Important Compliances and LODR Regulations of Listed Companies

LISTING REGULATIONS
A Bible for Listed Companies

STRUCTURE OF SESSION

♦ Background

♦ Amendments easing Compliance Burden

♦ Amendments enforcing Corporate Governance

♦ Amendments for symmetric info. dissemination

♦ Open Discussion: SEBI Proposed Changes

As a Compliance Officer/ PCS/ Consultant, one needs
to be well-versed with the Listing Regulations

Regulation 3: Applicability

In terms of Regulation 3, the provisions of Listing Regulations are applicable to entities that have listed any of their designated securities on the stock exchange.

New provision added:

Provisions of LODR applicable to the listed entities on the basis of market capitalization criteria shall continue to apply even if they fall below the specified thresholds in the subsequent periods.

Measures to ease Compliance Burden

Regulation 7(3)

Compliance Certificate from RTA and Compliance Officer with Demat facility:

CURRENT PROVISIONS	To be submitted within 1 month from the end of each half of the FY. [i.e., Twice in a FY]
AMENDED PROVISIONS	Listed entities to submit the compliance certificate within 30 days from the end of financial year. [Now, to be submitted, only Once at the end of FY]

Submission of voting results – Reg. 44(3)

Submission of voting results – Reg. 44(3)	As per current provision, voting results are to be submitted within 48 hours from the conclusion of shareholder’s meeting.
As per amended Reg 44(3)	WITHIN 2 WORKING DAYS from the conclusion of shareholder’s meeting

Reg. 40(9): Submission of Certificate from PCS

CURRENT PROVISIONS	Submission of certificate from Practicing Company Secretary within 1 month from the end of each half of FY.
AMENDED PROVISIONS	Listed entities to submit certificate from Practicing Company Secretary within 30 days from the end of FY.

Reg: 27: Corporate Governance Report

CURRENT PROVISIONS	Submission of Corporate Governance Report within 15 days from the end of each quarter.
AMENDED PROVISIONS	Listed entities to submit Corporate Governance Report within 21 days from the end of each quarter.

Reg. 47: Advertisements in Newspapers

Listed entity to publish:

♦ Notice of meeting of the board of directors where financial results shall be discussed – Reg. 47(1)(a);

♦ Statements of Deviation(s) or Variation(s) under Reg. 32 (1) on quarterly basis – Reg. 47(1)(c)

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—Omitted—

Reg 31A: Reclassification of Promoters

STEP 3: Post- Reclassification Conditions- Applicable to Promoter(s) along with

“persons related to promoter(s)”.

i. Shall not hold more than 10% voting rights.

ii. Shall not exercise control over the affairs of such listed entity, directly or indirectly.

iii. Shall not have any special rights through formal / informal arrangements including shareholders agreements.

iv. Shall not be allowed to have any representation on the board of such listed entities (including nominee director)

New concept of persons related to promoter(s) has been introduced, which shall include persons falling under pt. (ii), (iii) and (iv) of the definition of “Promoter Group” i.e., in relation to outgoing promoter, broadly would inter alia include immediate relatives of such promoter, any company or firm in which such promoter or holds 20% or more capital of the capital or profits, as the case may be.

New exceptions added

• Promoter(s) and persons related to the promoter(s) seeking reclassification, together, do not hold more than 1% of the total voting rights in the listed entity;
• Where reclassification is pursuant to a divorce.

Applicability in case of Resolution Plan/ Court Orders

Not applicable if the reclassification is as per the resolution plan approved under section 31 of the Insolvency Code or pursuant to an order of a Regulator under any law.

Requirement of:

• Seeking shareholder’s approval and
• Disclosure w.r.t. receipt of request for reclassification from promoters and minutes of BM of considering such request,

Not applicable if the intent of erstwhile promoters to reclassify has been disclosed in the letter of offer or scheme of arrangement.

Requirement of minimum public shareholding under Reg. 38 not applicable in case of reclassification pursuant to an open offer.

Measures to enforce Corporate Governance

Regulation 15: Applicability of CG Norms

Reg. 17: Board of Directors

Amended Board Composition

Regulations/ Particulars	Headings	Extant Provision	Amended Regulation	Effective From
Regulation 17(1)(a)	Woman Director	Woman Director	Woman Independent Director	By 1-Apr-20 (for Top 1000 Listed Cos.)
Regulation 17(1)(c )	Minimum Directors	Governed by Companies Act, No such Regulation in LODR	Min 6 Directors on Board	By 1-Apr-20 (for top 2000 cos.)
Regulation 17(1B)-	Splitting of Chairperson & MD	Chairperson can be Executive or Non-Executive	Chairperson can be: # Non -executive Director #Not related to/ relative of MD/CEO	Proposed from 01-Apr22 (Applicable to Top 500 Listed Companies)
	Not applicable to the listed entities which do not have any identifiable promoters as per the shareholding pattern filed with stock exchanges.

Cost of Non-Compliance

Amount of Fine	Base to check compliance	Frequency of Review of Non- Compliance
Rs. 5000/- per day	Corporate Governance Report	Quarterly

Practical Issues:

• Compliance done on 1 exchange;
• Lapse on account of Uncertain event;
• Falling in the List of top 1000/2000 at 1 exchange but not on other.

INSTITUTION OF INDEPENDENT DIRECTORS

Board Inter-Lock

COMPANY A Ltd.-listed	COMPANY B Ltd.-listed
Mr. X- Executive Director; Mr. Y- Independent Director; Mrs. Z: Non- Executive, Non-Independent Director	Mr. M- Executive Director; Mr. X- Independent Director; Mrs. O: Non- Executive, Non- Independent Director

Can Mr. M be appointed as a Director in A Ltd in the following capacity:

◊ Independent Director of A Ltd.?

◊ Executive Director in A Ltd.?

Obligations w.r.t. Independent Directors – Reg. 25(3)

CURRENT PROVISIONS	Independent directors to hold at least 1 meeting in a year.
AMENDED PROVISIONS	Independent directors to hold at least 1 meeting in a ‘financial’ year.

BOARD COMMITTEES

 

Reg. 21: Risk Management Committee

ROLE AND RESPONSIBILITY

• Formulate a detailed risk management policy which shall include:
  • Framework for identification of internal and external risks,
  • Measures for risk mitigation,
  • Business continuity plan.
• Ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks;
• Monitor and oversee implementation of the risk management policy;
• Periodically review the risk management policy, at least once in two years;
• Keep the BOD informed about the nature and content of its discussions, recommendations and actions to be taken;
• Appointment, removal and terms of remuneration of the Chief Risk Officer (if any) subject to review by the RMC.
• RMC to coordinate its activities with other committees, in instances where there is any overlap with activities of such committees, as per the framework laid down by the board of directors.

Reg 24: Corporate Governance
w.r.t. Subsidiary Companies

Reg. 24: Subsidiary Company

Disposing of shares by listed entity in its subsidiary – Reg. 24(5)

CURRENT PROVISIONS	Maximum reduction in shareholding of listed entity due to disposing of shares in material subsidiary: Not less 50%
AMENDED PROVISIONS	Maximum reduction in shareholding of listed entity due to disposing of shares in material subsidiary: Not Less than or equal to 50%

REG. 34: DISCLOSURES IN ANNUAL REPORT

Business Responsibility Report

CURRENT PROVISIONS	Submission of Business Responsibility Report by top 1000 listed entities based on market capitalization
AMENDED PROVISIONS	Requirement of submitting BRR for top 1000 listed entities discontinued after FY 2021-22; W.e.f FY 2022–23, top 1000 listed entities based on m-cap to submit a Business Responsibility and Sustainability Report (BRSR) in the format as specified. Voluntarily submission of BRSR in place of BRR by top 1000 entities for FY 2021-22;

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♦ SUSTAINABILITY REPORTING IS AS IMPORTANT AS FINANCIAL REPORTING.

♦ Material ESG risks and opportunities to be included.

Amendments relating to Symmetric Dissemination of Information

Regulation 29- Prior Intimations of Board Meeting

Prior intimation for Bonus Issue	Extant provision:	Amended provision:
	The proposal for declaration of bonus securities where such proposal is communicated to the board of directors of the listed entity as part of the agenda papers.	Omission of words: ‘where such proposal is communicated to the board of directors of the listed entity as part of the agenda papers’.

Reg. 30: Disclosure of Financial Results

CURRENT PROVISIONS	Disclosure of financial results within 30 minutes from the conclusion of the Board Meeting.
AMENDED PROVISIONS	The financial results are to be disclosed within 30 minutes from end of the Board meeting for the day on which such Results have been considered.

Reg. 43A: Dividend Distribution Policy

CURRENT PROVISIONS	Applicable on top 500 listed entities based on market cap.; Disclosure in their annual reports and on their websites.
AMENDED PROVISIONS	Applicable on top 1000 listed entities based on market capitalization; Disclosure on the website of the listed entity and a web-link shall also be provided in their annual reports

Reg. 46: Website (Additional disclosures)

he listed entity to upload the audio/ video recordings and the transcripts within:

• Audio/video calls → promptly available on website for minimum 5 years → within 24 hrs OR next trading day (whichever is earlier)
• Transcripts of such calls → within 5 working days from the conclusion of such calls.

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Voluntary w.e.f. April 01, 2021;

Mandatory w.e.f. April 01, 2022.

Reg. 46: Website

√ If consolidated financial statement of a subsidiary is placed on the website of the listed entity; the requirement of preparing separate financial statement is now relaxed.

√ Secretarial compliance report as per Reg. 24A(2)

√ The policy for determination of materiality of events or information required under Reg. 30(4)(ii)

√ Contact details of KMP authorized for the purpose of determining materiality of an event or information and for the purpose of making disclosures to SEs as under Reg. 30(5)

√ Statements of deviation(s) or variation(s), Dividend Distribution Policy and Annual Return.

SCHEDULE OF COMPLIANCE
UNDER LISTING REGULATIONS, 2015

Regulation	Disclosure Pertaining to	Where to Disclose	Due Date
QUARTERLY COMPLIANCES
Reg. 27(2):	Corporate Governance Report	Stock Exchange(s); To be signed by Compliance Officer/ CEO	Within 21 days from the end of qtr
Reg. 13(3):	Statement of Investors Complaints	Stock Exchange(s)	Within 21 days from the end of qtr
Reg. 31(1)(b):	Shareholding Pattern	Stock Exchange(s); Company’s Website	Within 21 days from the end of qtr
Update: 1. The listed entities are required to disclose the significant beneficial ownership (SBO) in the shareholding pattern; 2. Promoters & Promoter Group are to be shown separately in the SHP. 3. PAN based consolidation mandatory for Promoter as well as Public category. 4. No Physical transfers w.e.f., 01.04.2019.
Reg. 76: SEBI (Depositories and Participants) Regulations, 2018	Reconciliation of Share Capital Audit Report	Stock Exchange(s) XBRL Mode	Within 30 days from the end of Qtr
Regulation 33 read with Regulations 29 and 47: Financial Results
Reg. 29(1):	Intimation of Board Meeting	Stock Exchanges; Company’s Website	At least 5 Clear days in advance
Reg 47(1):	Publication of notice of Board meeting	English National Daily and other in Vernacular Language of the region where registered office is situated; Company’s Website	OMITTED
Reg 33:	Declaration of Results	Stock Exchanges; PDF Results: within 30 minutes of conclusion of meeting Company’s Website; PDF as well as XBRL filing	Within 45 days from the end of quarter i.e., by August 14, 2019 XBRL: within 24 hours from uploading of Results in PDF.
Reg 47(3):	Publication of Results in Prescribed Format	Same as above	Within 48 hours of conclusion of the Board Meeting
YEARLY COMPLIANCES
Reg. 34	Annual Report	Stock Exchanges; Website	Within 1 day of sending it to the shareholders (w.e.f., FY ended March 31, 2019)
Reg. 33	Audited Financial Results + Audit Report + Statement of unmodified opinion/ Statement of Impact of Qualifications	Stock Exchanges; Website	Within 60 Days from the end of Financial Year
Note: Closure of Trading Window	Purpose of Closure: Declaration of financial results Closing of Trading Window: From the end of every quarter i.e., from July 01, 2019 Opening of Trading Window: After 48 hours of declaration of financial results.

Non-Compliance

Regulation	Fine
Regulation 46 Non-compliance with norms pertaining to functional website	Rs. 10,000 per instance
Regulation 34 Non-submission of the Annual Report	Rs. 2,000 per day
Regulation 33 Non-submission of the financial results	Rs. 5,000 per day

ONLY This is the cost of Non- Compliance!?

NO

That was only the

Action of FIRST RESORT !!

In Case of Continued Non- Compliance

Stock Exchanges have been granted the power to

→ Suspension in Trading of Securities

→ Freezing of Entire Promoter Shareholding

→ Dissemination of such information by stock exchange in Public Domain

→ Shifting securities to “Z” category- ‘Tade to Trade’ Category

→ Trading in shares of the Listed Entity is under ‘suspension and trade to trade basis’ and trading shall stop completely if the Listed Entity remains not compliant for six months

OPEN DISCUSSION

Consultation Paper on Regulatory framework of
Promoter & Promoter Group

SHIFTING FROM CONCEPT OF ‘PROMOTER’ TO CONCEPT OF ‘PERSON IN CONTROL

◊ NEED FOR SHIFTING TO THE CONCEPT OF ‘PERSON IN CONTROL

I. Changing in the nature of ownership of Listed Entities

II. Increased focus on quality of Board and management

Consultation Paper on Regulatory Provisions
Related to Independent Directors

Current Provisions and Proposed Changes

(a) Eligibility Conditions for appointment as an Independent Director

Current Provisions	Proposed changes:
A person who has been: ✓ Employee, ✓ KMP or ✓ His/her relatives have been KMPs Of the Listed entity, its holding/ subsidiary/ associate company cannot be appointed as IDs.	A person who has been: ✓ Employee, ✓ KMP or ✓ Relative of such KMP Of the companies forming a part of the Promoter Group should also be excluded from acting as an ID.

(b) Cooling off period for persons to be eligible for acting as an Independent Director

Current Provisions	Proposed changes:
1. Cooling-off period of 3 years in case of Exemployees / KMP or relative of KMP of such company, its holding/ subsidiary/ associate company. 2. Cooling-off period of 2 years in case of a material pecuniary relationship between a person or his relative and the listed entity or its holding/ subsidiary/ associate company	KMPs or employees of promoter group companies & their relatives, cannot be appointed as IDs in the company, unless there has been a cooling-off period of 3 years. 3 Years – Cooling off Period in case of a material pecuniary relationship

Appointment and re-appointment process of Independent Directors

Current Provisions

Proposed changes:

As per the current provisions, independent directors are: ➢ Recommended by the Nomination and Remuneration Committee, ➢ Appointed by the Board of Directors, ➢ And finally, confirmed by approval of majority of shareholders.

Appointment/re-appointment to be subject to “dual approval” taken through a single voting process: 1. Approval of majority of all shareholders (ordinary resolution in case of appointment and special resolution in case of re-appointment), And 2. Approval of majority of minority shareholders. If either of the tests fails, the appointment/ re-appointment is rejected. In such case, the listed entity may: ➢ Propose a new candidate for appointment/re-appointment, or ➢ Propose the same candidate for second voting: After a cooling off period of 90 days but before 120 days (without a separate requirement of approval by ‘majority of the minority’). Such approval shall be sought through a special resolution. Notice to shareholders shall contain the reasons for proposing the same person despite being rejected in the first take.

Prior approval of shareholders for appointment of Independent Directors

Current Provisions	Proposed changes:
Companies appoint IDs as additional directors, subject to approval of shareholders in next general meeting	Appointment of IDs only with prior approval of shareholders in the General meeting. In case of casual vacancy due to resignation/removal/death/failure to get reappointed, approval of shareholders to be taken within 3 months from the date of such casual vacancy.

Removal of Independent Directors

Current Provisions

Proposed changes:

LODR: NO PROVISION CA 13: An ID can be removed through: ➢ Ordinary resolution in the first term, and ➢ Special resolution in case of a second term, after giving reasonable opportunity of being heard.

Removal of ID to be subject to “dual approval” taken through a single voting process: 1. Approval of majority of all shareholders, And 2. Approval of majority of minority shareholders. If either of the thresholds are not met, the removal is rejected. In such case, the listed entity may: ➢ Propose removal of such candidate through a second voting After a cooling off period of 90 days but before 120 days (without a separate requirement of approval by ‘majority of the minority’). Such removal shall be sought through a special resolution Notice to shareholders shall contain the reasons for proposing the same person despite not getting shareholders’ approval in the first take.

Removal of Independent Directors

Current Provisions	Proposed changes:
Resigning ID to disclose reasons of his resignation along with a confirmation that there is no other material reason for resignation other than those already provided.	Entire resignation letter of the ID to be disclosed along with list of their present directorships and memberships in board committees. Mandatory cooling off period of 1 year if the reason for resignation is preoccupation, other commitments or personal reasons. Cooling off period of 1 year before an ID can transition from an ID to a whole time Director.

(a) Enhancing and bringing in more transparency in the role of Nomination and Remuneration Committee

Proposed changes: to prescribe disclosures regarding the appointment process

Process for shortlisting of candidates:

1. For each appointment, NRC shall:

• evaluate the balance of skills, knowledge and experience on the board;
• On the basis on such evaluation, prepare description of roles and capabilities required for the particular appointment.

2. Proposed candidate should have the capabilities identified in this description.

3. For the purpose of identifying a suitable candidate, NRC may:

• Use services of external agencies,
• Consider candidates from a wide range of backgrounds, having due regard to diversity
• Consider time commitments of the appointees.

(a) Disclosures to be made to shareholders: Notice to shareholders for appointment of directors shall include:

• Skills and capabilities required for appointment and how the criteria is met by proposed candidate,
• Channels used for searching the proposed candidate.

(b) Modified Composition of Nomination and Remuneration Committee

Current Provisions	Proposed changes:
➢ Non-Executive Directors with at least 50% to be IDs.	➢ NRC to have at least 2/3 rd IDs.

Composition of Audit Committee

Current Provisions	Proposed changes:
2/3 rd should be Independent Directors.	2/3 rd Independent Directors, and 1/3 rd Non-executive Directors who are not related to Promoters, including nominee director.

Disclaimer: The entire contents of this document have been prepared based on the relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

(Submitted by CS Akanksha Aggarwal and for more details contact at akku0994@gmail.com)