“Discover the key highlights and implications of SEBI’s (Listing Obligations and Disclosure Requirements) Second Amendment Regulations, 2023, announced on June 14. Explore changes in mainstream media coverage, appointment of compliance officers, and revised deadlines for compliance. Understand the impact on director appointments, disclosure requirements, and business responsibility reports. Stay informed about the amendments’ broader implications for listed entities and the steps needed to ensure compliance and enhance governance.”
SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023
On June 14, 2023, the Securities and Exchange Board of India (SEBI) announced significant amendments to the Listing Obligations and Disclosure Requirements (LODR) regulations. These amendments aim to enhance transparency, strengthen compliance mechanisms, and protect the interests of shareholders and investors. Let’s take a closer look at the key amendments introduced by SEBI:
Regulation 2: Mainstream Media Coverage Expanded
Under Regulation 2 of the LODR, the definition of mainstream media has been broadened to include both print and electronic media, such as newspapers, news channels, and content published by news and current affairs publishers. This amendment ensures that news and information dissemination is comprehensive and accessible to a wider audience.
Regulation 6: Appointment of Compliance Officer
According to the revised Regulation 6, listed entities are required to appoint a Compliance Officer within three months, with no provision for interim appointments. This change emphasizes the importance of having a designated compliance professional who ensures adherence to regulatory requirements and promotes good governance practices.
Regulation 15: Revised Deadline for Second Proviso
SEBI has extended the deadline for compliance with the second proviso under Regulation 15 to March 31, 2024. The revised date will be notified separately by SEBI. This amendment provides listed entities with additional time to align their operations and reporting with the new requirements.
Regulation 17: Approval for Director’s Continuation
The amended Regulation 17 introduces a new provision, 17(1D), which paves the way for the abolition of permanent board seats. From April 1, 2024, the continuation of a director serving on the board of directors of a listed entity will be subject to approval by the shareholders in a general meeting at least once every five years. This amendment promotes board accountability, transparency, and periodic evaluation of director performance.
Exceptions to Regulation 17: MD, WTD, ID, and Nominee Directors
Certain exceptions to Regulation 17 have been outlined. The exceptions include Managing Directors (MDs), Whole-time Directors (WTDs), Independent Directors (IDs), and directors appointed pursuant to court or tribunal orders, government nominee directors, financial sector regulator nominee directors, or nominee directors of financial institutions or Debenture Trustees.
Casual Vacancies and Key Managerial Personnel
Regulation 17(1E) states that in the event of a casual vacancy of a director, the listed entity must fill the vacancy within three months. Additionally, vacancies in respect of certain Key Managerial Personnel, such as CEO, MD, WTD/Manager, and CFO, must be filled by the listed entity at the earliest and within three months from the date of the vacancy. The amendment discourages prolonged vacancies and emphasizes prompt appointment of key positions.
Disclosure Requirements: Regulation 30 and Market Rumors
Regulation 30 emphasizes the timely disclosure of material events or information by listed entities to the stock exchange(s). The revised regulation sets specific timelines for disclosure, including thirty minutes from the closure of the board of directors’ meeting, twelve hours from the occurrence of the event or information within the entity, and twenty-four hours for events or information originating externally. Failure to comply with the timelines requires the listed entity to provide an explanation for the delay.
To counter market rumors, the top 100 listed entities must confirm, deny, or clarify any reported event or information circulating among the investing public. This obligation comes into effect from October 1, 2023. Furthermore, starting from April 1, 2024, the top 250 listed entities must adhere to the same requirement. The purpose of this amendment is to address rumors promptly and maintain market integrity.
Additional Disclosures and Business Responsibility Reports
SEBI has introduced Regulation 30A, which requires all shareholders, promoters, related parties, directors, key managerial personnel, and employees of listed entities and their subsidiaries to inform the listed entity about any agreements to which they are parties. The listed entity, in turn, must disclose all such agreements to the stock exchanges and on its website within specified timelines.
Regulation 34 mandates the submission of a Business Responsibility and Sustainability Report by the top one thousand listed entities based on market capitalization. The format for this report, focusing on environmental, social, and governance disclosures, will be specified by the Board in due course. Remaining listed entities, including those listed on the SME Exchange, may voluntarily disclose such reports or obtain assurance of the Business Responsibility and Sustainability Report Core.
Undertaking Sale and Approval by Shareholders
Regulation 37A introduces the requirement of obtaining prior approval through a special resolution from shareholders for any sale, lease, or disposal of the whole or substantially the whole undertaking of a listed entity. The entity must also disclose the object, commercial rationale, and use of proceeds arising from such transactions in the statement annexed to the notice sent to shareholders. This amendment ensures transparency and safeguards shareholder interests.
Other Amendments and Reporting Requirements
Several other amendments have been introduced, including provisions related to investor meets, intimation to stock exchanges, and disclosure of interest, dividends, and repayments. The amendments also address aspects such as acquisitions, strategic alliances, changes in management, litigation, defaults, and financial statement revisions.
Additionally, Schedule V of the LODR regulations mandates the inclusion of particulars of senior management and disclosure of certain types of agreements binding listed entities in the annual report.
Implications for Listed Entities
The LODR amendments notified by SEBI bring about significant changes in compliance and reporting requirements for listed entities. The stricter timelines for disclosures, enhanced governance provisions, and increased transparency are aimed at improving investor confidence and ensuring better corporate governance practices.
Listed entities must review their existing practices and processes to ensure compliance with the amended regulations. It is crucial for them to appoint a Compliance Officer within the stipulated timeframe and develop robust systems for timely and accurate disclosure of material events and information. Companies should also focus on strengthening their board evaluation processes and obtaining periodic shareholder approval for director continuance.
By aligning with the LODR amendments, listed entities can enhance their governance frameworks, improve stakeholder communication, and foster trust and credibility among investors and shareholders.
Disclaimer: This article provides an overview of the LODR amendments notified by SEBI. It is recommended that listed entities consult the official SEBI notifications and seek professional advice to understand the amendments in detail and ensure compliance with the applicable regulations.
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