Advisory on disclosure of material impact of COVID–19 on listed entities

Advisory on disclosure of material impact of COVID–19 pandemic on listed entities under SEBI (LODR) Regulations, 2015

In view of the COVID 19 Pandemic, SEBI has granted several relaxations to the listed entities in terms of timelines for filing of various reports/disclosures under LODR Regulations.

As it is important for investors and stakeholders of a listed entity that they are made aware of all available information about the impact of these events on the company and its operations and that such information is communicated in a timely and cogent manner to its investors and stakeholders.

Section I – Existing provisions under the SEBI (LODR) Regulation, 2015 which require listed entities to disclose material events which have a bearing on its performance / operations.

A.  Regulation 30(3) requires listed entities to make  disclosures  of events  specified  in Para  B of Part A of Schedule  III of LODR,  based on  application of the  guidelines  for  Clause 6  of  Para  B  of  Part  A  of  Schedule  III  of  LODR specifies  events such as “Disruption  of operations  of any one or more units or division of the  listed  entity  due  to natural  calamity  (earthquake,  flood,  fire etc.),  force  majeure or events such as strikes,  lockouts etc.” that shall be disclosed upon application  of the guidelines  for materiality  referred in Regulation  30(4).

Regulation 30(4) deals with the criteria for determination of   materiality of events/ information and the requirement to frame a policy for determination of materiality, based on criteria specified in this sub-regulation, duly approved by its board of directors, which shall be disclosed on its website.

B.  SEBI Circular No. CIR/CFD/CMD/4/2015 dated September 09, 2015

Vide above mentioned circular, SEBI provided further guidance to  the  listed  entities  on such  disclosures. Annexure  I to the  circular, specifically, provides the  details  to  be  disclosed  in  cases  of  disruptions  of  operations due to natural calamity,  force majeure  and other events.

Please find below the link for SEBI Circular No. CIR/CFD/CMD/4/2015 dated September 09, 2015

https://taxguru.in/sebi/continuous-disclosure-requirements-listed-entities.html

C. Regulation 51(1) of LODR requires prompt dissemination to  the stock  exchange(s)  of all information  having  bearing  on  the performance/operation of  the  listed  entity,  price  sensitive  information  or  any  action that  shall  affect  payment  of  interest  or  As  per  Clause  16  of  Part  B  of Schedule  III  read  with  Regulation  51(2)  of  the  LODR,  a  listed  entity  shall  promptly inform  to  the  stock  exchange(s)  of  any  other  information  having  bearing  on  the operation/performance  of the listed entity.

Section II-Additional Requirements as per SEBI Circular no. SEBI/HO/CFD/CMD1/CIR/P/2020/84 dated May 20, 2020

In view of the impact of the pandemic, including that on financial condition and results of operations, future operations, capital and financial resources, liquidity, assets, internal financial control over financial reporting and disclosure controls and procedures, demand for products/services etc., all listed entities should endeavour to ensure that all investors have access to timely, adequate and updated information.

Accordingly, SEBI vide its circular no. SEBI/HO/CFD/CMD1/CIR/P/2020/84  dated May 20, 2020 has advised all listed entities:

A.   To evaluate the impact of the CoVID-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible and disseminate the same. An illustrative list of information that listed entities may consider disclosing, subject to the application of materiality, is given below:

An illustrative list  of information that   listed  entities   may consider   disclosing,   subject  to  the   application   of materiality, is given below:

1. Impact of the CoVID-19 pandemic on the business;

2. Ability to  maintain  operations including  the  factories/units/office  spaces functioning and closed down;

3. Schedule, if any, for restarting  the operations;

4. Steps taken to ensure smooth functioning of operations;

5. Estimation of the future impact of CoVID-19  on its operations;

6. Details of impact of CoVID-19 on listed entity’s-capital and financial resources; profit ability; liquidity position; ability to service debt and other financing arrangements; assets ; internal financial reporting and control; supply chain ; demand for its products/services;

7. Existing contracts/agreements where  non-fulfilment  of  the  obligations  by  any  party will have significant impact on the listed entity’s business;

8. Other relevant material updates about the listed entity’s business

The above list is only illustrative and not exhaustive. Further, to have continuous information about the impact of CoVID-19 on operations, listed entities may provide regular updates, as and when there are material developments.

B.  Disclosure in Financial Statement

While submitting financial statements under Regulation 33 (Financial results) of the LODR, listed entities may specify/include the impact of the CoVID-19 pandemic on their financial statements, to the extent possible.

C.  No Selective Disclosures

When  listed  entities  disclose  material  information  related  to  the  impact  of  CoVID-19,  they should   not  resort to  selective   disclosures, keeping   in  mind   the  principles   governing disclosures  and  obligations  of  a  listed  entity  as  prescribed  in LODR Regulations, more specifically, having  regard  to the  requirements  of Regulation  4(2)(e) of  the  LODR on disclosure and transparency. Depending  on circumstances peculiar to a listed entity and on account  of  passage  of  time,  the  listed  entity  shall  revisit,  refresh,  or  update its previous disclosures.

Regulation 4(2)( e)

The listed entity which has listed its specified securities shall comply with the corporate governance provisions as specified in chapter IV which shall be implemented in a manner so as to achieve the objectives of the principle of disclosure and transparency.

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