Aditya Shah


Clause 36 of Equity Listing Agreement inter-alia mandates every Listed Company to intimate stock exchanges on any material event which will have bearing on operation of company or any information which is price sensitive in nature. Clause 36 provides indicative events which may have ‘material impact’ on the performance or operations of the company. The clause although provides events which may have material impact on the functioning of the company, but there was no clear guidance or standard as to qualification of an event being ‘material event’ and the content and details of such disclosure, that resulted in a way disparity of disclosure across listed companies. The companies generally bare minimum information to the investors on ‘material events’ impacting the company, which may not necessarily convey the essence of such information and probable impact of such event on the company. Hence to ensure some sense of standardization, on 30th September, 2014 Bombay Stock Exchange[1] and National Stock Exchange[2] issued a Guidance note on the disclosure requirement under Clause 36 of Listing Agreement.

Guidance Note on Disclosure

Clause 36 of Equity Listing Agreement interalia provides an illustrative list of material event for which disclosure needs to be made, the list is not an exhaustive list, it merely indicates event for which disclosure needs to be made. Guidance note provides detailed information that needs to be disclosed pursuant to the said clause, on happening of relevant event. Further disclosure of material information being spirit behind the Clause, Guidance note requires a listed entity to identify an authority within a company that is entitled to take a call on materiality of an event qualifying for the purpose of disclosure, timing at which such disclosure needs to be made public and contents of such disclosure so as to enable public at large to understand gravity of such event. Such authority can be Board of Director, or CEO or Senior Level Executive Employee, or Key Managerial Personnel etc which may be identified by the company.

Guidance note further provides detailed information on the event that needs to be disclosed by the company which might have material impact on the operation or functioning of the company or which is price sensitive information which can have bearing of price of the shares of the company.

Brief details on content for relevant disclosures:-

1. Disclosure in General Character of Business:- The company has to disclose nature of arrangement that leads to change in the general character of business, whether due to technical, manufacturing, marketing, or financial tie up or by the reasons of selling of unit or division of the company or due to enlarging, restricting or closing down the operation of the company or otherwise. The rationale for such changes and probable benefit or impact of such changes in character of business of the company needs to be intimated by the company.

2. Disclosure due to disruption of operations due to natural calamity:- The company needs to intimate occurrence of natural calamity that might have material impact on the operation of company. The company needs to assess impact of such calamity in quantifiable terms such as value of assets loss, loss of production, extend to which damage caused etc. which shall be reported as early as possible but within 15 days of such occurrence. In case if impact cannot gauged then the status of assessment needs to be intimated within the period of 15 days of such calamity.       The disclosure interalia shall also include whether the risk was covered by insurance and expected time in order to return to normalcy.

3. Disclosure due to disruption of operation of unit/ division/ subsidiary etc. of the company: – The Company needs to disclose information of impact of disruption which may be due to strikes or lock outs and periodical disclosure till normalcy is restored. Periodical disclosure to include impact of such disruption in quantifiable terms, steps taken in order to restore normalcy, and when such strike or lockout is called off and information on quantitative impact of such disruption.

4. Disclosure due to commencement/ closure of commercial operations: – The company needs to intimate commencement or closure of commercial production, such disclosure shall include projected financial impact with appropriate disclaimers and continuing clarification in case of material variation from earlier disclosure.

5. Disclosure with regards to changes in regulatory framework:- The company needs to disclose material changes in pricing/ realization or profitability arising out of changes in regulatory framework and the company may quantify the impact of such regulatory framework.

6. Disclosure relating to Disputes, Litigation or Regulatory Actions:- The company shall disclose whenever the company or its Key Managerial Personnel or Promoter or controlling entity of person becomes party to a dispute in any litigation, adjudication or arbitration including any interim order passed against or in favor of the company or relevant personnel which can have material impact. The company needs to disclose brief details of such litigation and quantify financial implication such as fees, penalty etc. of such litigation.

The company has to periodically disclose in case of change in status or any material development in relation to such proceedings or in case of settlement material terms of such settlement, compensation or penalty of such settlement on the financial position of the company.

7.  Disclosure on revision of ratings: – The company shall disclose any revision of rating within 24 hours, the details of any rating or revision in rating assigned to any of companies debt or equity instrument or fixed deposit programme or of any scheme or proposal of the company involving mobilization of funds of company, which is relied upon or utilized by or on behalf of company. The company may also disclose reasons in case of downward revision of rating.

8. Disclosure of any other information bearing operation or performance of the company: – Company needs to disclose detailed information on any other information that may have material bearing on the operation or performance of the company. Other Information includes information with respect to Acquisition, Merger, De-Merger, Amalgamation, and Restructuring, Schemes of Arrangement, Spin off or selling of division of the company etc. at the time of Board Approval or approval of committee authorized by the Board. Detailed disclosure on issuance of ADR, GDR or FCCBs or alteration in terms of redemption or cancellation or redemption of any securities of the company issued by the company.

9. Cancellation of dividend/ rights/ bonus: – The Company needs to disclose detailed reasons of cancellation of dividend or rights or bonuses.

   Features of guidance note:-

  • Guidance note requires company to identify the authority for the purpose of disclosure from the company, hence consistence on disclosure can be ensured.
  • Guidance note requires company to quantify the probable amount that may impact the company in case of adverse situation to the company. Whether the disclosure pertains to disruption of operation or commencement of operation or litigation matters, guidance notes insist upon quantification of amount in terms of money. However it might become difficult to ascertain such quantifiable amount by the company.
  • Listed Companies hitherto were required to disclose material event perse, however the guidance note requires continues updates of such event, impact of such event and quantification of such event in material terms.
  • Minimum standard or information of disclosure has been prescribed under the guidance note.

The Guidance note is a supplement document to the existing equity listing agreement, it provides clarity on details that is required to be submitted to stock exchanges under Clause 36, and thus Guidance note has to be read with Clause 36 of the Agreement. The clause itself being inclusive in nature, the guidance note shall also be deemed to be an inclusive standard for disclosure purpose of Listed Companies. The spirit behind this guidance note seems to bring harmony of disclosure standard by a listed entity of material events that has potential to impact its functioning.



[The above post is contributed by Aditya Shah  at Vinod Kothari & Co. He can be contacted at ]

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October 2020