Analysis of SEBI (LODR) (Fifth Amendment) Regulations, 2021

the existing Explanation (1) shall be substituted with the following, namely,-

“Explanation (1) – For the purpose of this chapter, if the listed entity has listed its non-convertible redeemable preference shares, perpetual non-cumulative preference shares or instruments of nature similar to perpetual non-cumulative preference shares, the reference to “interest” in this chapter shall be read as “dividend”.”

d. the existing Explanation (2) shall be substituted with the following, namely,-

“Explanation (2) – For the purpose of this chapter, “default” shall mean non-payment of interest/dividend or principal amount in full on the pre-agreed date and shall be recognized at the first instance of delay in servicing of any interest/dividend or principal amount.

“(1) The listed entity shall give prior intimation to the stock exchange of at least two working days in advance, excluding the date of the intimation and the date  of the meeting of the board of directors, about the Board meeting in which any of the following proposals is to be considered:

(a) an alteration in the form or nature of non-convertible securities that are listed on the stock exchange or in the rights or privileges of the holders thereof;

(b) an alteration in the date of the interest/ dividend/ redemption payment of non-convertible securities;

(c) financial results viz. quarterly or annual, as the case may be;

(d) fund raising by way of issuance of non-convertible securities; or

(e) any matter affecting the rights or interests of holders of non-convertible securities.”

b. sub-regulation (2) shall be substituted with the following, namely, –

“(2) The listed entity shall also intimate the stock exchange not later than the date of commencement of dispatch of notices, in case of:

(a) any annual general meeting or extraordinary general meeting that is proposed to be held for obtaining shareholder approval for the proposals at clauses (c) and (d) under sub-regulation (1) of this regulation;

(b) any meeting of the holders of non-convertible securities in relation to the proposal at clause (e) of sub-regulation (1) of this regulation.”

c. sub-regulation (3) shall be omitted.

Sub-regulation (3) omitted.

Disclosure of information having bearing on performance/ operation of listed entity and/or price sensitive information

Explanation – The expression ‘promptly inform’, shall imply that the stock exchange shall be informed as soon as reasonably possible as but not later than twenty-four hours from the date of occurrence of the event or receipt of information. In case the disclosure is made after twenty-four hours of the date of occurrence of the event or receipt of information, the listed entity shall, along with such disclosures provide an explanation for the delay.

after sub-regulation (2), the following new sub-regulation shall be inserted, namely, –

“(3) The listed entity shall disclose on its website, all such events or information which have been disclosed to the stock exchange(s) under this regulation and such disclosures shall be hosted on the website of the listed entity for a minimum period of five years and thereafter as per the archival policy of the listed entity, as disclosed on its website.

Provided that in case of entities which have listed their equity shares and debt securities, a copy of the financial results submitted to stock exchanges shall be provided to Debenture Trustees on the same day the information is submitted to stock exchanges.

Provided that in case of entities which have listed their debt securities, a copy of the financial results submitted to stock exchanges shall also be provided to Debenture Trustees on the same day the information is submitted to stock exchanges.

Provided that if the listed entity intimates in advance to the stock exchange(s) that it shall submit to the stock exchange(s) its annual audited results within sixty days from the end of the financial year, un-audited financial results for the last half year accompanied by limited review report by the auditors need not be submitted to stock exchange(s).

Provided that in case of issuers whose accounts are audited by the Comptroller and Auditor General of India, the report shall be provided by any practicing Chartered Accountant.

Provided that issuers,  who are being audited by the Comptroller and Auditor General of India, shall adopt the following two step process for disclosure of the annual audited financial results:

(i) The first level audit shall be carried out by the auditor appointed by the Comptroller and Auditor General of India, who shall audit the financials of the listed entity and such financial results shall be submitted to the Stock Exchange(s) within sixty days from the end of the financial year.

(ii) After the completion of audit by the Comptroller and Auditor General of India, the financial results shall be submitted to the Stock exchange(s) within nine months from the end of the financial year.

Further in case of entities whose audit is conducted by Comptroller and Auditor General of India shall in addition to above are also required to submit the results after the completion of audit by the Comptroller and Auditor General of India, the financial results shall be submitted to the Stock exchange within nine months from the end of the financial year.

Financial Results.

Financial Results.

(a) ***

(b) ***

(c) debt-equity ratio;

(d) ***

(e) ***

(f) debt service coverage ratio;

(g) interest service coverage ratio;

(h) outstanding redeemable preference shares (quantity and value);

(i) capital redemption reserve/ debenture redemption reserve;

(j) net worth;

(k) net profit after tax;

(l) earnings per share:

Following ratios are further added to clause (4)

(m) current ratio;

(n) long term debt to working capital;

(o) bad debts to Account receivable ratio;

(p) current liability ratio;

(q) total debts to total assets;

(r) debtors turnover;

(s) inventory turnover;

(t) operating margin (%);

(u) net profit margin (%);

(v) sector specific equivalent ratios, as applicable.

Financial Results.

Financial Results.

(a) profit for the half year and cumulative profit for the year;

Financial Results.

(7) The listed entity shall within forty-five days from the end of every quarter submit to the stock exchange, a statement indicating the utilization of issue proceeds of non-convertible securities, which shall be continued to be given till such time the issue proceeds have been fully utilised or the purpose for which these proceeds were raised has been achieved.

Financial Results.

(7A) In case of any material deviation in the use of proceeds as compared to the objects of the issue, the same shall be indicated in the format as specified by the Board.

Financial Results.

(a) a copy of the annual report sent to the shareholders along with the notice of the annual general meeting, not later than the date of commencement of dispatch to its shareholders; and

(b) in the event of any changes to the annual report, the revised copy along with the details and explanation for the changes, not later than 48 hours after the annual general meeting.

after sub-regulation (2), a new sub-regulation shall be inserted, namely, –

(3) The listed entity shall disclose the asset cover available in case of non-convertible debt securities along with its financial results in the format as specified by the Board.

Credit Rating

b. in sub-regulation (1), in clause (d), the words and symbol “half-yearly financial results” shall be substituted with the words “financial results, in the manner and format as specified by the Board”.

c. in the proviso after clause (d), the words “half yearly” shall be substituted with the word “this”.

d. the following new sub-regulation shall be inserted before sub-regulation (2), namely, –

“(1A) The listed entity shall also disclose to the Debenture Trustee at the same time as it has intimated to the stock exchange, all material events and/or information as disclosed under regulation 51of these regulations in so far as it relates to the interest, principal, issue and terms of non-convertible debt securities, rating, creation of charge on the assets, notices, resolutions and meetings of holders of non-convertible debt securities.

Intimations/ other submissions to stock exchange(s)

after sub-regulation (3), the following new sub-regulations shall be inserted, namely, –

(4) The listed entity shall within five working days prior to the beginning of the quarter provide details for all the non-convertible securities for which interest/dividend/ principal obligations shall be payable during the quarter.

(5) The listed entity shall within seven working days from the end of the quarter provide:

(a) a certificate confirming the payment of interest/dividend/ principal obligations for non-convertible securities which were due in that quarter; and

(b) the details of all unpaid interest/dividend/ principal obligations in relation to non-convertible securities at the end of the quarter.

Terms of non convertible debt securities and non convertible redeemable preference shares

61A. (1) The listed entity shall not forfeit unclaimed interest/dividend/ redemption amount.

(2) Where the interest/dividend/ redemption amount has not been claimed within thirty days from the due date of interest/ dividend / redemption payment, a listed entity shall within seven days from the date of expiry of the said period of thirty days, transfer the amount to an escrow account to be opened by the listed entity in any scheduled bank:

Provided that the interest/ dividend/ redemption amount that is unclaimed and outstanding for a period of less than seven years as on the date of notification of this sub-regulation shall be transferred to the escrow account within thirty days, where it shall remain for the intervening period up to seven years.

(3) Any amount transferred to the escrow account that remains unclaimed for seven years shall be transferred to the ‘Investor Education and Protection Fund’ constituted in terms of section 125 of the Companies Act, 2013.

(a) details of its business;

(b) financial information including complete copy of the annual report including balance sheet, profit and loss account, directors report etc;

(c) contact information of the designated officials of the listed entity who are responsible for assisting and handling investor grievances;

(d) email address for grievance redressal and other relevant details;

(e) name of the debenture trustees with full contact details;

(f) the information, report, notices, call letters, circulars, proceedings, etc concerning non-convertible redeemable preference shares or non convertible debt securities;

(g) all information and reports including compliance reports filed by the listed entity;

(h) information with respect to the following events:

(i) default by issuer to pay interest on or redemption amount;

(ii) failure to create a charge on the assets;

(iii) revision of rating assigned to the non convertible debt securities:

“(aa) composition of the Board;

Existing sub clause (b) replaced with following:-

(b) financial information including:

(i) notice of meeting of the board of directors where financial results shall be discussed;

(ii) financial results, on the conclusion of the meeting of the board of directors where the financial results were approved;

iii) complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance report etc;

Existing sub clause (h)(iii) related to credit rating deleted and new sub clauses added after sub clause (h):-

(i) all credit ratings obtained by the entity for all its listed non-convertible securities, updated immediately upon any revision in the ratings;

(j) statements of deviation(s) or variation(s) as specified in sub-regulation (7) and sub-regulation (7A) of regulation 52 of these regulations;

(k) annual return as provided under section 92 of the Companies Act, 2013 and the rules made thereunder.

Website

(a) composition of the various committees of the board of directors;

(b) terms and conditions of appointment of independent directors;

(c) code of conduct of the board of directors and senior management personnel;

(d) details of establishment of vigil mechanism/ whistle blower policy;

(e) criteria of making payments to non-executive directors, if the same has not been disclosed in the annual report;

(f) secretarial compliance report as per sub-regulation (2) of regulation 24A of these regulations;

(g) policy on dealing with related party transactions;

(h) policy for determining ‘material’ subsidiaries;

(i) details of familiarization programmes imparted to independent directors including the following details:-

(i)   number of programmes attended by the independent directors (during the year and on a cumulative basis till date),

(ii)   number of hours spent by the independent directors in such programmes (during the year and on cumulative basis till date), and

(iii)  other relevant details.

OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS SPECIFIED SECURITIES

OBLIGATIONS OF A  LISTED ENTITY WHICH HAS LISTED ITS SPECIFIED SECURITIES AND NON-CONVERTIBLE DEBT SECURITIES

These Regulations 15 to 27 shall apply to a listed entity which has listed its non-convertible debt securities and has an outstanding value of listed nonconvertible debt securities of Rs 500 Crore and above i.e. ‘high value debt listed entity’. These Regulations relates to the following:-

Regulation-15 Applicability

Regulation-16 Definitions.

Regulation-17 Board of Directors.

Regulation-18 Audit Committee.

Regulation-19 Nomination and remuneration  committee.

Regulation-20 Stakeholders  Relationship    Committee.

Regulation-21 Risk Management Committee.

Regulation-22 Vigil mechanism.

Regulation-23 Related party transactions.

Regulation-24 Corporate governance requirements with respect to subsidiary of listed entity.

Regulation-25 Obligations with respect to independent directors.

Regulation-26 Obligations with respect to employees including senior management, key managerial persons, directors and promoters.

Regulation- 27 Other Corporate Governance requirements.

The provisions of Regulation 15 to 27 of this chapter shall also apply to a listed entity which has listed its non-convertible debt securities and has an outstanding value of listed non-convertible debt securities of Rs 500 Crore and above. In case an entity that has listed its non-convertible debt securities triggers the specified threshold of Rs 500 Crore during the course of the year, it shall ensure compliance with these provisions within six months from the date of such trigger.

Further these provisions shall be applicable to a ‘high value debt listed entity’ on a ‘comply or explain’ basis until March 31, 2023 and on a mandatory basis thereafter.

The ‘high value debt listed entities’ on the date of notification of this amendment would be determined on basis of value of principal outstanding of listed debt securities as on March 31, 2021.

‘Comply or explain’ shall mean that the entity shall endeavour to comply with the provisions and achieve full compliance by March 31, 2023. In case the entity is not able to achieve full compliance with the provisions, till such time, it shall explain the reasons for such non-compliance/ partial compliance and the steps initiated to achieve full compliance in the quarterly compliance report filed under Regulation 27(2) (a).

Mandatory w.e.f. 31st March, 2023.

Comply or explain shall mean –

a.   Comply with the requirements within 31st March, 2023

b. In case of non-compliance/partial compliance, explain reasons for same along with steps initiated to ensure compliance.

– to be reported in the quarterly compliance report filed under Reg 27