Review of Corporate Governance Norms for HVDLEs

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, were amended in 2021 to introduce corporate governance norms for High Value Debt Listed Entities (HVDLEs), defined as entities with listed non-convertible debt securities exceeding Rs. 500 crore. These norms were made applicable on a “comply or explain” basis until March 2023, extended to March 2025. SEBI formed a working group in May 2023 to review these provisions, focusing on improving business ease while protecting investors’ interests. A consultation paper issued in October 2024 sought public comments on various proposed changes, such as increasing the threshold for HVDLEs from Rs. 500 crore to Rs. 1000 crore, establishing a separate chapter for HVDLE corporate governance norms, and introducing a sunset clause ensuring continued compliance for three consecutive financial years if the debt value falls below the threshold. The proposals included adjustments to governance structures, such as delegating the functions of committees like the NRC, RMC, and SRC to the audit committee. Public feedback has been analyzed, and the recommendations are now under SEBI’s review for final approval.

Securities and Exchange Board of India

Review of provisions regarding corporate governance norms for High Value Debt Listed entities (HVDLEs) – amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

1. Objective

This Board Memorandum proposes to review provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) pertaining to corporate governance norms for High Value Debt Listed entities (HVDLEs).

2. Background

2.1. SEBI vide notification dated September 07, 2021, inserted Regulation 15(1A) in the LODR Regulations which specifies compliance of Regulation 16 to Regulation 27 by an entity having outstanding value of listed non-convertible debt securities of Rs. 500 Crore and above, referred to as ‘HVDLEs.

2.2. This amendment was effected with a view to protect the interests of debenture holders of such entities and imbibing corporate governance amongst such issuer entities of debt securities. They, inter-alia, relate to the composition of Board of Directors, submission of compliance report, constitution of various committees, stipulations related to Related Party Transactions (RPTs), etc. The aforesaid provisions were made applicable on a ‘comply or explain’ basis until March 31, 2023, and currently extended till March 31, 2025.

3. Review Process and Analysis

3.1. SEBI constituted a working group in May 2023, comprising of representatives from the industry to review the applicability of Corporate Governance Norms under LODR Regulations, inter-alia, keeping in mind the ease of doing business and the interest of investors in such HVDLEs.

3.2. Further, in order to promote the ease of doing business and reduce the compliance burden, SEBI vide Press Release dated October 04, 2023 had also sought comments from the public on various Regulations by November 06, 2023. The comments received from the public regarding corporate governance norms for HVDLEs were forwarded to the working group for consideration in its final recommendation. The working group submitted its report in January 2024.

3.3. Based on the recommendations of working group and subsequent internal deliberations, a consultation paper on review of corporate governance norms for HVDLEs was issued in October 2024. The proposals on which public comments are sought alongwith the analysis of the comments received from public are given below:

(15 entities responded to the public consultation paper. The respondents included Stock Exchanges, listed entities, Practicing Company Secretaries, CS firms, Merchant Bankers, ICSI, ICAI and individuals)

Proposals
1	Whether the proposal of introducing a separate chapter for HVDLEs comprising of all the provisions pertaining to corporate governance norms is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
	in no.		11	1	2	14
	in %		79%	7%	14%	100%
2	Whether the proposal of carving out only those provisions for HVDLEs which differ from equity listed entities in a separate chapter is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	3	1	6	10
		in %	30%	10%	60%	100%
3	Whether the proposal of increasing the threshold of listed outstanding non-convertible securities for identification of a debt listed entity as HVDLE from Rs.500 crore to Rs.1000 crore is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	9	0	1	10
		in %	90%	0%	10%	100%
4	Whether the proposal that once the corporate governance norms become applicable to a HVDLE, they shall continue to remain applicable till such time the value of outstanding listed debt securities reduces and remains below the specified threshold for a period of three consecutive financial years. The value of outstanding listed debt securities may be reviewed on the last day of every financial year (i.e. cut-off date – March 31) is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	12	0	0	12
		in %	100%	0%	0%	100%
5	Whether the proposal that if the value of outstanding listed debt securities of the entity increases in the subsequent years and the listed entity hits the specified threshold, then it has to ensure compliance with the provisions within two quarters i.e. six months and disclosures of such compliance may be made in Corporate Governance compliance report on and from third quarter following the trigger is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	11	0	0	11
		in %	100%	0%	0%	100%
6	Whether the proposal that the board of directors of a HVDLE may either choose to constitute NRC or may ensure that the functions of NRC as specified in Regulation 19(4) of the LODR Regulations is delegated and discharged by the Audit Committee is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	11	0	0	11
		in %	100%	0%	0%	100%
7	Whether the proposal that the board of directors of a HVDLE may either choose to constitute RMC or may ensure that the functions of RMC as specified in Regulation 21(4) of the LODR Regulations is delegated and discharged by the Audit Committee is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	10	0	3	13
		in %	77%	0%	23%	100%
8	Whether the proposal that the board of directors of a HVDLE may either choose to constitute SRC or may ensure that Board of directors of a HVDLE may discharge the functions of SRC as specified in Regulation 20(4) of the LODR Regulations is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	8	1	4	13
		in %	62%	8%	31%	100%
9	Whether the proposal to specify that quarterly compliance report as specified in Regulation 27(2) of the LODR regulations shall be in XBRL format is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	10	1	0	11
		in %	91%	9%	0%	100%
10	Whether the proposal of harmonising the format of quarterly compliance report for HVDLEs with that specified for equity listed entities is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	9	0	2	11
		in %	82%	0%	18%	100%
11	Whether the proposal that HVDLEs may comply with the requirements of publishing BRSR on a voluntary basis, is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	10	0	2	12
		in %	83%	0%	17%	100%
12	Whether the proposal to include directorships in HVDLEs  alongwith directorships in equity listed entities while reckoning the number of directorships held by a person in listed entities, is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	9	0	2	11
		in %	82%	0%	18%	100%
13	Whether the proposal of providing a period of six months or a period of time till next AGM to all the listed entities to ensure compliance with the provision, is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	9	1	1	11
		in %	82%	9%	9%	100%
14	Whether the proposal of considering HVDLEs (along with equity listed companies) for the purpose computing maximum limit of committees, a director can act as a member or chairperson, is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	8	0	2	10
		in %	80%	0%	20%	100%
15	Whether the proposal that Issuer at the time of issuance of non-convertible securities (proposed to be listed) may provide a declaration upfront in the offer document regarding the amount (percentage of issue size) of RPT, issuer proposes to undertake over the tenor of the proposed non-convertible securities is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	3	1	9	13
		in %	23%	8%	69%	100%
16	Whether the proposal that the monitoring of the utilization of proceeds of the issue may be conducted by credit rating agency is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	3	1	8	12
		in %	25%	8%	67%	100%
17	Whether the proposal that the issuer shall upfront declare in the offer document the debt-equity ratio, debt service coverage ratio and interest service coverage ratio and such other financial/ non-financial covenants that will be maintained by the Issuer over the tenor of the non-convertible securities. The    monitoring of such     ratios including covenants shall       be conducted by the Debenture Trustee is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	6	2	4	12
		in %	50%	17%	33%	100%
18	Whether the proposal that in cases where Issuer has not made the aforesaid declaration upfront in the offer document as specified in para 13.3.4(a) of the Consultation Paper, the Issuer/ listed entity  shall obtain No-objection Certificate (NOC) from the Debenture Trustee who in turn shall obtain such NOC from the debenture holders (determined by a majority of the debenture holders not related with the Issuer) for all the material RPTs is appropriate and adequate?
			Agree	Partially Agree	Disagree	Total no. of comments received
		in no.	4	1	8	12
		in %	33%	8%	67%	100%

3.4. The proposals consulted in the abovementioned consultation papers, suggestions received from the public and views of SEBI thereon were placed before the CoBoSAC in the meeting held on November 26, 2024. The details of the same are placed at Annexure-A. Based on review of comments received from public, recommendations of the CoBoSAC and internal deliberations, this memorandum is placed before the Board for approval.

4. Introduction of a separate chapter for corporate governance norms in the LODR Regulations which will be applicable only to HVDLEs (Table 1 of Annexure A)

4.1. Background:

Presently, Regulation 15 to 27 of the LODR regulations contain corporate governance norms which have been approached from an equity perspective and as such may not be fully relevant from the perspective of the debt listed entities. Out of total 812¹ debt listed entities as on March 31, 2024, 264 (33%) entities are both equity and debt listed whereas 538 (66%) entities are only debt listed.

4.2. Rationale and Proposal:

In order to provide ease of reference for pure debt listed entities, it is proposed to introduce a separate chapter for HVDLEs comprising of provisions pertaining to corporate governance norms and to clearly specify that provisions of this separate chapter shall be applicable to HVDLEs to whom Regulations 15 to 27 are not applicable. i.e. the provisions of this separate chapter shall be applicable only to pure debt listed entities.

5. Relaxation in the threshold for identification of High Value Debt Listed Entities for applicability of Corporate Governance Norms (Table 2 of Annexure A)

5.1. Background:

Currently, the Corporate Governance norms are applicable on the basis of the outstanding value of listed non-convertible debt securities² and an entity is identified as HVDLE as and when it hits the threshold of Rs. 500 crore.

5.2. Extant regulatory provision:

Regulation 15(1)(A) of LODR Regulations reads as under:

“(1A) The provisions of this regulation and regulation 16 to regulation 27 of this chapter shall 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 Rupees Five Hundred Crore and above:      .”

5.3. Rationale and Proposal:

In order to align the threshold for HVDLEs with that specified for Large Corporates, it is proposed that for identification of a debt listed entity as HVDLE, the threshold of outstanding listed non-convertible debt securities may be increased from Rs.500 crore to Rs.1000 crore.

6. Introduction of the sunset clause for applicability of Corporate Governance norms (Table 3 of Annexure A)

6.1. Background:

6.1.1. Currently, Regulation 3(3) of the LODR Regulations provide that the corporate governance norms shall continue to apply to a HVDLE even when the outstanding amount of listed non-convertible debt securities falls below the specified threshold of Rs. 500 crores. But there is no specified period for which a HVDLE shall continue to comply with such provisions, once the outstanding amount of listed non-convertible debt securities falls below the specified threshold of Rs. 500 crores.

6.1.2. It may be noted that in case of equity listed entities, explanation to Regulation 15(2)(a) of the LODR Regulations provides that once the corporate governance norms become applicable to a listed entity, they shall continue to remain applicable till such time the equity share capital or the net-worth of such entity reduces and remains below the specified threshold for a period of three consecutive financial years.

6.2. Extant regulatory provision:

6.2.1. Regulation 3(3) of the LODR Regulations read as under:

“3(3). The provisions of these regulations which become applicable to listed entities on the basis of the criterion of the value of outstanding listed debt securities shall continue to apply to such entities even if they fall below such thresholds as mentioned in sub-regulation (1A) of regulation 15”

6.2.2. Explanation to Regulation 15(2)(a) of the LODR Regulations reads under:

“Provided further that once the above regulations become applicable to a listed entity, they shall continue to remain applicable till such time the equity share capital or the net-worth of such entity reduces and remains below the specified threshold for a period of three consecutive financial years.”

6.3. Rationale and Proposal:

At present, the provisions of corporate governance norms continue to apply to an HVDLE even the value of outstanding listed non-convertible debt securities fall below the specified threshold. In order to address this issue, a provision similar to that specified for equity listed entities is proposed to be introduced for HVDLEs. The proposal is as under.

a) Once the corporate governance norms become applicable to a HVDLE, they shall continue to remain applicable till such time the value of outstanding listed debt securities reduces and remains below the specified threshold for a period of three consecutive financial years. The value of outstanding listed debt securities may be reviewed on the last day of every financial year (i.e. cut-off date – March 31).

b) Further, if the value of outstanding listed debt securities of the entity increases in the subsequent years and the listed entity hits the specified threshold, then it has to comply ensure compliance with the provisions within two quarter i.e. six months and disclosures of such compliance may be made in Corporate Governance compliance report on and from third quarter following the trigger.

Illustration

Particulars/ Date	March 31, 2023	March 31, 2024	March 31, 2025	October 01, 2025
Outstanding value of NCDs (in Rs. Cr)	600	500	750	1,050

–

Compliance Status

Listed entity is not mandated to comply with the corporate governance norms w.e.f April 01, 2025

Date of trigger: October 01, 2025;HVDLE shall ensure compliance with corporate governance norms by March31, 2026 (2 qtrs);Compliance starts from April 01, 2026;Disclosure w.r.t compliance shall be made in the compliance report for the quarter April to June 2026.

7. Relaxation with regard to constitution of the Nomination and remuneration committee (NRC) (Table 4 of Annexure A)

7.1. Background:

Regulation 19 of the LODR, inter-alia, mandates constitution of NRC as part of corporate governance norms.

7.2. Extant regulatory provision:

Regulation 19 of the LODR Regulations reads as under:

“Nomination and remuneration committee.

19. (1) The board of directors shall constitute the nomination and remuneration committee ….”

7.3. Rationale and Proposal:

7.3.1. In order to avoid constitution of multiple committees by HVDLEs, it is proposed that the board of directors of a HVDLE may either choose to constitute NRC or may ensure that the functions of NRC as specified in Regulation 19(4) of the LODR Regulations are discharged by full board of directors;

7.3.2. Further, it may be noted in case of certain entities like PSUs or entities that are set up under the Statue or Act of Parliament or State financial corporations or have been setup under the Public Private Partnership (PPP) mode/ structure, directors may be appointed by the Ministry or central government or State government or as the provisions of the respective statue or the terms of the PPP model/ structure. In such cases, the role of NRC is limited. Thus, in order to provide clarity to such entities, it is proposed to specify that in case of entities that are not companies or body corporate incorporated under the Companies Act, 2013 or are setup under the PPP mode/ structure, the function of the NRC may be ensured as per the provisions of their respective statues or the terms of the PPP model/ structure.

7.3.3. For this purpose, PPP shall be defined as a Public-Private Partnership
basis between a public concessioning authority and a private SPV concessionaire selected on the basis of open competitive bidding or on the basis of an MoU with the relevant authorities.

8. Relaxation with respect to constitution of Risk Management Committee (RMC) (Table 5 of Annexure A)

8.1. Background:

Regulation 21 of LODR regulations, inter-alia, mandates constitution of RMC as part of corporate governance norms.

8.2. Extant regulatory provision:

Regulation 21 of the LODR Regulations reads as under:

“Risk Management Committee.

21. (1) The board of directors shall constitute a Risk Management

Committee…”

8.3. Rationale and Proposal:

In order to avoid constitution of multiple committees by HVDLEs, it is proposed that the board of directors of a HVDLE may either choose to constitute RMC or may ensure that the functions of RMC as specified in Regulation 21(4) of the LODR Regulations is discharged by the Audit Committee or board of directors.

9. Relaxation with respect to constitution to Stakeholders Relationship Committee(SRC) (Table 6 of Annexure A)

9.1. Background:

Regulation 20 of LODR regulations, inter-alia, mandates constitution of SRC as part of corporate governance norms.

9.2. Extant Regulatory Provision:

9.2.1. Regulation 20 of the LODR Regulations reads as under:

“Stakeholders Relationship Committee.

20. (1) The listed entity shall constitute a Stakeholders Relationship Committee to specifically look into various aspects of interest] of shareholders, debenture holders and other security holders…”

9.2.2. Part D of Schedule II – role of committees (other than Audit committee) provides the following functions for SRC:

“The role of the committee shall inter-alia include the following:

(1) Resolving the grievances of the security holders of the listed entity including complaints related to transfer/transmission of shares, non-receipt of annual report, non-receipt of declared dividends, issue of new/duplicate certificates, general meetings etc.

(2) Review of measures taken for effective exercise of voting rights by shareholders.

(3) Review of adherence to the service standards adopted by the listed entity in respect of various services being rendered by the Registrar & Share Transfer Agent.

(4) Review of the various measures and initiatives taken by the listed entity for reducing the quantum of unclaimed dividends and ensuring timely receipt of dividend warrants/annual reports/statutory notices by the shareholders of the company.”

9.3. Rationale and Proposal:

9.3.1. In order to avoid constitution of multiple committees by HVDLEs, it is proposed that the board of directors of a HVDLE may either choose to constitute SRC or may ensure that the functions of SRC as specified in Regulation 20(4) of the LODR Regulations is delegated and discharged by the Board of Directors;

9.3.2. As seen from para 9.2.2 above, the functions of SRC are drafted more from an equity perspective, therefore it is proposed that the functions of the SRC may be modified to include the grievances related to creation of charge, payment of interest/ principal, maintenance of security cover, any other covenants.

10. Harmonization of reporting formats with that specified for equity listed entities (Table 7 of Annexure A)

10.1. Background:

In case of equity listed entities, section II-B of the Master circular for compliance with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 by listed entities dated November 11, 2024 provides for submission of compliance report on corporate governance at various intervals like quarterly, half-yearly, annually. However, in case of HVDLEs, compliance report on corporate governance norms is to be submitted on quarterly basis only.

10.2. Extant Regulatory Provision:

10.2.1. Extract from Master circular specified for equity listed entities: Section II-B Report on compliance with the Corporate Governance provisions specified in the LODR Regulations inter-alia provides: “3.Accordingly, the submission of compliance report on Corporate Governance shall be as under:

a) Annexure3–on quarterly basis

b) Annexure 4–at the end of the financial year

c) Annexure 5–at the end of 6 months from the close of financial year d)Annexure6–on a half yearly basis”

10.2.2. Extract from Master circular specified for debt listed entities

Chapter VII on Formats specifying disclosure of Corporate Governance by ‘high value debt listed entities inter-alia provides as follows:

“The format for Compliance Report on Corporate Governance to be submitted by a listed entity on quarterly basis, is enclosed as Annex – VII-A.”

10.3. Rationale and Proposal:

In order to have parity between the reporting requirements for equity and debt listed entities regarding compliance with governance norms, it is proposed to harmonize the reporting requirements and formats specified for HVDLEs with that specified for equity listed entities. The formats shall be specified by way of circular.

11. Introduction of Business Responsibility and Sustainability Report (BRSR) for HVDLEs on a voluntary basis (Table 8 of Annexure A)

11.1. Background:

Regulation 34(2)(f) of LODR regulations mandates top 1000 listed companies (by market capitalization) to provide disclosures as per the BRSR.

11.2. Extant Regulatory Provision:

Regulation 34(2)(f) of LODR regulations reads as under:

“34(2) The annual report shall contain the following:

f) for the top one thousand listed entities based on market capitalization, a Business Responsibility and Sustainability Report on the environmental, social and governance disclosures, in the format as may be specified by the Board from time to time.”

11.3. Rationale and Proposal:

To inculcate practice of good governance at par with equity listed entities, it is proposed that HVDLEs may comply with the requirements of providing disclosures as per BRSR as specified in regulation 34(2)(f) of the LODR Regulations on a voluntary basis.

12. Requirements related to maximum number of directorships (Table 9 of Annexure A)

12.1. Background:

Regulation 17A of LODR Regulations, inter-alia, specifies maximum no. of listed entities in which a person can act as a director/ independent director. While counting the said number of listed entities, it includes only those whose equity shares are listed on a stock exchange. Thus, the extant regulations exclude HVDLEs while counting the same.

12.2. Extant Regulatory Provision:

Regulation 17(1)(A) of LODR regulations reads as under:

“(17A) The directors of listed entities shall comply with the following conditions with respect to the maximum number of directorships, including any alternate directorships that can be held by them at any point of time – (1)A person shall not be a director in more than eight listed entities with effect from April 1, 2019 and in not more than seven listed entities with effect from April 1, 2020:…

….

Explanation – For the purpose of this regulation, the count for the number of listed entities on which a person is a director / independent director shall be only those whose equity shares are listed on a stock exchange.”

12.3. Rationale and Proposal:

12.3.1. To ensure that a director is able to pay adequate attention to all listed entities irrespective of the security listed, it is important to include HVDLEs while counting the ceiling on the number of directorships; this will facilitate due corporate governance, due attention to matters by the directors and accordingly, protection of investors – whether in debt or equity. Thus, it is proposed to include directorships in HVDLEs alongwith directorships in equity listed entities while reckoning the number of directorships held by a person in listed entities.

12.3.2. Further, to give sufficient time to all the listed entities to ensure compliance with the provision, a period of 6 months or till the time AGM is held from the date of applicability of the provision to the entity, whichever is later, may be provided.

13. Requirements related to number of memberships or chairpersonships in the committees by a director (Table 10 of Annexure A)

13.1. Background:

Regulation 26 of the LODR Regulations provides a maximum limit on the number of committees across all listed entities, a director can act as a member or chairperson. While determining the number of such listed entities, HVDLEs are excluded.

13.2. Extant Regulatory Provision:

Regulation 26 of the LODR Regulations reads as under:

“26. (1) A director shall not be a member in more than ten committees or act as chairperson of more than five committees across all listed entities in which he 182[/she] is a director which shall be determined as follows:

(a) the limit of the committees on which a director may serve in all public limited companies, whether listed or not, shall be included and all other companies including private limited companies, foreign companies, ‘high value debt listed entities and companies under Section 8 of the Companies Act, 2013 shall be excluded;”

13.3. Rationale and Proposal:

In order to ensure that directors devote adequate time to listed entities including HVDLEs and in the interest of investor protection, it is proposed that HVDLEs (along with equity listed companies) may be considered for the purpose of computing the maximum limit of committees, a director can act as a member or chairperson.

14. Requirements pertaining Related Party transactions (RPT) (Table 11 of Annexure A)

14.1. Background:

14.1.1. Regulation 23 of LODR regulations specifies the regulatory requirement pertaining to related party transactions inter-alia including formulation of a policy on materiality of related party transactions, prior approval of audit committee for all related party transactions, prior approval of shareholders through resolution for material related party transactions, etc.

14.1.2. It is observed that in case of certain debt listed entities the shareholding of such entities are wholly/ substantially held by one or a few shareholders, which are related parties. When these entities enter into RPTs, they are required to obtain the approval of majority of the shareholders who are not related parties. Such shareholders, who are not related parties, either hold a negligible portion of the equity or none at all, in which case the entity will not be able to transact such RPTs because of ‘impossibility of compliance’ with the provisions of LODR Regulations

14.2. Extant Regulatory Provision:

Regulation 23(4) of LODR Regulations (pertaining to RPTs), inter-alia, provides as follows

“(4) All material related party transactions and subsequent material modifications as defined by the audit committee under sub-regulation (2) shall require approval of the shareholders through resolution and no related party shall vote to approve such resolutions whether the entity is a related party to the particular transaction or not.”

14.3. Rationale and Proposal:

14.3.1. It may be noted that under section 186(5) Companies Act, 2013, prior approval of public financial institution (where the term loan is subsisting) is obtained in case the company proposed to give any loan to any person or proposes to give guarantee or provide any security in connection with a loan to any person above a certain specific threshold.

14.3.2. Taking a cue from the above, in order to address the issue specified in para 14.1.2, the following is proposed:

a) An issuer, proposing to undertake material related party transaction³, as defined under Regulation 23, shall obtain No-objection Certificate (NOC) from the Debenture Trustee [who in turn shall obtain such NOC from the debenture holders (determined by a majority (i.e. more than 50%) (in value) of the debenture holders not related with the Issuer, on the basis of present and voting including e-voting)].

b) For related party transactions of unlisted subsidiaries of a listed subsidiary, the prior approval of the shareholders and NOC from Debenture Trustee of the listed subsidiary [who in turn shall obtain such NOC from the debenture holders (i.e. more than 50%) (in value) of the debenture holders not related with the listed subsidiary, on the basis of present and voting including e-voting.

c) All existing material related party contracts or arrangements entered into prior to the date of notification of these regulations and which may continue beyond such date shall be placed for approval of the shareholders in the first Annual General Meeting held subsequent to notification of the regulation and NOC from Debenture Trustee within a period of one year from the date of notification shall be obtained. The Debenture Trustee shall in turn shall obtain such NOC from the debenture holders (i.e. more than 50%) (in value) of the debenture holders not related with the listed entity, on the basis of present and voting including e-voting.

e) The said NOC shall be obtained before seeking shareholder’s approval on the same through resolution. If the NOC has been withheld, the matter shall not be taken forward for shareholders’ consideration.

f) The said provisions shall be applicable only to pure HVDLEs (i.e pure debt listed entities).

15. Relaxation to entities set up under the public private partnership (PPP) mode from the provisions of the extant Regulation 16 (Explanation to Regulation 16(1)(b)) and Regulation 17 (third proviso to Regulation 17(1D)

15.1. Background:

In case of entities that are set up under public private partnership (PPP) mode/ structure, where the composition of board of directors is pre-decided or is as per mutual terms between the public authority and private entity it may be appropriate to provide relaxation to such entities from the provisions regarding directors in the LODR Regulations.

15.2. Extant Regulations

15.2.1. Explanation to Regulation 16(1b) is re-produced as under:

“Explanation – In case of a ‘high value debt listed entity’:(a) which is a body corporate, mandated to constitute its board of directors in a specific manner in accordance with the law under which it is established, the non- executive directors on its board shall be treated as independent directors.”

15.2.2. Third proviso to Regulation 17(1D) is reproduced:

“Reg17(D) With effect from April 1, 2024, the continuation of a director serving on the board of directors of a listed entity shall be subject to the approval by the shareholders in a general meeting at least once in every five years from the date of their appointment or reappointment, as the case may be.

Provided further that the requirement specified in this regulation shall not be applicable to the director appointed pursuant to the order of a Court or a Tribunal or to a nominee director of the Government on the board of a listed entity, other than a public sector company, or to a nominee director of a financial sector regulator on the board of a listed entity.”

15.3. Proposal:

Entities that are set up under public private partnership (PPP) mode/ structure, where the composition of board of directors is pre-decided or is as per mutual terms between the public authority and private entity the following is proposed:

15.3.1. Modification to definition of independent director:

“independent director” shall have the same meaning as assigned to it under clause (b) of sub-regulation (1) of regulation 16 of these Regulations Provided that in case of a listed entity which is a body corporate, mandated to constitute its board of directors in a specific manner in accordance with the law under which it is established or an entity set up under the Public Private Partnership model/structure, the non- executive directors, other than a nominee director of such entity on its board, shall be treated as independent directors.

15.3.2. Relaxation to PPP vide the following proviso:

Provided also that the requirement specified in this regulation shall not be applicable to the director appointed pursuant to the order of a Court or a Tribunal or a resolution plan approved under section 31 of the Insolvency Code or to a nominee director of the Government on the board of a listed entity, other than a public sector company, or to a nominee director of a financial sector regulator on the board of a listed entity or to a director appointed under the Public Private Partnership model/structure.

15.3.3. The aforesaid proposal shall be applicable to pure debt listed entities.

16. Proposal to the Board:

The Board is requested to:

a) consider and approve the proposals under para 4.2, 5.3, 6.3, 7.3, 8.3, 9.3, 10.3, 11.3, 12.3, 13.3 14.3 and 15.3 above.

b) approve the consequent draft amendment notification placed at Annexure B;

c) authorize the Chairperson to make consequential and incidental changes and take necessary steps to give effect to the decisions of the Board.

Notes:-

¹ Source – NSDL

2 Regulation 2 (1)(t) of the LODR Regulations provides that non-convertible debt securities’ means ‘debt securities’ as defined under the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021;

3 proviso to Regulation 23(1) of the LODR Regulations provides that a related party transaction shall be considered material, if such transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds Rs.1,000 crore (Rupees one thousand crore) or 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.

Source: SEBI Board Meeting Dated: Wednesday 18th December 2024