June 16, 2023
Summary of the SEBI notification dated 14/06/2023
This notification is integrated in our free-to-use website ca2013.com.
Key highlights of the amendments made to SEBI LODR are as follows:
1. New Definition is inserted to define the scope of Mainstream Media, which shall include print or electronic mode of newspaper, news channels, content published by news channels etc.
Further, SEBI now requires that the top 100 listed entities with effect from 01/10/2023 and thereafter the top 250 listed entities with effect from 1/04/ 2024 shall confirm, deny or clarify any reported event or information in the mainstream media which is not general in nature and which indicates that rumours of an impending specific material event or information are circulating amongst the investing public, as soon as reasonably possible and not later than twenty four hours from the reporting of the event or information. If confirming such rumours, it shall also provide the current stage of such event.
2. Timeline for filling of vacancies of:
A. Compliance officer or Chief Executive Officer, Managing Director, Whole Time Director, Manager or the Chief Financial officer shall be carried out not later than 3 months. No appointment shall be made in interim capacity unless such appointment is according to laws applicable in case of a fresh appointment of a Compliance Officer and obligations under such law has been made applicable on the person so appointed.
B. The Director shall be filled at the earliest but not later than 3 months. However, if the listed entity becomes non-compliant with the Board composition requirement due to expiration of the term of office of any director, the resulting vacancy shall be filled by the listed entity on the same date. The requirement of this provision will not be triggered if the composition of the Directors on the Board of listed entity is in order without filling the vacancy.
3. Applicability of Regulations 15 to Regulation 27 of SEBI(LODR) to a ‘high value debt listed entity’ shall be on a ‘comply or explain’ basis until March 31, 2024.
4. With effect from 01/04/2024, continuation of a director serving on the board of directors of a listed entity shall be subject to the approval by the shareholders in a general meeting at least once in every five years from the date of their appointment or reappointment. For the directors who are on board as on March 31, 2024, without the approval of the shareholders for the last five years or more shall be subject to the approval of shareholders in the first general meeting to be held after March 31, 2024.
This requirement however shall not be applicable to WTD, MD, Manager, Independent Director or a Director retiring by rotation if the approval of the shareholders for the reappointment or continuation of the aforesaid directors or Manager is provided for by the Companies Act, 2013 and has been complied with.
This requirement shall also be not applicable on following persons:
i) Director appointed pursuant to an order of court or Tribunal.
ii) Nominee Director of the Government on board of a listed Company.
iii) Nominee Director of a financial Sector regulator.
iv) Director nominated by a financial institution registered with the RBI.
v) A Debenture Trustee registered with the SEBI.
5. Disclosures to Stock Exchanges:
A. Listed entities to disclose the details of cyber security incidents or breaches or loss of data or documents along with the Corporate Governance Report submitted to the Stock Exchanges.
B. The listed entity to also include omission of an event or information, whose value or the expected impact in terms of value, exceeds the lower of the following as material information for the purpose of disclosure to the stock exchange:
i) two percent of turnover, as per the last audited consolidated financial statements of the listed entity;
ii) two percent of net worth, as per the last audited consolidated financial statements of the listed entity, except in case the arithmetic value of the net worth is negative;
iii) five percent of the average of absolute value of profit or loss after tax, as per the last three audited consolidated financial statements of the listed entity.
6. Revision of Timelines for disclosure of material events /information is as follows:
i) thirty minutes from the closure of the meeting of the board of directors in which the decision pertaining to the event or information has been taken.
ii) twelve hours from the occurrence of the event or information, in case the event or information is emanating from within the listed entity.
iii) twenty four hours from the occurrence of the event or information, in case the event or information is not emanating from within the listed entity.
7. Regulation 30A has been introduced which states that all the parties to the agreements entered into by 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, among themselves or with the listed entity or with a third party, solely or jointly, which, either directly or indirectly or potentially or whose purpose and effect is to, impact the management or control of the listed entity or impose any restriction or create any liability upon the listed entity, must disclose to the listed entity about the agreements in which the company is not a party within 2 working days of entering into such contracts or agreements. The Company further shall disclose all such agreements to the stock exchange.
The Company shall also disclose such number of agreements and their salient features including the link to webpage where complete details of the agreements are available in its annual report relating to F.Y 2022-23 or for F.Y 2023-24.
8. Regulation 31B has been inserted which states, any special right granted to a shareholder subsisting on the date of this notification or any special right granted after this amendment shall be approved by the shareholders in a general meeting by way of a special resolution once in every five years starting from the date of publish of this notification and date of grant of such right respectively. This shall not be applicable on the special rights granted by the Company to a Financial Institution or a Debenture Trustee if they become shareholders.
9. The listed entity, subsequent to its listing, shall disclose its financial results for the quarter or the Financial Year immediately succeeding the period for which financial statements have been disclosed in the offer document.
10. The Voluntary requirement for the top 1000 listed entities based on market capitalisation to submit Business Responsibility and Sustainability Report has now been made compulsory. Business Responsibility Report as required to be submitted earlier, is done away with. The said entities are now mandatorily required to submit a Business Responsibility and Sustainability Report in the format specified by the Board. Further, the listed entities are also required to make disclosures and obtain assurance for their value chain as per the Business Responsibility and Sustainability Core.
Regulation 47A has been newly introduced titled ‘Sale, lease or disposal of an undertaking outside Scheme of Arrangement’. The regulation provides that prior approval of shareholders by way of special resolution is required to be obtained for sale, lease or disposal of whole or substantially whole of the undertaking. The statement annexed to the notice sent to the shareholders shall contain object and commercial rationale for the said sale/ lease/ disposal and shall specify the manner of utilization of proceeds. The requirement for approval of shareholders by way of special resolution shall not be applicable in case of sale/ lease/ disposal of an undertaking by a listed entity to its wholly owned subsidiary whose accounts are consolidated with the listed entity.
12. Part A of Schedule III has been amended to include the following disclosures to be made to the stock exchanges, to name a few:
A. Events to be disclosed without the application of guidelines of materiality:
a. In addition to the existing requirement of disclosing to the stock exchange sale/ disposal of units, division or subsidiary, listed entities are now required to disclose sale/ disposal of whole or substantially whole of the undertaking and sale of any stake in its associate company.
b. Agreements entered into by the shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, employees of the listed entity, its holding company, subsidiary company or associate company among themselves, or with the listed entity or with a third party, whose purpose is to impact the management or control of the listed entity.
c. In addition to frauds/ defaults by promoter, key managerial personnel, listed entity or arrest of the key managerial personnel or promoter, frauds/ defaults by director, senior management or subsidiary or arrest of senior management or director, whether occurred in India or not, is required to be disclosed to the Stock exchanges.
d. Letter of resignation along with detailed reasons of resignation in case of resignation of key managerial personnel, senior management, compliance officer, or director other than independent director.
e. Unavailability of the Managing Director or CEO to fulfil requirements in a regular manner for more than forty five days in any rolling period of ninety days.
f. Voluntary revision of financial statements or report of the Board of Directors of the listed entity under section 131 of the Companies Act, 2013.
B. Events to be disclosed upon application of guidelines of materiality:
a. Pendency of any litigation/ dispute or outcome which has an impact on the listed entity.
b. Delay or default in the payment of fines, penalties, dues, etc. to any regulatory, statutory, enforcement or judicial authority.
Click here to view the SEBI Circular.
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