The Securities and Exchange Board of India (SEBI) has introduced several amendments to the SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations (hereinafter referred to as “Regulations”) vide SEBI (LODR) (Third Amendment) Regulations, 2024 aimed at enhancing transparency, governance, and disclosure requirements for listed entities.
Key Amendments
1. Definition of half year
The definition of half year has been omitted (“half year” means the period of six months commencing on the first day of April or October of a financial year).
2. Exceptions to RPT
Two additional clauses have been added in the Regulations which shall not be covered under the ambit of RPT:
“acceptance of current account deposits and saving account deposits by banks in compliance with the directions issued by the Reserve Bank of India or any other central bank in the relevant jurisdiction from time to time” and
“retail purchases from any listed entity or its subsidiary by its directors or its employees, without establishing a business relationship and at the terms which are uniformly applicable/offered to all employees and directors”.
3. Definition of SR equity shares
A new definition has been added in the Regulations – “SR equity shares” means the equity shares of a listed entity having superior voting rights compared to all other equity shares issued by that listed entity.
4. Increased accountability of KMP, Directors, Promoters, Promoter group, etc.
KMP, Directors, Promoters, members of the Promoter Group, and any other persons are now obligated to provide all information that is relevant and necessary for the listed entity to ensure compliance with the applicable law.
5. Filling the Vacancy of Compliance Officer in Insolvency Cases
Any vacancy in the office of the Compliance Officer of such listed entity in respect of which a resolution plan under section 31 of the Insolvency Code has been approved, shall be filled within a period of three months of such approval.
6. Regulation 7(3) omitted
The listed entity is no longer required to submit a compliance certificate to the exchange certifying compliance with the requirements of sub- regulation (2) which states that the listed entity shall ensure that all activities in relation to both physical and electronic share transfer facility are maintained either in house or by Registrar to an issue and share transfer agent registered with the Board.
7. Timeline of 21 days omitted for Investor Grievance Report
The listed entity shall file with the recognised stock exchange(s) on a quarterly basis a statement detailing the redressal of investor grievances in such form and within the timelines as specified by the Board instead of the 21 days’ time frame.
8. Alteration in the definition of material subsidiary
The word income has been replaced with turnover in the definition of material subsidiary:
Previous clause: “material subsidiary” shall mean a subsidiary, whose income or net worth exceeds ten percent of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.
Amended clause: “material subsidiary” shall mean a subsidiary, whose turnover or net worth exceeds ten percent of the consolidated turnover or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.
9. Definition of Senior Management
The definition now shall also include persons identified and designated as key managerial personnel, other than the board of directors, by the listed entity.
10. Additional clause for approval of appointment of NED attaining 75 years of age
A listed entity shall appoint a person or continue the directorship of any person as a non-executive director who has attained the age of seventy five years by passing a special resolution. The approval for such appointment may be made at the time of appointment or re-appointment or any time prior to the non-executive director attaining the age of seventy- five years.
11. Approval of Audit Committee for RPT
All related party transactions and subsequent material modifications shall require prior approval of the audit committee of the listed entity including:
(e) remuneration and sitting fees paid by the listed entity or its subsidiary to its director, key managerial personnel or senior management, except who is part of promoter or promoter group, shall not require approval of the audit committee provided that the same is not material.
(f) The members of the audit committee, who are independent directors, may ratify related party transactions within three months from the date of the transaction or in the immediate next meeting of the audit committee, whichever is earlier, subject to the following conditions.
(i) the value of the ratified transaction(s) with a related party, whether entered into individually or taken together, during a financial year shall not exceed rupees one crore.
(ii) the transaction is not material.
(iii) rationale for inability to seek prior approval for the transaction shall be placed before the audit committee at the time of seeking ratification.
(iv) the details of ratification shall be disclosed along with the disclosures of related party transactions.
(v) any other condition as specified by the audit committee.
Provided that failure to seek ratification of the audit committee shall render the transaction voidable at the option of the audit committee and if the transaction is with a related party to any director, or is authorised by any other director, the director(s) concerned shall indemnify the listed entity against any loss incurred by it.
11. Exemptions of Approval by Audit Committee for RPT
The listed company is now permitted to grant omnibus approval for transactions undertaken by its subsidiaries, subject to quarterly review.
The RPT exempted from approvals shall include:
-transactions entered into between two public sector companies
-transactions which are in the nature of payment of statutory dues, statutory fees or statutory charges entered into between an entity on one hand and the Central Government or any State Government or any combination thereof on the other hand
-transactions entered into between a public sector company on one hand and the Central Government or any State Government or any combination thereof on the other hand.
12. Exemption to WOS under Insolvency provisions for selling/disposing/leasing of assets
Selling, disposing and leasing of assets amounting to more than twenty percent of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of special resolution, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court/Tribunal or under a resolution plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved.
Nothing contained in this sub-regulation shall be applicable if such sale, disposal or lease of assets is between two wholly-owned subsidiaries of the listed entity.
13. Additional provisions for Secretarial Audit and Secretarial Compliance Report:
Every Secretarial Auditor shall be a Peer Reviewed Company Secretary and has not incurred any of the disqualifications as specified by the Boar. A firm whereof majority of partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be Secretarial Auditor of the listed entity. Where a firm including a limited liability partnership is appointed as Secretarial Auditor of the listed entity, only the partners who are Peer Reviewed Company Secretaries shall be authorised to act and sign on behalf of the firm.
Note: Provided that the listed entity shall ensure that with effect from April 1, 2025, the Secretarial Compliance Report submitted to the stock exchange(s) on annual basis is signed only by the Secretarial Auditor or by a Peer Reviewed Company Secretary.
14. Deletion of timeline for submitting Quarterly Compliance Report on Corporate Governance
The listed entity shall submit to the recognised stock exchange a quarterly compliance report on corporate governance in the format and within the timelines as may be specified by the Board.
15. New provisos for Board Meeting disclosures
Provided that in case the meeting of the board of directors closes after normal trading hours of that day but more than three hours before the beginning of the normal trading hours of the next trading day, the listed entity shall disclose the decision pertaining to the event or information, within three hours from the closure of the board meeting.
Provided further that in case the meeting of the board of directors is being held for more than one day, the financial results shall be disclosed within thirty minutes or three hours, as applicable, from closure of such meeting for the day on which it has been considered.
17. Timeline for Disclosure of Litigation Claims
If all the relevant information, in respect of claims which are made against the listed entity under any litigation or dispute, other than tax litigation or dispute, in terms of sub-paragraph 8 of paragraph B of Part A of Schedule III, is maintained in the structured digital database of the listed entity in terms of provisions of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the disclosure with respect to such claims shall be made to the stock exchange(s) within seventy-two hours of receipt of the notice by the listed entity.
18. Revision in the process of reclassification of promoter holding
i. The promoter(s) seeking reclassification shall make a request for reclassification to the listed entity along with a rationale for the request.
ii. The board of directors of the listed entity shall analyze such request and provide their views in the immediate next board meeting or within two months from the date of receipt of the request from its promoter(s), whichever is earlier.
iii. The listed entity shall submit an application seeking no-objection of the recognized stock exchange for such reclassification request along with the views of the board of directors within five days of consideration of the request by the board of directors.
iv. The recognized stock exchange shall decide on such application(s) within a period of thirty days, excluding the time taken, if any, by the listed entity to respond to queries of stock exchanges, from the date of receipt of the application.
Provided further that in case of entities that are listed on more than one recognized stock exchange, the concerned stock exchanges shall jointly decide on the application.
v. The listed entity shall place the reclassification request before the shareholders in a general meeting for approval, within sixty days of receipt of no-objection letter from the recognized stock exchange, along with the views of the board of directors on the request and the no-objection letter received from the recognized stock exchanges.
vi. The request of the promoter(s) seeking reclassification shall be approved in the general meeting by an ordinary resolution in which the promoter(s) seeking reclassification and the persons related to him/her/it shall not vote to approve such reclassification request.
19. Financial Results for listed entities under Insolvency
The listed entity in respect of which a resolution plan under section 31 of the Insolvency Code has been approved, shall disclose its financial results within ninety days from the end of the quarter in which such resolution plan was approved, except in case such resolution plan has been approved in the last quarter of a financial year. Such entity shall disclose its annual audited financial results within 120 days from the end of such financial year.
20. Documents and information to shareholders
A letter providing the web-link to be sent to those shareholders who have not registered their email ID instead of sending hard copies, including the exact path, where complete details of the Annual Report is available.
21. General Meeting Notice for appointment of Secretarial Auditors
The notice being sent to shareholders for an annual general meeting, where the statutory auditor(s) or Secretarial Auditor is/are proposed to be (2) appointed/re-appointed shall include the following disclosures as a part of the explanatory statement to the notice:
(a) Proposed fees payable to the statutory auditor(s) or Secretarial Auditor along with terms of appointment and in case of a new auditor, any material change in the fee payable to such auditor from that paid to the outgoing auditor along with the rationale for such change;
(b) Basis of recommendation for appointment including the details in relation to and credentials of the statutory auditor(s) or Secretarial Auditor proposed to be appointed.
22. Certificate under Regulation 40(10) omitted
Certificate stating requests for sub division, renewal, exchange, transfer, replacement, remat, transmission in respect of shares of the company is now omitted.
23. Change in Record Date
The listed entity shall give notice in advance of at least three (instead of seven) working days (excluding the date of intimation and the record date) to stock exchange(s) of record date specifying the purpose of the record date.
Further, the listed entity shall ensure the time gap of at least five working (instead of thirty) days between two record dates.
24. Additional website disclosure
– Memorandum of Association and Articles of Association.
– Brief profile of board of directors including directorship and full-time positions in body corporates.
– Presentations prepared by the listed entity for analysts or institutional investors meet, post earnings or quarterly calls prior to beginning of such events.
– Audio recordings, video recordings, if any, and transcripts of post earnings or quarterly calls, by whatever name called, conducted physically or through digital means
– Employee Benefit Scheme Documents, excluding commercial secrets and such other information that would affect competitive position of the listed entity, framed in terms of the provisions of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.
25. QR Code for newspaper advertisements
The listed entity shall publish an advertisement in the newspaper, within forty eight hours of conclusion of the meeting of board of directors at which the financial results were approved, containing a Quick Response code and the details of the webpage where complete financial results of the listed entity, along with the modified opinion(s) or reservation(s), if any, expressed by the auditor, is accessible to the investors.
26. Disclosure on imposition of penalty
Imposition of fine or penalty shall be disclosed such as disclosure of fine or penalty of rupees one lakh or more imposed by sectoral regulator or enforcement agency and fine or penalty of rupees ten lakhs or more imposed by other authority or judicial body shall be disclosed within twenty four hours as well as disclosure of fine or penalty imposed which are lower than the monetary thresholds specified in the clause above on a quarterly basis in the format as may be specified.
27. Events which shall be disclosed without any application of the guidelines for materiality
The acquisition of shares or voting rights aggregating to five percent or more of the shares or voting rights in an unlisted company and any change in holding from the last disclosure made exceeding two per cent of the total shareholding or voting rights in the said unlisted company shall be disclosed on a quarterly basis in the format as may be specified.
Conclusion:
The amendments to the LODR Regulations aim to enhance transparency, governance, and disclosure requirements for listed entities. The new requirements will help improve investor confidence and promote better corporate governance practices in India.
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