Key Highlights of Amendment of SEBI (LODR) Regulation

Last Updated On: Aug. 17, 2021, 10:38 p.m.
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KEY HIGHLIGHTS OF AMENDMENT IN SEBI(LODR) REGULATIONS

The provisions of SEBI LODR regulations which become applicable to listed entities on the basis of market capitalisation criteria shall continue to apply to such entities even if they fall below such thresholds. [Newly inserted Regulation 3(2)].

For example: The top 100 listed entities by market capitalization, determined as on March 31st of every financial year, shall hold their annual general meetings within a period of five months from the date of closing of the financial year.

Now due to the above amendment if the listed Company fails to make in Top 100 list due to falling below the thresholds, still, it is mandatory for the Company to hold their annual general meetings within a period of five months from the date of closing of the financial year.

 

APPLICABILITY OF CHAPTER IV I.E. OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS SPECIFIED SECURITIES

Once the Corporate Governance provisions become applicable to a listed entity because of crossing the threshold of paid up capital of Rupees ten crore and net worth of Rs, twenty five crore , then such provisions shall remain applicable to the Listed Company until for a period of 3 consecutive financial years. [Newly inserted proviso in Regulation 15(2)(a)]

 

COMPLIANCE CERTIFICATE W.R.T. SHARE TRANSFER FACILITY

Compliance Certificate by signed by Compliance officer and RTA is required to be filed once in a F.Y. within 30 days of the end of F.Y. (Earlier there was a requirement for filing of said certificate on half yearly basis) [Amendment in Reg 7(3)]

 

FUNCTIONS OF AUDIT COMMITTEE

Some roles has been added in the functions of Audit committee i.e. to consider and comment on rationale, cost-benefits and impact of schemes involving merger, demerger, amalgamation etc., on the listed entity and its shareholders (This is not a new requirement as the said roles was already provided in SEBI Circular dated November 03, 2020. This amendment came to aligns the provision of said circular with the requirements SEBI LODR Regulations. [Reg.18 r/w schedule II(c)]

 

RISK MANAGEMENT COMMITTEE (STRENGTHENING THE ROLE OF RISK MANAGEMENT COMMITTEE)

i. The Risk Management Committee (“RMC”) shall be required to have minimum three members with majority of them being members of the board of directors, including at least one independent director and in case of a listed entity having outstanding SR equity shares, at least two thirds of the Risk Management Committee shall comprise independent directors. (Earlier there was no requirement of minimum no. of members and independent Director in the RMC). [Amendment in Reg 21(2)]

ii. Now the RMC shall meet twice in a year. (Earlier there was a requirement of only one meeting in a year). [Amendment in Reg 21(3A)].

iii. The quorum for a meeting of the RMC shall be either two members or one third of the members of the committee, whichever is higher, including at least one member of the board of directors in attendance. [Newly inserted Regulation 21(3B)].

iv. Gap between 2 meetings of RMC shall not exceed 180 days (Earlier there was no requirement of minimum gap). [Newly inserted Regulation 21(3C)].

v. The new proviso has been added to fix the role and responsibilities of the Risk Management Committee which shall mandatorily include the performance of functions specified in Part D of Schedule II. [Newly inserted proviso to Reg 21(4)]

vi. Top 500 listed companies shall form RMC. (Earlier it was applicable to top 1000 listed companies). [Amendment in Reg 21(5)]

vii. Contents of Risk Management Policy:

a) A framework for identification of internal and external risks specifically faced by the listed entity, in particular including financial, operational, sectoral, sustainability (particularly, ESG related risks), information, cyber security risks or any other risk as may be determined by the Committee.

 

CORPORATE GOVERNANCE REQUIREMENTS WITH RESPECT TO SUBSIDIARY OF LISTED ENTITY.

A Listed entity shall not dispose of shares in its material subsidiary resulting in shareholding falling to 50% without passing Special Resolution. Earlier it was “less than 50%” [Amendment in Reg 24(5)]

 

SECRETARIAL AUDIT

i. Secretarial Audit Report of Material unlisted Subsidiaries Companies is required to be annexed with the Annual Report of Listed Company. (Earlier there was no specific clarity in the provisions) [Amendment in Reg 24A]

ii. The listed Company shall submit a secretarial compliance report to the stock exchanges, within sixty days from end of each financial year (This sub regulation has been added, just to incorporating the provisions of SEBI Circular dated February 8 2019, in SEBI LODR, Regulations. [Newly inserted Reg 24A(2)]

 

OBLIGATIONS WITH RESPECT TO INDEPENDENT DIRECTORS

The independent directors of the listed entity shall hold at least one meeting in a financial year. (Earlier there was requirement for holding meeting in a year instead of financial year) [Amendment in Reg 25]

b) Measures for risk mitigation including systems and processes for internal control of identified risks.

c) Business continuity plan Actions required to be taken by the Companies within 6 months from the date on which such regulations become applicable to listed entities as prescribed under proviso to Reg 15(2)(a)

Companies (501 to 1000) will have to constitute RMC. Existing companies to ensure composition in line with revised requirement

Terms of reference to be amended in line with quorum, minimum number of meetings, gap between two meetings of RMC and powers and responsibilities of the committee.

Risk Management Policy to be amended in line with amendments made.

 

 PRIOR INTIMATION OF BOARD MEETING 

for considering the proposal of declaration of bonus securities under Reg. 29(f) to be given to STX irrespective of whether the same is a part of the agenda papers of the BM. [Amendment in Reg 29(1)f)]

 

CONDITIONS FOR RE-CLASSIFICATION OF ANY PERSON AS PROMOTER / PUBLIC

[Amendment in Reg 31A((3)(a)]

i. Reduction in Time Gap: The time gap between the Board Meeting and the Shareholders meeting for the purpose of consideration of reclassification request should be minimum of 1 month and maximum of 3 months;

ii. Approval of Shareholders exempted where:

  • promoter(s) seeking reclassification and persons related to the promoter(s) seeking reclassification, together, do not hold more than 1 of the total voting rights in the listed entity
  • reclassification is pursuant to a divorce [Amendment in Reg 31A(9)]
  • Scope of exemption widened and Order of other regulator is also included for reclassification without following the conditions mentioned in the Regulation. [Newly Inserted Reg 31A(10)]

In case of reclassification pursuant to an open offer or a scheme of arrangement exemptions from the following provisions have been provided:

Regulation 31 A(3)(a): Approval of Shareholders and BODs

Regulation 31 A(3)(c)(i): ( Listed entity compliance with the condition of minimum public shareholding as required under regulation 38 of these regulations (available only in case of open offer)

Regulation 31A(8)(a)&(b): disclosure by listed entities to stock exchange

Clarification note: Exemption is available subject to the condition that the intent of the erstwhile promoter(s) to reclassify has been disclosed in the letter of offer or scheme of arrangement

 

STATEMENT OF DEVIATION(S) OR VARIATION(S)

Report from monitoring agency to be submitted to STX within 45 days from the end of each quarter (This is a new requirement as per amendment). [Amendment in Reg 32(6)]

 

FINANCIAL RESULTS

Earlier, the statement on Impact of Audit Qualification was required to be reviewed by the STX. Now this requirement has now been done away with. [Amendment in Reg 33(6) and 52(3)]

 

ANNUAL REPORT

Regulation 34(2)(f) mandates top one 1000 listed entities based on market capitalization to submit a Business responsibility report. The said requirement shall be discontinued after F.Y. 2021-22 and thereafter, with effect from the F.Y. 2022–23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report. However, even during the financial year 2021–22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report. [Amendment in Reg 34(2)(f)]

 

DOCUMENTS & INFORMATION TO SHAREHOLDERS

In case of the appointment of a new director or re-appointment of a director, shareholding of non-executive directors will also include the shareholding as a beneficial owner, which must be provided to the shareholders along with other prescribed information.(This is not a new requirement as Reg 26(4) which provided for the same has been omitted by these amendments and inserted under this Regulation [Amendment in Reg 36(3)(e)].

 

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