ministry of I&B under the Government of India, and content published under the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and similarly registered or permitted news platforms in jurisdictions outside India.
With regards to this insertion, Regulation 30 of the Regulation, 2015 has also been amended where the top 100 listed entities (effective from October 1, 2023) and thereafter the top 250 listed entities (effective from April 1, 2024) are required to confirm, deny, or provide clarification on any specific event or information reported in the mainstream media. It must be done within 24 hours from the time of reporting the event or information.
Disclosures for certain types of agreements binding listed companies
The amendment introduced as Regulation 30A, requires the disclosure of agreements among shareholders, promoters, promoter group entities, related parties, directors, KMP, employees of the listed entity or its holding/subsidiary/associate company, to the stock exchange.
Approval of special rights to shareholders
Regulation 31B (1) has been inserted in order to subject any special rights, granted to any set of shareholders of a listed company, to shareholders’ approval by a special resolution, once in every five years (beginning from the date on which such special right has been granted) .
Board permanency
Regulation 17 (1D) has been inserted, according to which, from April 1, 2024, directors of listed companies will require shareholder approval in a general meeting at least once in every five years from the date of appointment / reappointment. However, this provision will not apply to directors appointed through court orders, lending arrangements by RBI-regulated financial institutions, or under subscription agreements for debentures issued by the listed entity.
Additionally, in case there is a director on the board of a listed company (on March 31, 2024) who has served on the board of the listed company for five years or more (without shareholder approval), such person’s continuation on the board shall be subject to shareholder approval in the first general meeting after March 31, 2024.
Vacancies in respect of certain Key Managerial Personnel
The amendment introduced as regulation 26A prescribes a timeframe for filling up vacant Compliance Officer positions— within three months from the date of such vacancy. Similarly, vacancies of MD, CEO, CFO, and other Key Managerial Personnel (KMPs) must be filled within three months from the date of the vacancy. The introduction of these regulations has filled a gap in the regulatory framework, as there was no specific provision regarding timelines for filling vacancies in these key positions
Materiality threshold for disclosures under Para B of Part A of Schedule III
Regulation 30(4) has been amended to introduce quantitative thresholds for determining the materiality of events. The listed company shall disclose any matter which is mentioned in Para B of Part A of Schedule III, where the omission of an event or information, whose value or the expected impact in terms of value, exceeds the lower of the following:
- two percent of the turnover, as per the last audited consolidated financial statements of the listed company;
- two percent of net worth, as per the last audited consolidated financial statements of the listed company, except in case the arithmetic value of the net worth is negative; or
- five percent of the average of absolute value of profit of profit or loss after tax, as per the last three audited consolidated financial statement of the listed company.
Extension of timelines on the applicability of the Amendment Regulations to high value listed debt entities (“HVDLEs”)
Regulation 15(1A) has been amended to extend the timeline for applicability of the obligations under Chapter IV of the LODR, in respect of HVDLEs, to a “comply or explain” basis until March 31, 2024 (as opposed to March 31, 2023). This extends the current framework of “comply or explain” for another year, after which HVDLEs must mandatorily comply with Chapter IV.
In addition to all the amendments mentioned above, the Amendment Regulations 2023 also makes changes to Schedule III, to include new disclosure requirements and amend certain existing disclosure requirements.
SEBI LODR (Second Amendment) Regulations, 2023, brought about important changes in the governance of listed entities, aiming to increase transparency and accountability. These amendments are bound to have significant implications, which listed entities must carefully review and implement.
Read SEBI LODR Amended Regulations at: SEBI LODR
Any comments / feedback / corrections, most welcome. Please contact:
Team Complinova
https://www.complinova.com/
Mobile: +91 95773 96773
Email: contact@complinova.com