SEBI (LODR) (SECOND AMENDMENT) REGULATIONS, 2021
Effective from May 6, 2021
⇒ SEBI vide its notification dated May 5, 2021 has amended SEBI (LODR) Regulation, 2015
⇒ These regulations may be called the SEBI (LODR) (Second Amendment) Regulations, 2021.
⇒ These regulations shall be effective from the date of their publication in the Official Gazette, i.e. May 6, 2021
REGULATION 2 & 3
⇒ Definition (Regulation 2):
♦ The reference of SEBI (ICDR) Regulations, 2009 along with all its definition has been substituted with SEBI (ICDR) Regulations, 2018, thereby aligning the provisions of SEBI (LODR) Regulations, 2015 with SEBI (ICDR) Regulations, 2018.
♦ New definition inserted:
Clause (zn): “working days” means working days of the stock exchange where the securities of the entity are listed.
⇒ Applicability of the regulations (Regulation 3):
♦ Regulation 3(2) inserted- The provisions of the listing regulations which becomes applicable on the basis of the market capitalization shall continue to apply, even if the listed entity falls below the threshold limit.
REGULATION 7 & 15:
⇒ Compliance Certificate (Regulation 7(3)):
The compliance certificate w.r.t maintenance of share transfer facility shall be submitted within 30 days from the end of the financial year. The requirement of half yearly compliance has been omitted.
⇒ Applicability of Corporate Governance provisions (Regulation 15):
New proviso inserted – The compliance of the corporate governance provisions which were initially exempted to listed entity having paid up equity share capital not exceeding INR 10 crore and net worth not exceeding INR 25 crore, as on the last day of the previous financial year, once applicable, shall now remain applicable to the listed entity till the equity share capital or net worth criterion remains below the threshold limit for a period of 3 consecutive financial years.
RISK MANAGEMENT COMMITTEE-
⇒ Composition of the Risk Management Committee (RMC):
♦ Minimum 3 members;
♦ majority of them being Board members, and;
♦ including at least 1 ID (incase of SR equity shares, at least 2/3rd of the RMC shall comprise of IDs)
⇒ The RMC shall meet twice a year. Earlier their was a requirement to meet once a year.
⇒ Newly inserted sub-regulation 3B & 3C:
♦ Sub-regulation 3B- Quorum of the RMC shall be 2 or 1/3rd of the members which ever is higher, with at least one member of the Board of Directors
♦ Sub-regulation 3C- The gap between 2 RMC meeting shall not exceed 180 days.
⇒ Role of Risk Management Committee shall mandatorily include the functions as specified in Part D of Schedule II, which inter-alia includes the following:
♦ To formulate a detailed risk management policy which shall include, framework for identification of internal and external risk, measures of risk mitigation and business continuity plan
♦ To ensure a methodology, process and system is in place to monitor and evaluate risk
♦ To oversee implementation of risk management policy
♦ To periodically review the risk management policy at least once in a two year
♦ To keep the BoD informed about the nature and content of its discussion, recommendation and action to be taken
♦ The appointment, removal and terms of the Chief Risk Officer shall be subject to the review by the RMC
♦ To co-ordinate activities with other committee incase of overlap
⇒ The provisions of Regulation 21 shall be now applicable to top 1000 listed entities determined on the basis of market capitalization, as at the end of the immediate previous financial year.
⇒ The RMC shall have the power to seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.
⇒ Disclosure in the Corporate Governance Report (Schedule IV Para C)- The disclosure w.r.t. the RMC are to be made in the corporate governance report to be annexed to the Annual Report:
♦ brief description of terms of reference;
♦ composition, name of members and chairperson, and;
♦ meetings and attendance during the year
REGULATION 24, 24A, 25, 27 & 29:
⇒ Corporate governance requirements with respect to subsidiary of listed entity (Regulation 24(5)) – Material Subsidiary shall not be disposed resulting in shareholding to fall to 50% unless Special Resolution passed. Earlier it was less than 50%.
⇒ Secretarial Audit and Secretarial Compliance Report (Regulation 24A) – The provisions of Regulation 24A has been aligned with that of the requirement of earlier issued SEBI circular. The Annual Secretarial Compliance Report to be submitted within 60 days from the end of each financial year, in the prescribed format.
⇒ Obligations with respect to independent directors (Regulation 25) – The IDs shall meet at least once in every financial year. Earlier its was once in every year.
⇒ Other corporate governance requirements (Regulation 27) – The listed entity shall file the quarterly compliance report on corporate governance within 21 days from the end of the quarter. Earlier the timeline was 15 days.
⇒ Prior Intimations (Regulation 29 (f)) – Prior intimation of BM considering the proposal for declaration bonus, to be given to the stock exchanges. Irrespective of the fact that the same was the part of the agenda paper of the BM.
RE-CLASSIFICATION OF PROMOTER OR PROMOTER GROUP ENTITY-REGULATION 31A (1/2)
⇒ Time Gap has been reduced: The time gap between the Board meeting and the shareholder meeting for re-classification of request from promoters should be minimum 1 month and maximum 3 months. Earlier it was “at least 3 month and not exceeding 6 months”.
⇒ Exemption from obtaining shareholders approval by way of O/R incase where the promoter seeking re-classification and the person related to promoter together do not hold more than 1 % of the voting right in the listed entity or where the re-classification is done due to divorce.
⇒ Exemption from the following provisions:
♦ Reg. 31A (3)-Approval of shareholder, conditions to be fulfilled by promoter and listed entity;
♦ Reg. 31A (4)- Conditions to be fulfilled by Promoters, and;
♦ Reg. 31A (8)(a) &(b)- Disclosure to stock exchanges
Where re-classification is being done pursuant to IBC or any other regulator under law, subject to the condition that the promoters seeking re-classification do not remain in control of the listed entity.
RE-CLASSIFICATION OF PROMOTER OR PROMOTER GROUP ENTITY-REGULATION 31A (2/2)
⇒ Exemption from the following provisions:
♦ Reg. 31A(3)(a) -Approval of shareholder;
♦ Reg. 31A (3)(c)(i)- compliances by the listed entity (only for open offer);
♦ Reg. 31A (8)(a) &(b)- Disclosure to stock exchanges
Where re-classification is being done pursuant to an open offer or Scheme of Arrangement, if the intent of the erstwhile promoter(s) to reclassify has been disclosed in the letter of offer or scheme of arrangement.
REGULATION 32(6), 33 & 34 :
⇒ Statement of deviation(s) or variation(s) (Regulation 32(6)) – In case, where a monitoring agency has been appointed by the listed entity to monitor utilization of proceeds of a public or right issue. The reports / comments received from such monitoring agency shall be submitted to the stock exchange within 45 days from the end of the quarter. Earlier there was no prescribed timeline for this compliance.
Further, for the purpose of this regulation monitoring agency shall mean a monitoring agency as specified under SEBI (ICDR) Regulations, 2018.
⇒ Financial Results (Regulation 33 (6))- Earlier it was prescribed that the Statement on Impact of Audit Qualifications (for audit report with modified opinion) and the accompanying annual audit report submitted, shall be reviewed by the stock exchange(s). Now, this has been done away with. This has been also omitted for debt listed compliances (u/r 52 (3))
⇒ Annual Report (Regulation 34(2)(f) – Business and Responsibility Report shall be submitted by top 1000 listed entity as per market capitalization. This requirement has been done away from FY 2021-22 onwards. Further, the Companies are required from FY 2022-23, i.e. for the annual report of FY 2022-23 to submit a Business Responsibility and Sustainability Report.
REGULATION 36, 37 & 40 (9):
⇒ Documents & Information to shareholders (Regulation 36(2) (e)) – The details of shareholding and shareholding as beneficial owners needs to be disclosed to the shareholders, at the time of appointment / re-appointment of NEDs.
⇒ Draft Scheme of Arrangement & Scheme of Arrangement (Regulation 37) – The requirement of obtaining observation letter has been omitted. Now the stock exchanges are empowered to issue No- objection letter to the entities which are in compliance of the securities law. This has also been amended in duties and obligation of recognized stock exchange (Reg. 94)
⇒ Transfer or transmission or transposition of securities (Regulation 40(9))-Another half yearly compliance has been omitted. Now the requirement of submitting the certificate from the PCS on behalf of the share transfer agent certifying that all certificates have been issued within thirty days of the date of lodgment for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies, within 30 days from the end of financial year.
REGULATION 43A, 44 & 45:
⇒ Dividend Distribution Policy (Regulation 43A) – This requirement to formulate a Dividend Distribution policy is now applicable to top 1000 listed entity. Earlier it was applicable to top 500 listed entity. And the requirement to provide the policy in the Annual report has been omitted. Now the listed entities are required to host the same in its website and the web link shall be provided in the Annual report.
⇒ Meetings of shareholders and voting (regulation 44(2)) – The timeline of disclosure of voting results has now been changed to 2 working days instead of 48 hrs. However, in terms of Regulation 30(6), it need to be disclosed not later than 24 hrs. Hence, this amendment brings no change.
⇒ Change in name of the listed entity (Regulation 45(3)) – The additional requirement of obtaining the approval of the stock exchanges has been omitted. A certificate form the PCA in compliance of Regulation 45(1) needs to annexed along with the explanatory statement.
WEBSITE-REGULATION 46 (1/2) :
⇒ The word “meet” has been defined as group meetings or group conference calls conducted physically or through digital means.
⇒ Additional compliance requirement (voluntary from April 1, 2021 and mandatory from April 1, 2022):
♦ Schedule of analyst/institutional investors meet & the presentations
i. Presentation & audio video recording before the next trading day / within 24 hours from the conclusion of the call, which ever is earlier
ii. To be hosted on the website for at least 5 years & thereafter as per archival policy
iii. Transcripts within 5working days from conclusion of the call
iv. To be hosted on the website as per the preservation policy of the company(as per Regulation 9)
♦ Financial of foreign subsidiary (harmonized with the provisions of CA’13)
WEBSITE-REGULATION 46 (2/2):
♦ Secretarial Compliance Report
♦ Policy for determination of materiality of events / information
♦ Details of KMP authorised to determine materiality of events
♦ Disclosure u/r 30 (8)
♦ Statement of deviation & variation
♦ Dividend Distribution policy
♦ Annual return provided u/s 92 of CA’13
ADVERTISEMENTS IN NEWSPAPERS- REGULATION 47
⇒ The requirement of newspaper advertisement for –
♦ notice of board meeting where financial results are disclosed, and;
♦ quarterly statement of deviation and variation u/r 32 after review of the audit committed has been now omitted.
ROLE OF AUDIT COMMITTEE-SCHEDULE II
⇒ The Role of the Audit Committee as per SEBI LODR shall include, to comment on scheme involving merger, demerger and amalgamation of the listed entity:
♦ Cost benefits, and
♦ Impact on the listed entity and its shareholder
⇒ In case where BM in which financial results are considered continues for more than 1 day, then financial results shall be disclosed within 30 minutes of the meeting for the day on which it was considered.
⇒ In clause 9 of Schedule III- the word Corporate Debt restructuring has been substituted with the word “Resolution plan/ Restructuring in relation to loans/borrowings from banks/financial institutions”. Further additional disclosures are required:
i. Decision to initiate resolution of loans/borrowings;
ii. Signing of Inter-Creditors Agreement (ICA) by lenders;
iii. Finalization of Resolution Plan;
iv. Implementation of Resolution Plan;
v. Salient features, not involving commercial secrets, of the resolution/ restructuring plan as decided by lenders