Introduction: SEBI LODR (Second Amendment) Regulations, 2023
The Securities and Exchange Board of India (SEBI) issued the SEBI Listing Obligations and Disclosure Requirements (LODR) (Second Amendment) Regulations, 2023, on June 14, 2023. These regulations, effective from July 14, 2023, bring several noteworthy changes for listed entities.
New Definition of ‘Mainstream Media’
In a significant move, the amendment introduces the definition of ‘Mainstream Media’. This term includes newspapers registered with the Registrar of Newspapers for India, news channels permitted by the Ministry of I&B under the Government of India, and content published under the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. It also covers similarly registered or permitted news platforms in jurisdictions outside India.
Filling up Vacant Positions
The amendment also prescribes a timeframe for filling up vacant Compliance Officer positions— within three months from the date of such vacancy. Similarly, vacancies of MD, CEO, CFO, and other Key Managerial Personnel (KMPs) must be filled within three months from the date of the vacancy.
Regulations on High Value Debt Listed Entities
Regulations 16 -27 of SEBI LODR 2015 will not be legally binding on high-value debt listed entities until March 31, 2024. Such entities must either comply with these regulations or explain the reasons for non-compliance. Post this date, compliance becomes mandatory.
Changes to Director Appointments
From April 1, 2024, the permanence of a director’s seat on a listed company’s board will end. A director’s continuation on the board will be subject to shareholders’ approval at a general meeting at least once in every five years. However, this provision will not apply to directors appointed through court orders, lending arrangements by RBI-regulated financial institutions, or under subscription agreements for debentures issued by the listed entity.
The amendment introduces mandatory quarterly disclosure of details of cybersecurity incidents/breaches or data loss in the Corporate Governance Report. It also introduces quantitative thresholds for determining the materiality of events in Regulation 30. An event is considered material if its value exceeds the lower of:
Events impacting the listed entity, occurring before the notification of these amendments, must also be disclosed to the stock exchange as a material event within 30 days.
Timeline for Disclosures and Verification of Market Rumours
The amendment also dictates specific timelines for the disclosure of material events to the stock exchange. These depend on the nature of the event and whether it originates within the listed entity. Furthermore, top 100 listed entities by market capitalization are required to verify and confirm or deny market rumours from October 1, 2023, and top 250 entities from April 1, 2024.
Agreement Disclosures and Special Rights
The amendment requires the disclosure of agreements among shareholders, promoters, promoter group entities, related parties, directors, KMP, employees of the listed entity or its holding/subsidiary/associate company, to the stock exchange. Any special rights granted to shareholders shall be subject to approval in a general meeting by a special resolution once every five years.
New Reporting Requirements
The amendment requires a listed entity to submit its financial results for the quarter/financial year succeeding the period disclosed in the offer document for the IPO. Additionally, it must submit a certificate regarding the status of payment of interest/dividend or repayment/redemption of principal of non-convertible securities within one working day of it becoming due.
In case of resignation of KMP, senior management, Compliance Officer/director other than an independent director, the letter of resignation, along with detailed reasons, should be disclosed to the stock exchange within seven days from the effective date.
Conclusion: SEBI LODR (Second Amendment) Regulations, 2023, bring about important changes in the governance of listed entities, aiming to increase transparency and accountability. These amendments are bound to have significant implications, which listed entities must carefully review and implement.