Recently the Securities Exchange Board of India Board has decided to amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to facilitate more comprehensive and timely disclosure by the Listed entities. SEBI also decided to bring about some changes in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, in order to increase transparency and streamlining certain issue processes. The amendments in these two regulations are viewed upon being in line with the continuous efforts made by the Regulator towards Shareholder empowerment. The gist of these amendments is given as under:
Amendments in SEBI (LODR) Regulations, 2015
Materiality of events/information
The SEBI Board has decided to introduce a quantitative threshold for determining ‘materiality’ of events / information and to set a shorter time duration for disclosure of material events/ information. The listed entities will now have to make a disclosure of material events and information in respect of which the Board of Directors have taken a decision in their Board meeting within 30 minutes. In case, the decisions are emanating from within the listed entity, then the disclosures are required to be made even in a shorter period of within 12 hours.
Handling market rumors
In case there are any market rumors making rounds about a company and the company happens to be one the top 100 listed entities by market capitalization then any such rumor will have to be verified and confirmed, denied or clarified, as the case may be, by such listed entity. This regulation shall come into effect from October 1, 2023 for them. However this rule shall become applicable to top 250 listed entities with effect from April 1, 2024.
Disclosure for certain types of agreements binding listed entities
The SEBI Board has approved certain changes in respect of the disclosure of certain types of agreements which are binding on the listed entities with a view to enhance disclosure and empowering shareholders through a number of mechanisms which are likely to become applicable after amendments in the Listing regulations are made applicable.
Periodic shareholders’ approval will be required for any special right granted to a shareholder of a listed entity. This is necessary to deal with the issue of the perpetuity of special rights. Besides, SEBI is going to strengthen the extant mechanism of sale, lease or disposal of an undertaking of a listed entity outside the ‘Scheme of Arrangement’ framework.
Further it will become mandatory to seek periodic shareholders’ approval for any director serving on the board of a listed entity. Hence the practice of permanent board seats shall be done away with.
Timeline for submission of first financial results by newly listed entities
Keeping up with the timeline for the submission of first financial results by newly-listed entities has always been quite challenging. The time line for the immediate submission of the financial results post listing is being streamlined so as to ensure that there is no omission in submission of the financial results by the newly listed entities.
Timeline to fill up vacancy of Directors and the KMP of listed entities
SEBI has taken a view that critical positions such as Directors, Compliance Officer, Chief Executive Officer and Chief Financial Officer are not to be kept pending for appointment for more than three months from the date of such vacancy. The listed entities can not wait for a longer time period of six months or so which hitherto was available to them under the Companies Act, 2013.
Amendments to SEBI(Issue of Capital and Disclosure Requirements) Regulations, 2018
Sebi has approved amendments in the ICDR regulations with the objective of increasing transparency and streamlining certain issue processes. This is also a move to empower shareholders.
Disclosures regarding Underwriting
If the issuer is opting for underwriting for shortfall in demand or to cover the subscription risk this will have to be disclosed in the offer document prior to issue opening.
Issue of Bonus Shares
SEBI has put a Pre-condition for announcing Bonus Issue and issuance of bonus only in demat mode.
If a listed entity wants to announce bonus issue of shares, it can do so only after obtaining approval from the stock exchanges for listing and trading of all the pre-bonus securities issued by it. Further, the Bonus issue shall have to be made only in dematerialized form.
Issuance of Bonds/ Commercial Paper
Sebi has prescribed Introduction of concept of General Information Document (GID) and Key Information Document (KID) for issuance of bonds in order to reduce the burden of multiple filings of placement memoranda by issuers for non-convertible securities and Commercial Paper proposed to be listed. This will also promote ease of doing business for issuers.
A GID shall contain the information and disclosures specified in common schedule and shall be filed with the Stock Exchanges at the time of the first issuance. The GID shall have a validity period of one year. Thereafter, for subsequent private placements of non-convertible securities and/or Commercial Paper within the validity period, only a KID shall be required to be filed with the Stock Exchanges containing material changes.
Private placement of non-convertible securities which are proposed to be listed
The SEBI Board has approved the proposal to introduce a common schedule for disclosures for private placement of non-convertible securities proposed to be listed in order to ensure parity in disclosures required to be made in a prospectus for public issuance of debt securities/ Non-Convertible Redeemable Preference Shares and placement memorandum.
Issuance of debt securities for Large Corporates (LCs) to the extent of 25% of incremental borrowings
SEBI has extended the ‘Comply or Explain’ period for Large Corporates (LCs) to meet their financing needs from debt market through issuance of debt securities to the extent of 25% of their incremental borrowings in a financial year. The Board decided that the period of compliance for Large Corporates to meet their financing needs from debt markets through issuance of debt securities to the extent of 25% of their incremental borrowings in a contiguous block of two financial years will be extended to the contiguous block of three years.
Amendments in the corporate governance norms for the High Value Debt Listed Entities(HVDLEs).
The SEBI has extended ‘Comply or Explain’ period for the High Value Debt Listed Entities (HVDLEs) in respect of corporate governance norms. (i.e. regulation 16 to 27 of LODR Regulations) till March 31, 2024.
Further, SEBI decided to consolidate the disclosure requirements under Regulation 57 of the LODR Regulations in order to enhance ease of doing business for issuers of non-convertible securities.
The disclosure requirements pertaining to the payment of interest / coupon and redemption amount are being streamlined and multiple filings are being eliminated.
Disclaimer: This article has been published based on the Author’s own understanding of the applicable listing regulations/ICDR regulations. For compliance purposes, the reader is advised to take expert opinion/informed view.
Reference: This article is published by the Author in the Newsletter “KnowFunda Digest” (12th Edition) on LinkedIn on April 16, 2023