The Companies which are listed on stock exchanges has to mandatorily comply with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2018 or SEBI (LODR). These companies needs to comply with the Quarterly/half yearly/annual and general compliances under SEBI Listing Regulations (LODR), which are as follows:

QUARTERLY COMPLIANCES:

Regulation 13(3): Submission of statement giving number of investor complaints at the beginning, received, disposed off and remaining unsolved during the quarter within 21 days of end of each quarter.

Regulation 31: Submission of shareholding pattern within 21 days of end of each quarter.

Regulation 33: within 45 days of end of each quarter submission of unaudited quarterly results along with limited review report or where audited financials are being submitted, the same has to be submitted within 60 days of close of financial year.

Regulation 27(2): Submission of corporate governance report within 15 days of end of each quarter.

Compliance

Note: Applicable only to listed Companies whose paid up equity and net worth exceeds ten crores and twenty five crores respectively.

 HALF YEARLY COMPLIANCES:

Regulation 7(3): Submission of compliance certificate signed by the share transfer agent and compliance officer within 1 month of end of each half financial year.

Regulation 40(9): Submission of certificate from practicing company secretary within 1 month of end of each half financial year.

 ANNUAL COMPLIANCES:

Regulation 14: Fees and other charges to be paid to the recognized stock exchange(s) within one month from the end of financial year.

Regulation 24A: Submission of Annual Secretarial Compliance Report w.r.t. compliances of SEBI Regulations, deviations and actions taken thereof within 60 days of end of financial year.

Regulation 33 (3) (d): Financial Results alongwith Auditor’s Report within 60 days from the end of the financial year.

Regulation 34: Submission of Annual Report within 21 working days of it being approved and adopted.

Regulation 44: Submission of voting results within 48 hours of conclusion of general meeting.

EVENT BASED COMPLIANCE:

Regulation 7(5): Intimation of appointment of Share Transfer Agent within 7 days of Agreement with RTA

Regulation 28 (1): In-principle approval of recognized stock exchange(s) before issuing securities.

Regulation 29 (2) (b) to (f) : Atleast two working days in advance, excluding the date of the intimation and date of the meeting, Prior intimation of Board meeting for Buyback, Dividend, Raising of Funds, Voluntary Delisting etc.,

Regulation 29 (2) (a): Atleast five days in advance (excluding the date of the intimation and date of the meeting), Prior intimation of Board meeting for Financial Results.

Regulation 29(3): Atleast eleven working days in advance, Prior intimation of Board Meeting for alteration in nature of securities etc.

Regulation 30 (6): Disclose to stock exchange(s) of all events, as specified in Part A of Schedule III, or information as soon as reasonably possible and not later than twenty four hours from the occurrence of event or information.

Regulation 37(2): Draft Scheme of arrangement, Obtain observation letter or No-objection letter from the stock exchange(s) before filing the scheme with any court or tribunal.

Regulation 39(3): Loss of share certificates and issue of the duplicate certificates, send Intimation within two days of getting information.

Regulation 6: Submission of Annual Report within 21 working days of it being approved and adopted.

Regulation 51: (i) Listed entities shall make disclosure of any default on loans, including revolving facilities like cash credit, from banks / financial institutions which continues beyond 30 days. Such disclosure shall be made promptly, but not later than 24 hours from the 30th day of such default.

(ii) For unlisted debt securities i.e. NCDs and NCRPS, the disclosure shall be made promptly but not later than 24 hours from the occurrence of the default.

Additionally, a listed entity is required to report within seven days from the end of the quarter in case there is any outstanding amount in following cases as on the last date of any quarter:

-Any loan including revolving facilities like cash credit from banks/financial institutions where the default continues beyond 30 days or

-There is any outstanding debt security under default.

AFTER INSOLVENCY AND BANKRUPTCY CODE, 2016 (IBC) CAME INTO FORCE:

After the introduction of the Insolvency and Bankruptcy Code, 2016 (IBC), Corporate Debtor, Resolution professionals were facing several issues, this involves meeting various statutory compliance requirements for which the management of the corporate debtor was responsible prior to commencement of the Corporate Insolvency Resolution Process (CIRP) such as filing of financial statements, maintaining board’s reports, appointment of auditor, etc. It may also involve informing the Registrar of Companies that a corporate debtor is going through a CIRP.

Corporate Insolvency Resolution Process (“CIRP”) is the process for resolution of insolvency of a corporate debtor in accordance with the provisions of IBC. Where the corporate debtor is a listed entity, the applicable regulatory framework under various SEBI Regulations may have to be suitably modified to facilitate insolvency resolution while at the same time ensuring that the interests of investors in securities of such corporate debtors are protected.

The Insolvency and Bankruptcy Board of India (“IBBI”) has, inter alia, clarified vide circular dated January 03, 2018 that a corporate person undergoing insolvency resolution process under IBC needs to comply with provisions of the applicable laws (Acts, Rules and Regulations, Circulars, Guidelines, Orders, Directions, etc.) during such process, unless the provision is specifically exempted by the competent authority or becomes inapplicable by operation of law for the corporate person. IBBI has further directed that while acting as an Interim Resolution Professional, a Resolution Professional, or a Liquidator for a corporate person under the Code, an insolvency professional shall exercise reasonable care and diligence and take all necessary steps to ensure that the corporate person undergoing any process under IBC complies with the applicable laws.

Considering that there is a fundamental change in the management and governance of a listed entity during a CIRP as well as pursuant to the approval of a resolution plan, SEBI and other concerned authorities came up with the followings notification, which are as follows:

On August 14, 2017 SEBI has come up with the Notification by amending the regulation of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

These regulations may be called the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2017.

In the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, in regulation 70:

(i) In sub-regulation (1), in clause (c), after the words and figure “Sick Industrial Companies (Special Provisions) Act, 1985 or” and before the words “the Tribunal”, the words “the resolution plan approved by” shall be inserted.

(ii) ……………………………………

 

On March 28, 2018, SEBI issued a discussion paper wherein proposals were made for further amending certain SEBI Regulations.

SEBI has issued 4 (four) notifications amending the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”), the SEBI (Delisting of Equity Shares) Regulations, 2009 (“Delisting Regulations”), the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) and the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009 (“ICDR Regulations”) which was introduced through notifications dated 31 May, 2018 effective from 01 June, 2018.

This update discusses the changes that have been introduced in the abovementioned regulations.

  • TAKEOVER REGULATIONS:

These Regulations may be called the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2018:

(i). In regulation 3, in sub-regulation (2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, after the proviso and before the explanation to sub-regulation (2), the following proviso shall be inserted, namely,-

“Provided further that, acquisition pursuant to a resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 shall be exempt from the obligation under the proviso to the sub regulation (2) of regulation 3”.

Earlier provisions of the Takeover Regulations (proviso to regulation 3(2)), prohibits an acquirer from acquiring or entering into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding i.e. 75% (seventy five percent).

Pursuant to the notification dated May 31, 2018, the Takeover Regulations have been amended to state that an acquisition of shares by an acquirer, pursuant to a resolution plan under section 31 of IBC would be exempted from the obligation under the proviso to regulation 3(2) of the Takeover Regulations.

In light of the aforesaid amendment, henceforth, a resolution plan can provide that a resolution applicant proposing to acquire a listed company undergoing CIRP can acquire more than 75% (seventy five percent) of the share capital of the company, thereby reducing the shareholding of the public shareholders to below 25% (twenty five percent).

With this amendment, further consolidation beyond 75% is now permitted. For example, Tata Steel, which received only 72% in exchange for its initial investment into Bhushan Steel, can now invest the additional INR 45 billion contemplated under its IBC resolution plan and take its holding to 98%.

  • DILISTING REGULATIONS:

These Regulations may be called the Securities and Exchange Board of India (Delisting of Equity Shares) (Amendment) Regulations, 2018.

(i). In regulation 3, after sub-regulation (2), the following sub-regulation (3) was inserted. The amendment under the said regulations exempts listed entities whose resolution plan has been approved under the IBC from complying with procedures, if the resolution plan:

  1. Lays down any specific procedure to complete the delisting of such shares; or
  2. Provides an exit option to existing public shareholders at a price specified therein.

It further provides that exit to shareholders of such listed entities should be at a price not less than the liquidation value, as determined under regulation 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, after paying off dues in the order of priority, as defined under section 53 of the IBC.

Provided further that, if the existing promoters or any other shareholders are proposed to be provided an opportunity to exit under the resolution plan at a price higher than the price determined in terms of the above proviso, the existing public shareholders shall also be provided an exit opportunity at a price which shall not be less than the price, by whatever name called, at which such promoters or other shareholders, directly or indirectly, are provided exit:

Provided also that, the details of delisting of such shares along with the justification for exit price in respect of delisting proposed shall be disclosed to the recognized stock exchanges within one day of resolution plan being approved under section 31 of the Insolvency and Bankruptcy Code, 2016.

An amendment has been made to the effect that the shares of the company which have been delisted as per the above can re-apply for listing without any tenure restriction.

(ii). In regulation 30, after sub-regulation (2) and before sub-regulation (3), the following sub-regulation was inserted, namely, –

“(2A) Notwithstanding anything contained in sub-regulation (1), an application for listing of delisted equity shares may be made in respect of a company which has undergone corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

  • LODR REGULATIONS

These regulations may be called the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2018.

The LODR Amendment requires the following disclosures to be made with respect to the CIRP of a listed entity (corporate debtor) under the IBC:

(i). Filing of application by a corporate applicant for initiation of CIRP, also specifying the amount of default;

(ii). Filing of application by financial creditors for initiation of CIRP against the corporate debtor, also specifying the amount of default;

(iii). Admission of application by the NCLT, along with amount of default or rejection or withdrawal, as applicable;

(iv). Public announcement made pursuant to order passed by the NCLT under section 13 of the IBC;

(v). List of creditors as required to be displayed by the corporate debtor under regulation 13(2)(c) of the CIRP Regulations;

(vi). Appointment/ replacement of the resolution professional;

(vii). Prior or post-facto intimation of the meetings of committee of creditors;

(viii). Brief particulars of invitation of resolution plans under section 25(2)(h) of the IBC in the form specified under regulation 36A(5) of the CIRP Regulations;

(ix). Number of resolution plans received by resolution professional;

(x). Filing of resolution plan with the NCLT;

(xi). Approval of resolution plan by the NCLT or rejection, if applicable;

(xii). Salient features, not involving commercial secrets, of the resolution plan approved by the NCLT; and

(xiii). Any other material information not involving commercial secrets.

Listed companies undergoing the CIRP do not have to comply with the provisions of the LODR Regulations dealing with the composition and roles and responsibilities of the board of directors and board committees. These roles and responsibilities must now be fulfilled by the resolution professional. This is line with the IBC’s general scheme of entrusting the corporate debtor’s management and governance function to the resolution professional and committee of creditors, but the resolution professional will need to be careful in interpreting and applying some of the provisions of the LODR Regulations (e.g. certain board responsibilities involve seeking shareholder approval, but this would be a redundant requirement in an IBC context).

  • Shareholder approval requirements will not apply in relation to the following matters: (i) approval of material related party transactions; (ii) cessation of majority shareholding in, or exercise of control over, a material subsidiary; and (iii) transfer or lease of more than 20% of a material subsidiary’s assets (on an aggregate basis, for a given financial year).
  • The stock exchange pre-clearance requirement will not apply to any schemes of arrangement under an IBC resolution plan. This will be a hugely welcome step for acquirers, as the time taken to obtain pre-clearances could have made the 270 day IBC deadline unviable.
  • Certain provisions of the LODR Regulations dealing with promoter reclassification (e.g. the restriction on promoters having post-reclassification special rights) will not apply if reclassification is contemplated under an IBC resolution plan and the promoter and promoter group being reclassified as public shareholders do not remain in control of the company. The intent here may be that any involvement of the former promoters, after a resolution plan is approved, should be controlled by the provisions of section 29A of the IBC.
  • A number of IBC-related and CIRP-related disclosures will need to be made by the listed company (without applying any judgment as to the materiality of the information). The disclosable matters include application filings and admission, appointments and replacements of the resolution professional, notification of meetings of the committee of creditors and salient features (not involving commercial secrets) of resolution plans as mentioned above in point no (i) to (xiii). These additional disclosure requirements are a positive step and will enhance transparency of the CIRP, in particular, for the listed company’s shareholders.

In addition, information in relation to (b), (c) and (d) above will need to be disclosed to the stock exchanges, in each case, within a day of the approval of the resolution plan.

  • ICDR REGULATION:

These Regulations may be called the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2018.

  1. In regulation 70, in sub-regulation (1) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 following changes has been made:
  • clause (c) shall be omitted; and
  • the proviso to sub-regulation (1) shall be omitted.
  1. In regulation 70, after sub-regulation (1) and before sub-regulation (2), the following sub-regulation shall be inserted, namely,-

“(1A) The provisions of this Chapter, except the lock-in provisions, shall not apply where the preferential issue of specified securities is made in terms of the rehabilitation scheme approved by the Board of Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985 [1 of 1986] or the resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 [No. 31 of 2016] whichever applicable.”

On July 24, 2018, Ministry of Finance came up with the notification and amended the rule which is called Securities Contracts (Regulation) (Amendment) Rules, 2018.

In the Securities Contracts (Regulation) Rules, 1957, in rule 19A, after sub-rule (4), the following sub-rule shall be inserted, namely:–

“(5) Where the public shareholding in a listed company falls below twenty-five per cent, as a result of implementation of the resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), such company shall bring the public shareholding to twenty-five per cent within a maximum period of three years from the date of such fall, in the manner specified by the Securities and Exchange Board of India:

Provided that, if the public shareholding falls below ten per cent, the same shall be increased to at least ten per cent, within a maximum period of eighteen months from the date of such fall, in the manner specified by the Securities and Exchange Board of India.”

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