SEBI (LODR) Regulations, 2015 & SEBI (PIT) Regulations, 2015 Vinod Kothari Vinod Kothari Consultants P. Ltd. 1006-1009 Krishna Building 224 AJC Bose Road Kolkata 700017 Phone 033-22811276/ 22813742/7715 E-mail corplaw@vinodkothari.com 601-C, Neelkanth 98 Marine Drive Mumbai 400002 Phone 022-22817427 E-mail: bombay@vinodkothari.com www.vinodkothari.com Email: vinod@vinodkothari.com
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Scope, Applicability etc. 4
5 Highlights Quick highlights: Consolidation of listing requirements Consummation of previous discussion papers Discussion paper on materiality: Sept. 2014 http://www.sebi.gov.in/cms/sebi_data/attachdocs/1408444809721.pdf Discussion paper on promoter and promoter group onboarding and offboarding: Jan 2015: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1419934886654.pdf Comes into effect from 90 th day from date of publication That is, from 1 st Dec, 2015 However, following changes effected immediately Substitution of Ordinary Resolution in place of Special Resolution for material RPTs Provisions related to disclosure of Promoter shareholding and conditions for reclassification
Applicability.. 6 Listed entity, whose any of the following designated securities are listed on recognised stock exchange(s): Specified securities listed on main board or SME Exchange or institutional trading platform; Non-convertible debt securities Non-convertible redeemable preference shares Perpetual debt instrument Perpetual non-cumulative preference shares Indian depository receipts Securitized debt instruments Units issued by mutual funds any other securities as may be specified by the Board.
7 Statutory basis With the LODR Regulations, the listing agreement gets its own statutory backing Prior to this, the LA was merely an agreement between the exchange and the company
8 Principles governing disclosures and obligations
9 Principles applicable to every listed entity Implement the prescribed accounting standards in letter and spirit Refrain from misrepresentation Adequate and timely information to recognised stock exchange(s) and investors Accounting standards to be adhered to: AS-3/ Ind AS 7 for cash flow statement AS- 5/ Ind AS- 8 for disclosure of change in accounting policies/ net profit or loss for the period, prior period items AS -25/ Ind AS-34- Internal Financial reporting AS- 17/ Ind AS for segment reporting AS-18 for related party disclosure May also follow IFRS for submission of financial statements Annual audit to be conducted by an independent, competent and qualified auditor Equal, timely and cost efficient access of relevant information Event based or periodic filings, reports, statements etc. shall contain relevant information These provisions are not imbibed in the present listing agreement
Overarching principles of listing obligations and disclosure 10 Primarily, obligations of listed entities are two: Obligations to comply Obligations pertaining to disclosure Reg 4 provides the general principles of disclosure and listing obligations New provision By Reg 4 (3), this regulation has an overriding force Contents of reg 4 are by and large general Of course, there is a repeated reference to compliance in letter and spirit
11 Principles to be followed by listed entity having its specified securities listed Reg 4 (2) pertains to specified securities only Compliance with corporate governance provisions to achieve the principles of Rights of shareholders Timely information Equitable treatment of shareholders Role of stakeholders in corporate governance Disclosure and transparency Responsibilities of the board of directors
Key functions of board of directors 1/2 Disclosure of information by directors and KMPs of direct/ indirect material transaction Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans, setting performance objectives, monitoring implementation and corporate performance, and overseeing major capital expenditures, acquisitions and divestments Monitoring the effectiveness governance practices and making changes Selecting, compensating, monitoring and replacing KMPs and overseeing succession planning Aligning remuneration of KMPs and of board with the longer term interests of the entity and its shareholders Ensuring a transparent nomination process of directors with the diversity of thought, experience, knowledge, perspective and gender in the board of directors Monitoring and managing potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions 12
13 Key functions of board of directors 2/2 Ensuring the integrity of accounting and financial reporting systems independent audit appropriate systems of control in place appropriate systems of control are in place financial and operational control compliance with the law and relevant standards Overseeing the process of disclosure and communications Monitoring and reviewing board of director s evaluation framework provide strategic guidance to ensure effective monitoring of the management
14 Chap III-Common Obligations of Listed Entities
15 Common Obligations-1/4 KMP/Directors/promoters/any other person dealing with the listed entity comply with responsibilities or obligations as prescribed under the LODR New provision Burden of compliance is on KMPs, directors and promoters or any other person If obligations assigned to them Reg 5 Compliance obligation on the CS Not clear who could be the other person Compliance Officer and his Obligations- Reg 6 Qualified Company Secretary as the compliance officer Responsible for Ensuring conformity with the regulatory provisions Co-ordination with and reporting to the Board, recognised stock exchange(s) and depositories the compliance with rules, regulations and other directives of these authorities Ensuring that the correct procedures have been followed in filing monitoring email address of grievance redressal division Similar to the old provisions provided under Equity Listing Agreement, Debt Listing Agreement, SME Listing Agreement etc.
Common Obligations-2/4 16 Appointment of Share Transfer Agent- Reg 7 Mandatory if total number of security holders exceeds one lakh Other wise the listed entity shall have to be registered with the Board Ensuring all activities in relation share transfer facility are maintained either in house or by Registrar to an issue and share transfer agent Half yearly Compliance Certificate with regard to compliance of the above with stock exchange New provision Within 1 month of end of half year Change of agent only through agreement New appointment to be intimated within 7 days Submission of information to securities intermediaries Reg 8 New provision Company shall submit regular information to intermediaries Intermediaries include rating agencies Policy on Preservation of documents - Reg 9 New requirement Approved by BoD This is a new policy
17 Common Obligations-3/4 Filing of information with recognise stock exchange in electronic platform- Reg 10 New provision Proposed scheme of arrangements etc. not to vilolate, override, limit the provisions of securities laws and requirements of Ses- Reg 11 Not applicable for units issued by listed mutual funds Electronic payment of dividend /interest /redemption /repayment amounts- Reg 12 New provision RTA to maintain bank details of investors Payable-at-par warrants or cheques may be issued If dividend is more than Rs. 1500 to be sent by speed post Obligatory to print bank a/c details on payment warrant
18 Common Obligations-4/4 Grievance Redressal Mechanism Reg 13 Mandatory registration with SCORES platform or other electronic platform or system of the Board Filing of quarterly statement with respect to- number of pending investors complaints at the beginning and ending of the quarter Complaints received and disposed and remained unresolved within 21 days of the end of the quarter Earlier the same was provided under CG Report in Annual Report and with financial results
19 Chap IV-Obligations applicable in case of listing of specified securities
Scope Obligations applicable for specified securities 20 Equity shares and convertible securities Listed on Main Board, SME Exchange or ITP Similar exemptions as earlier - Listed entities having paid up equity share capital not exceeding Rs. 10 crore and net worth not exceeding Rs. 25 crore, as on the last day of the previous financial year. Listed entities which have listed its specified securities on the SME Exchange Body corporates other than companies however is not exempted although listed in SME Exchange which is a new requirement.
Exemptions to small and SME listed companies 21 Regulations exempted- 17-Composition of BoD 18-Audit Committee 19-NRC 20-SRC 21-Risk Management Committee 22- Vigil Mechanism 23-RPTs 24-CG requirement with respect to subsidiaries 25- Obligations w.r.t to IDs 26-Obligations w.r.t Directors and senior mgmt 27- other corporate governance requirements
22 Definitions pertinent to corporate governance- 1/3 Definition of control Same as SAST right to appoint majority of the directors, or to control the management or to control policy decisions directly or indirectly by virtue of shareholding or mgmt rights or shareholders agreement or by voting agreements Similar to CA
Definitions pertinent to corporate governance- 2/3 23 ID means- NED other than nominee director Not a promoter of the entity/holding/ Sub/Associate Not related to the promoters of aforesaid No material pecuniary relationship with the entity its H/S/A & their promoters/ directors Two immediately preceding FYs and the current Year No relative has/ had pecuniary relationship/ transaction with the entity/h/s/a/ promoters/directors Amounting 2% or more of gross turnover/total income 50 lacs- lower, during two immediately preceding FYs and the current Year Neither himself nor his relatives is or has been KMP or employee of the entity/ H/S/A in 3 immediately preceding FYs Employee/ proprietor/partner in any 3 immediately preceding FY s of a audit firm, PCS or cost auditor of the listed entities/ H/S/A or legal consulting firm has / had any transaction with the listed entities/ H/S/A Not holding together with his relatives 2% or more voting powers Not CEO/Director of non profit org receiving 25% or more of its receipts from the entity/promoter/ director/h/s/a or who holds 2% or more total voting power of the entity. Not a material supplier, service provider, customer or lessor or lessee of the entity Not less than 21 years of age
Definitions pertinent to corporate governance- 3/3 24 Material subsidiaries- Reg 16 Definition includes all subsidiaries Earlier it was only material non- listed Indian subsidiary whose income or net worth exceeds 20% of the consolidated income or net worth in the immediately preceding accounting year SMPs officers/personnel of the listed entity who are member of core Mgmt. team excluding BoD One level below the Board The word officer has been inserted newly
Obligations applicable for specified securities 25 BoD- Reg 17 Optimum combination of executive and non-executive directors At least one woman director Not less than 50% non-executive directors Independent directors Shall meet at least four times a year Board meetings to have maximum time gap of 120 days between any two meetings. Fees and remuneration payable to all NEDs to be approved by shareholders resolution However, sitting fees excluded, if within limits as per CA Shall be responsible for framing, implementing and monitoring the risk management plan for the listed entity Similar to the earlier requirements Reg 17 (9) provides about the company to formulate risk assessment and minimisation plan
Obligations Obligations applicable for specified securities Audit committee NRC committee Stakeholders relationship committee 26 Risk management committee Composition minimum 3 directors Two-thirds independent at least three directors All shall be NED Atleast 50 % shall be independent Board shall decide Majority from Board Chairperson Independent director Independent director NED Member of the Board Role and responsibility Part C Schedule II Part D Schedule II Part D Schedule II Board shall define Other Company secretary to act as secretary to the committee Applicable to top 100 listed companies
27 Minimum information to be placed before the Board Part A of Schedule II Similar to the details under clause 49
28 Audit committee- Reg 18 No change as compared to Clause 49 Mandatory review by Audit Committee- Part C of schedule II quarterly statement of deviation(s) including report of monitoring agency, if applicable, submitted to stock exchange(s) annual statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice This is a new requirement
29 Nomination and Remuneration Committee- Reg 19 To see whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors This is new role of NRC Other provisions are similar to the earlier provisions.
30 Risk Management Committee- Reg 21 Applicable only to top 100 companies by market capitalisation Reg 21 (5) Not necessarily a committee of the board Majority shall be board members Chairperson to be member of Board Board to determine the role and responsibility
Obligations applicable for specified securities 31 Vigil Mechanism- Reg 22- For directors and employees adequate safeguards against victimization of director(s) or employee(s) or any other person direct access to the chairperson of the audit committee
32 Related Party Transactions- Reg 23 Related party transactions ( RPT )- Formulation of policy on materiality and on dealing with RPT Material RPT Previous +proposed transaction during FY exceeds 10% of annual consolidated turnover All RPT shall require prior approval of the audit committee Audit committee may grant omnibus approval (reviewed quarterly) Quarterly review of RPTs pursuant to omnibus approval Resolution valid for 1 year Material RPT shall require approval of shareholders Earlier it was Special Resolution Now ordinary resolution All related party to abstain from voting Existing transactions may be continued only after approval of shareholders at the general meeting held after these regulations Exceptions transactions entered into between two government companies; transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.
33 Obligations pertaining to material subsidiaries Reg 24 Atleast 1 ID to be director of unlisted indian material subsidiary Audit committee to review the FS In particular investments by such subsidiary minutes of board meetings to be placed before board of the company statement of all significant transactions and arrangements entered into by the unlisted subsidiary to be placed before board of the company any individual transaction or arrangement that exceeds or is likely to exceed 10% of the total revenues or total expenses or total assets or total liabilities, as the case may be, of the unlisted material subsidiary for the immediately preceding accounting year
Obligations pertaining to material subsidiaries Reg 24 34 SR will be required in case of- disposal of shares in its material subsidiary resulting in reduction of its shareholding to less than 50% or cessation of control over the subsidiary Selling, disposing and leasing of assets amounting to more than 20% of the assets of the material subsidiary on an aggregate basis during a financial year In case of chain subsidiaries, if there is an intermediate listed company. such listed intermediate listed company to also comply with the regulations
Obligations pertaining to independent directors Reg 25 35 In case of resignation/ removal of ID Replacement at the next Board meeting or 3 months, later CA provides for 180 days Other provisions are similar
Obligations applicable to directors Reg 26 36 Member in not more than ten committees Chairperson of not more than five committees across all listed entities in which he is a director Chairpersonship and membership of the audit committee and the Stakeholders Relationship Committee shall be considered determination of limit Disclosures to the board relating to all material, financial and commercial transactions, where there personal interest NEDs to disclose their shareholding held directly or on behalf of others and the same shall be inserted in the notice of general meeting. Similar to the earlier provisions
Obligations applicable to senior management Reg 26 37 Disclosure to BoD with regard to material, financial and commercial transactions having personal interest that may have a potential conflict with the interest of the listed entity conflict of interest relates to dealing in the shares of listed entity; commercial dealings with bodies, which have shareholding of management and their relatives etc.
Senior Management Personnel 38 KMPs Chairman Whole Time Director Managing Director Whole Time Director HoD1 HoD2 HoD3 SMPs
Compliance Report- Reg 27 39 Listed entity shall submit a quarterly, first half yearly and annual compliance report on corporate governance within fifteen days from close of the quarter other than Listed entities having paid up equity share capital not exceeding Rs. 10 crore and net worth not exceeding Rs. 25 crore, as on the last day of the previous financial year. Listed entities which have listed its specified securities on the SME Exchange Body corporates other than companies however is not exempted even if listed in SME Exchange which is a new requirement
40 Compliance Report contents Quarterly report detailed report details about the board of directors, committees (viz audit committee, nomination & remuneration committee, risk management committee and stakeholders relationship committee), and meetings of board and committees have to be disclosed. Regarding compliance of related party transactions details have to be annexed with the compliance report. First half yearly report Yes/No/N.A report of compliance in relation to annual general meeting Annual report - Yes/No/N.A report of annual affirmations of compliance and disclosure on website in terms of the Listing Regulations
41 Singing of Compliance Report Signed by Compliance officer or the CEO of the company Where the regulation empowers the compliance officer/ CEO to sign the compliance report of corporate governance, the format prescribed for the same additionally empowers the MD to sign the report
Comparison of CG Report 42 Points of difference Existing under Agreement Format Listing Format under Listing Regulations Periodicity Quarterly Quarterly, First Half yearly and Annually Type Yes/No/N.A report Quarterly report detailed report details about the board of directors, committees (viz audit committee, nomination & remuneration committee, risk management committee and stakeholders relationship committee), and meetings of board and committees have to be disclosed. Regarding compliance of related party transactions details have to be annexed with the compliance report. First half yearly report Yes/No/N.A report of compliance in relation to annual general meeting. Annual report - Yes/No/N.A report of annual affirmations of compliance and disclosure on website in terms of the Listing Regulations Signed by Compliance officer or the CEO of the company Where the regulation empowers the compliance officer/ CEO to sign the compliance report of corporate governance, the format prescribed for the same additionally empowers the MD to sign the report
In-principle approval Reg 28 43 Before issuing securities where the securities are listed only on recognised stock exchange(s) having nationwide trading terminals, from all such stock exchange(s) If not listed on any recognised stock exchange having nationwide trading terminals, from all the stock exchange(s) in which the securities of the issuer are proposed to be listed If listed on recognised stock exchange(s) having nationwide trading terminals as well as on the recognised stock exchange(s) not having nationwide trading terminals, from all recognised stock exchange(s) having nationwide trading terminals Not required if securities issued pursuant to the scheme of arrangement for which No-Objection Letter from recognised stock exchange(s) already received
44 Prior intimations Reg 29-1/2 Meeting of Board held for following matters financial results viz. quarterly, half yearly, or annual 5 days in advance Earlier it was 7 days proposal for buyback of securities; proposal for voluntary delisting fund raising by way of further public offer, rights issue, IDR, GDR, FCCB, QIPs, Debt Issue, Preferential issue, any other method and for determination of issue price, declaration/recommendation of dividend, issue of convertible securities including convertible debentures or of debentures carrying a right to subscribe to equity shares or the passing over of dividend declaration of bonus securities if included in agenda At least 2 working days in advance AGM / EGM/ postal ballot for approval for further fund raising indicating type of issuance
45 Prior intimations Reg 29-2/2 Atleast 11 working days in advance New requirement any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable
Material Events- Reg 30 46
47 Disclosure of material events Evidently, one of the most important parts of the LODR Regulations Global view IOSCO principles on Ongoing Disclosures and Material Developments Reporting by Listed Entities http://www.iosco.org/library/pubdocs/pdf/ioscopd132.pdf Para 202.05 of NYSE Listing guidance http://nysemanual.nyse.com/lcmtools/platformviewer.asp?selectednode=chp_1_ 3_2_6&manual=%2Flcm%2Fsections%2Flcm-sections%2F Australian Stock Exchange Guidance note no 8 http://www.asx.com.au/documents/about/guidance-note-8-clean-copy.pdf FSA UK s Disclosure and Transparency Rules http://www.fsa.gov.uk/pubs/ukla/disclosure_transparency.pdf Are there any quantitative norms available? The key question to be asked is, when is the information material? Generally, estimated impact of 10% or more is considered material Impact of 5% or less is considered non material ASIC guidance in Para 8.7 of Guidance Note no 8 The 10%/ 5% rules are rules of thumb regulators have generally denied them but the rule can be practically handy Also, in Hutchison v. Deutsche Bank Securities Inc., 647 F.3d 479 (2d Cir. 2011), US court held materiality is to be tested based on aggregate assets of issuer, not equity value
Rulings on meaning of material information The question of whether an information disclosed/not disclosed was material has agitated minds of lawmakers/companies all over the world Several rulings exist from different parts of the world The canonical rule of materiality in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976). there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available Australia ruling in Jubilee Mines NL v Riley Australian ruling James Hardie Industries NV v ASIC Singapore ruling in Airocean 48
Approaches to disclosure of material information 49 Two approaches General guidance approach Prescriptive approach Deemed material events Illustrative events, but to be tested on the benchmark of materiality
50 Types of materiality Deemed material Part A of Schedule III Material based on application of guidelines Part B of Schedule III, read with Reg 30 (4) Guidance of SEBI vide 9 Sept 2015 Implications of materiality Intimation to stock exchange within 24 hours If based on board meeting results, then within 30 min Put material developments on website Keep the same for 5 years Continue to provide updates of material developments on such events Question of closure of trading window may also arise Formulation of policy on materiality The Board shall authorise one of the KMPs to determine materiality Disclosures required for material subsidiaries as well Response to rumours Reg 30 (11) allows the company the option to confirm or deny rumours about material developments
Material event 51 An event occurred Whether covered under Part A of Sch. III Yes No No Whether covered under Part B of Sch. III No disclosure to be made Yes Apply significant price sensitivity test or any change/ discontinuance of existing significant price sensitive information earlier disclosed No Yes Whether the information is significant Disclosure to be made
Events- Deemed to be material-1/4 Acquisition(s) (including agreement to acquire) Scheme of Arrangement (amalgamation/ merger/ demerger/restructuring), sale or disposal of any unit(s), division(s) or subsidiary of the Company any other restructuring issuance or forfeiture of securities split or consolidation of shares buyback of securities any restriction on transferability of securities or alteration in terms structure of existing securities including forfeiture, reissue of forfeited securities, alteration of calls, redemption of securities etc. 52
53 Events- Deemed to be material-2/4 Outcome of Meetings of the board of directors held for discussing- declaration of dividends and/or cash bonuses recommended or declared or the decision to pass any dividend and the date on which dividend shall be paid/dispatched any cancellation of dividend with reasons thereof the decision on buyback of securities the decision with respect to fund raising proposed to be undertaken increase in capital by issue of bonus shares through capitalization including the date on which such bonus shares shall be credited/dispatched reissue of forfeited shares or securities, or the issue of shares or securities held in reserve for future issue or the creation in any form or manner of new shares or securities or any other rights, privileges or benefits to subscribe to; short particulars of any other alterations of capital, including calls; financial results; To be disclosed within 30 minutes of conclusion of the meeting
54 Events- Deemed to be material-3/4 Agreements- joint venture agreement(s), family settlement agreement(s) (to the extent that it impacts management and control of the Company), agreement(s)/treaty (ies)/contract(s) with media companies) which are binding and not in normal course of business, revision(s) or amendment(s) and termination(s) thereof. Revision in Rating(s) Fraud/defaults by promoter or key managerial personnel or by Company or arrest of key managerial personnel or promoter. Change in directors, key managerial personnel, Auditor and Compliance Officer. Appointment or discontinuation of share transfer agent. Corporate debt restructuring. One time settlement with a bank Reference to BIFR and winding-up petition filed by any party / creditors.
55 Events- Deemed to be material-4/4 Issuance of Notices, call letters, resolutions and circulars sent to shareholders, debenture holders or creditors or any class of them or advertised in the media by the Company. Proceedings of Annual and extraordinary general meetings of the Company. Amendments to memorandum and articles of association of Company, in brief. Schedule of Analyst or institutional investor meet and presentations on financial results made by the Company to analysts or institutional investors
Material events subject to the Guidance prescribed 56 the omission of an event or information, which is likely to result in discontinuity or alteration of event or information already available publicly; or the omission of an event or information is likely to result in significant market reaction if the said omission came to light at a later date; or In case where the criteria specified in sub-clauses (a) and (b) are not applicable, an event/information may be treated as being material if in the opinion of the board of directors of Company, the event / information is considered material
Guidance to consider an event as Material-1/2 57 Commencement or any postponement in the date of commencement of commercial production or commercial operations of any unit/division. Change in the general character or nature of business brought about either in entirety or piecemeal Capacity addition or product launch. Awarding, bagging/ receiving, amendment or termination of awarded/bagged orders/contracts not in the normal course of business. Agreements (viz. loan agreement(s) (as a borrower) or any other agreement(s) which are binding and not in normal course of business) and revision(s) or amendment(s) or termination(s) thereof.
Guidance to consider an event as Material-2/2 58 Disruption of operations of any one or more units or division of the Company due to natural calamity (earthquake, flood, fire etc.), force majeure or events such as strikes, lockouts etc. Effect(s) arising out of change in the regulatory framework applicable to the Company Litigation(s) / dispute(s) / regulatory action(s) with impact. Fraud/defaults etc. by directors (other than key managerial personnel) or employees of Company. Options to purchase securities including any ESOP/ESPS Scheme. Giving of guarantees or indemnity or becoming a surety for any third party. Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals. Any event likely to affect business
Time limit and other administrative measure Administrative Measures 59 The board of directors to authorize one or more Key Managerial Personnel for the purpose of determining materiality of an event or information. The contact details of such personnel shall be also disclosed to the stock exchange(s) and as well as on the listed entity's website Policy on determination of materiality is a new requirement Disclosure to the Stock exchange Not later than twenty four hours from the occurrence of the event or information In case Board Meeting held for discussion of prescribed items- Within 30 minutes of conclusion
Guidance on when an event/information is deemed to be occurred upon receipt of approval of Board of Directors In certain events/information after receipt of approval of both i.e. Board of Directors and Shareholders The events/ information in the nature of price sensitive nature on receipt of approval of the event by the Board of Directors, pending Shareholder s approval In the events/information such as natural calamities, disruption etc. can be said to have occurred when the Company becomes aware of. 60
Filing of shareholding pattern Reg 31 Statement showing holding of securities and shareholding pattern separately for each class of securities shall be submitted to the Stock exchange 1 day prior to listing of its securities on the stock exchange(s); on a quarterly basis, within 21 days from the end of each quarter; and, within 10 days of any capital restructuring of the listed entity resulting in a change exceeding two per cent of the total paid-up share capital Exception : Listed entities which have listed their specified securities on SME Exchange, the statements shall be submitted on a half yearly basis within 21 days from the end of each half year 61
62 Re-classification of Promoter Holdings- Reg 31A
63 Promoter Person who are in control Persons instrumental in the formation of a plan/programme/ pursuant to which securities are offered to public Persons named in the offer document Following persons shall not be deemed promoter- 1. Persons acting in mere professional capacity 2. FIs, FPIs, MFs & Scheduled Banks merely holding atleast 10% of equity cap of the issuer.
64 Promoter Group Promoter Promoter Body Corporate (PBC) Promoter Individual ( X ) Subsidiary Companies Holding Companies Body corporate in which PBC holds atleast 10% of equity share capital Fellow Associates of PBC Body corporate which holds atleast 10% equity share capital in PBC Body corporate ( Y ) in which X / HUF/Firm (where X is a member) holds atleast 10% equity share capital Body Corporate ( Z ) where Y holds atleast 10% equity share capital Immediate relatives = Parents, Siblings, Spouse and Children (including step children) Fellow associates = Any body corporate where group of individuals/companies/combination thereof holds 20% or more eq. sh. capital in such body corporate and also the PBC HUF/Firm where the aggregate holding of X is atleast 10%
Promoter holdings- Reg 31A 65 New requirement Reclassification of promoters pursuant to Transmission/ Inheritance Open Offer Company becoming professionally managed Listed entity shall ensure that 100 percent of shareholding of promoter(s) and promoter group is in dematerialized form The shareholding shall be maintained on a continuous basis in the manner as specified by the Board Note This was not required earlier in the Listing Agreement.
Re-classification of shareholding of promoters and promoters group 66 Promoters and Promoters group to disclose shareholding separately Approval of SE requires before any modification / re-classification In case of transmission etc. the successor to be classified as promoter
67 Replacement of outgoing promoter Approval of Shareholders Not more than 10% of the paid up equity capital shall be held by the outgoing promoter along with PAC & Promoter group Shall not continue to have any special rights All agreements granting shareholders special rights shall be terminated The outgoing promoter and his relatives shall not act as a KMP for more than 3 years from the date of shareholders approval Resolution to specifically approve
Re- classification of promoter shareholding as public 68 In case of professionally managed companies- No group can hold more than 1%. Shall not directly or indirectly, exercise control Increase in the level of public shareholding pursuant to re-classification shall not be counted for compliance with minimum public shareholding as per SCRA The event of re-classification to be disclosed to SE Board may relax conditions
69 Deviations from use of proceeds of public issue, rights issue, preferential issue etc. Reg 32
Deviations from use of proceeds of issues- 1/2 Applicable for public issue, rights issue, preferential issue etc. Quarterly submission of report indicating deviations in the use of proceeds from the objects stated in the offer document or explanatory statement to the notice for the general meeting, as applicable; indicating category wise variation (capital expenditure, sales and marketing, working capital etc.) between projected and the actual utilization of funds 70
Deviations from use of proceeds of issues- 2/2 71 Continue reporting till fully utilized Statement to be placed before audit committee before submission Explanation for the variation in directors report Preparation of annual statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice certified by Statutory auditor placing it before the audit committee till such time the full money utilized Submission of report of monitoring agency Placing of such report before audit committee annually
Financial Statements- Reg 33 72
73 Financial statements power to approve financial results is only with the board of directors General practice of committee approval before Board Limited review report to be place before Board option for submission of quarterly consolidated results intimation shall be given in first quarter of FY. disclosures pertaining to investor complaints and explanation of reasons for variations etc. is not required to disclose in financial results Audit report with modified opinion and the accompanying annual audit report shall be reviewed by the stock exchange(s) and Qualified Audit Report Review Committee
74 Interim financial statements Quarterly financial statements to comply with AS 25 or IndAS 34 Form A (for unmodified opinion)/ B (for modified opinion) to be submitted along with annual results (standalone as well as consolidated) Last quarter figure (audited) are balancing figure between 3 rd Y-T-D and Annual results The requirement was there in LA as well
Miscellaneous provisions 75
76 Requirements for annual report & AIM Reg 34 & 35 Annual report to be submitted within 21 days of adoption at AGM New requirement Similar disclosures as earlier provided under CA and listing agreement BRR is applicable to top 100 listed companies as on March 31 every financial year. Annual Information Memorandum to be submitted as specified by SEBI. New requirement
Disclosures on appointment & reappointment of directors- Reg 36 77 Disclosures to the shareholders brief resume of the director nature of his expertise in specific functional areas disclosure of relationships between directors inter-se names of listed entities in which the person also holds the directorship and the membership of Committees of the board Earlier it was for all companies shareholding of non-executive directors
78 Schemes of arrangement Reg 37 Draft schemes to be filed with SEs for observation before filing with court etc. Filing with court only after observation from SEs Such letter to be placed before authority Validity of observation letter is 6 months Submission of documents with SEs after sanction of the scheme
79 Certificate for split/ consolidation of securities- Reg 39 Issue of certificate within 30 days of lodgment Earlier it was 6 weeks Compliance of procedural requirements may be delegated to RTA
80 Transfers Reg 40-1/2 Detailed procedures with timelines has been prescribed for transfer/ transmission/ transposition of securities Board may delegate the power to transfer to a committee or to compliance officer or to the registrar to an issue and/or share transfer agent Delegated authority to place report on transfer of securities to the board of directors in each meeting Registration of Transfer within 15 days Otherwise to compensate the aggrieved party Transmission for securities held in dematerialized mode within 7 days Transmission for physical securities- within 21 days Record to be maintained No registration in case of any statutory restriction If transferor objects and within 60 days of objection place any prohibitory order Indebtedness of transferor is not a valid ground to reject transfer In case of delay in transfer the company has to compensate to aggrieved party and any claim / dispute is to be settled by arbitration as per exchange bye-law
81 Transfers Reg 40-2/2 Half yearly certificate from PCS Within 1 month of end of half year Certificate to be filed with SEs simultaneously Provisions are applicable for deletion of name of the deceased holder transmission of securities to the legal heir transposition of securities Schedule VII to be followed
82 Record date- Reg 42 Annual Book closure requirement is done away with Requirement is for fixing record date Recommendation or declaration of dividend and/or cash bonuses at least 5 WDs before the record date Other provisions are similar
83 Remote e-voting- Reg 44 All resolutions In terms of MGT rules Submission of results within 48 hours of conclusion of the meeting Proxy form to all
84 Change of name- Reg 45 Mandatory name change (within 6 months) in case company change its activities which is not reflected in its name. Prior approval of SE is mandatory before making application to ROC Both are new requirements Other provisions are same
Website of listed company Reg 46-1/2 85 Shall have a functional website Details of business terms and conditions of appointment of independent directors composition of various committees of board code of conduct of board and SMPs details of establishment of vigil mechanism criteria of making payments to NEDs If not in annual report RPT policy Material Subsidiary Policy Familiarization programme for IDs No of programmes attended during the year on cumulative basis No of hours spend during the year on cumulative basis Other relevant details Policy on determination of material events Contact details of KMPs authorised by the Board for the purpose of determination of materiality and disclosure thereon
86 Website of listed company Reg 46-2/2 the email address for grievance redressal contact information of the designated officials responsible for assisting and handling investor grievances financial information notice of meeting of the board of directors where financial results shall be discussed financial results, on conclusion of the meeting of the board of directors where the financial results were approved complete copy of the annual report shareholding pattern details of agreements entered into with the media companies and/or their associates schedule of analyst or institutional investor meet and presentations new name and the old name for a continuous period of one year Advertisements made under regulation 47
Newspaper advertisement Reg 47 87 notice of meeting of the board of directors where financial results to be discussed financial results along-with the modified opinion(s) or reservation(s), if any, expressed by the auditor If both standalone & CFS has submitted then CFS to be published statements of deviation(s) or variation on quarterly basis, after review by audit committee explanation in directors report in annual report notices given to shareholders by advertisement Reference in newspaper publication shall be on the website Publication shall be simultaneously with the submission of the same to SEs FS to be published within 48 hours of conclusion of the meeting of board of directors Atleast 1 English language national daily circulating in the whole or substantially the whole of India 1 daily newspaper published in the language of the region, where the registered office is situated Not applicable to entities whose securities are listed on SME Exchange. Website link New requirement
88 Additional disclosures in Annual Report
89 New disclosures in Annual Report Schedule V (10) Details of non-compliance, penalties imposed by SE / SEBI / Regulatory Authority on any matter related to capital market During last 3 years Web link of material subsidiary policy, RPT policy Disclosures of commodity price risks & commodity hedging activities Non-compliance of any requirement of CG along with reason
Policies under the Regulations 90
91 Policies-1/5 Reg No. Name of the policy Specific Requirements/Contents Approv al Earlier provisio ns Disclosure on the website 9 Preservation of documents Policy To be classified into two categories:- 1. documents whose preservation shall be permanent in nature ; 2. documents with preservation period of not less than eight years after completion of the relevant transactions: BoD -- Not required 16 (1c) Policy on determining "material subsidiary" Although Regulation 6 is silent about the contents of this Policy, it is understood that the Policy among other things will contain process for determining such material subsidiaries and also the general obligations of the holding company in this regard. Regulatio ns, 2015 is silent regarding this. The Board can can such a policy. Clause 49 Required to be disclosed; Any changes to be updated within 2 working days of such change
92 Policies-2/5 Reg No. Name of the policy Specific Requirements/Contents Approval Correspo nding requirem ents Website disclosure 17(9)(b) Risk Management Policy The policy should lay down procedures to inform members of board of directors about risk assessment and minimization procedures 17(5) Code of Conduct For all members of the Board and SMPs BoD Clause 49 -- BoD Clause 49 To be disclosed; Any changes to be updated within 2 working days of such change 19 (4) and 20(4) with ref to Part D of Schedule II Remuneration of the directors, key managerial personnel and other employees Nomination and remuneration committee shall frame the policy in consonance with the Companies Act, 2013 and other relevant laws NRC -- --
Policies-3/5 93 Reg No. Name of the policy 19(4), Board Diversity 20(4), Schedule I part D Policy 23 (1) Materiality of related party transactions and on dealing with related party transactions Specific Requirements/Contents As the very name suggests, the policy has to contain details pertaining to laying down thresholds for determining materiality and on dealing with related party transactions. Approval Audit Committee Regulations, 2015 is silent regarding this. The Board can pass such a policy. Corresp onding require ments Clause 49 Clause 49 Website disclos ure Not required Required to be disclosed; Any changes to be updated within 2 working days of such change 23(3) Criteria for granting omnibus approval for RPTs In line with RPT Policy Audit Committee Clause 49 Not required
94 Policies-4/5 Reg No. Name of the policy 25(7) Familirization Programme for IDs Specific Requirements/Contents To familiarize the IDs with the industry where the company operates, business model etc. Approval No specific requirement Correspo nding requirem ents Clause 49 Website disclosure To be disclosed; Any changes to be updated within 2 working days of such change 30 Policy on determination of materiality To be framed on the basis of Regulation 30 (4) and Schedule III BoD -- Required to be disclosed; 46 Vigil Mechanism For directors and employees to report genuine concerns Regulations, 2015 is silent regarding this. The Board can pass such a policy. Clause 49 To be disclosed; Any changes to be updated within 2 working days of such change
95 Policies-5/5 Reg No. Name of the policy 46 Criteria for making payment to NEDs Specific Requirements/Conte nts For payment to NEDs including IDs Approval Corresponding requirements NRC Clause 49 To be disclosed, if not disclosed in annual report; Any changes to be updated within 2 working days of such change Sch II Part D criteria for evaluation of performance of independent directors and the board of directors For performance evaluation of IDs NRC Clause 49 Not required
Intimations under LODR 96
97 Prior intimation- 1/2 Reg. No Particulars Time line 29(1)(a) Meeting of Board held for approval financial results viz. quarterly, half yearly, or annual 5 days in advance 29(1)(b) to (f) Proviso to 29(1)(d) Meeting of Board held for Buyback voluntary delisting further public offer, rights issue, IDR, GDR, FCCB, QIPs, Debt issue, preferential issue and determination of issue price etc. declaration/recommendation of dividend issue of convertible securities declaration of bonus securities if included in agenda AGM / EGM/ postal ballot for approval for further fund raising indicating type of issuance 2 working days in advance 2 working days in advance 29(3)(a) any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof 11 working days in advance
98 Prior intimation- 2/2 Reg. No Particulars Time line 29(3)(b) any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable 11 working days in advance 42(2) Notice of record date or date of closure of transfer books At least 7 working days (excluding the date of intimation and the record date) 50 (1) Information of interest on debentures and bonds, and redemption amount of redeemable shares or of debentures and bonds 50 (2) intention to raise funds through new non-convertible debt securities or non-convertible redeemable preference shares proposes to list either through a public issue or on private placement basis, 50 (3) recommendation or declaration of issue of non convertible debt securities or any other matter affecting the rights or interests of holders of non convertible debt securities or non convertible redeemable preference shares is proposed to be considered 11 working days before date on and from which they are payable Prior to meeting of the Board in which it shall be considered at least two working days in advance, excluding the date of the intimation and date of the meeting
99 Post event intimation- 1/5 Reg. No Particulars 7(3) Compliance certificate with regard to maintenance of share transfer facility either in house or through Share transfer agents, RTI Time line Within 1 month of end of each half of the financial year 7(4) Changes or Appointment of new Share Transfer Agent Within 7 days of entering into the agreement 13(3) A statement giving the number of investor complaints pending at the beginning of the quarter, those received, disposed off and those remaining unresolved at the end of the quarter. Within 21 days from the end of each quarter 27(2)(a) Compliance report on corporate governance, Details of Material RPT Within 15 days from close of the quarter
100 Post event intimation- 2/5 Reg. No Particulars Time line 30 Material events as enumerated under Schedule III Not later than 24 hours of occurrence 30 Outcome of Meetings of the Board of Directors- dividends and/or cash bonuses recommended or declared or the decision to pass any dividend and the date on which dividend shall be paid/dispatched; any cancellation of dividend with reasons thereof; the decision on buyback of securities; the decision with respect to fund raising proposed to be undertaken; increase in capital by issue of bonus shares through capitalization including the date on which such bonus shares shall be credited/dispatched; reissue of forfeited shares or securities, or the issue of shares or securities held in reserve for future issue or the creation in any form or manner of new shares or securities or any other rights, privileges or benefits to subscribe to; short particulars of any other alterations of capital, including calls; financial results; decision on voluntary delisting by the listed entity from stock exchange(s). Within 30 minutes of the Meeting