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.
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
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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Please feel free to contact the undersigned in case you require any further information/ clarification on the above article.
|Ms. Jaya Yadav||Ms. Trishna Choudhary|
|Jayayadav @ whitespan.in||Trishna @ whitespan.in|