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Latest from the Regulator - December 2024

By- Institute of Directors


Insights from the recent Board Meeting of Securities and Exchange Board of India (SEBI):

The recent board meeting of the Securities and Exchange Board of India (SEBI), held on December 18, 2024, marked a notable movement in the regulatory landscape of India's capital markets. The meeting resulted in a series of significant amendments aimed at mainly facilitating ease of doing business, enhancing corporate governance and improving transparency and also to protect stakeholders' interest. These changes are particularly relevant for Corporate Boards as they navigate the implications for compliance, reporting, and strategic decision-making. Each of these areas contains specific amendments that will refocus corporate governance practices within boardrooms.

This coverage, as compiled from available inputs, is aimed to elucidate, inter alia, majority of the changes, emphasizing and identifying their implications for board dynamics, compliance requirements, and overall governance framework.

Overview of Key Changes

1. Business Responsibility and Sustainability Reporting (BRSR)

Standardized guidance on BRSR core disclosures: SEBI has proposed introduction of standardised guidance for BRSR Core disclosures. This framework aims to enhance the quality of sustainability reporting among listed entities. Boards must ensure compliance with these standards to improve transparency and accountability in their sustainability practices.

Disclosure of green credits: A new leadership indicator has been added to Principle 6 of BRSR, mandating the disclosure of Green Credits generated or procured by listed entities and their top ten value chain partners. This requirement emphasizes the need for boards to engage actively with their partners to collect accurate data on environmental impacts. Boards should foster collaborative sustainability initiatives and lead efforts to innovate operational practices that generate Green Credits.

2. Value Chain Disclosure and ESG Assurance

Relaxation in timelines for ESG disclosures: The timelines for ESG disclosures related to value chain partners have been extended to FY 2025-26, allowing boards' additional time to strengthen internal systems for data collection. This postponement provides an opportunity for boards to build their organizational capacity in ESG reporting.

Voluntary Disclosure Framework: The shift from a "comply-and-explain" approach to voluntary disclosures enables boards to gradually adapt their reporting practices while aligning with industry benchmarks. This flexibility allows boards to use the initial reporting period to gather baseline data and identify gaps in their sustainability strategies.

3. Regulations for ESG Rating Providers

Simultaneous Sharing of ESG Rating Reports: Amendments allow ESG Rating Providers (ERPs) to share rating reports simultaneously with subscribers and rated issuers.

4. High-Value Debt Listed Entities (HVDLE)

Increased Threshold Limits: The threshold for identifying HVDLEs has been raised from Rs. 500 crores to Rs. 1000 crores.

Corporate Governance Norms: A separate chapter for corporate governance norms specific to HVDLEs has been proposed in the SEBI (LODR) Regulations, 2015, establishing tailored governance requirements covering Sunset Clause, Flexibility in Committee Structures, No Objection Certificate Requirement, Adjustments in calculation for cap in Directorship, Relaxation for PPP Entities and Voluntary BRSR Adoption.

5. Regulations for Small and Medium Enterprises (SMEs)

Enhanced Corporate Governance Norms: Corporate Governance provisions under SEBI's LODR Regulations have been extended to SMEs, promoting higher standards of governance in smaller firms.

6. Regulatory Responsibility for Use of Artificial Intelligence

New regulations assign responsibility for the use of artificial intelligence tools to market infrastructure institutions and SEBI registered intermediaries.

SEBI regulated entities will be required to take complete responsibility for any AI tools they utilize, whether developed in-house or procured from third-party providers. Entities must ensure the privacy, security, and integrity of investor and stakeholder data throughout all processes involving AI.

Important Takeaways

The changes instituted by SEBI necessitate re-evaluation of corporate governance practices within boardrooms: practices, financial health etc..., periodically and as required. , to ensure value addition in the hands of stakeholders.

6. Training Programs:

• To meet new governance standards effectively, boards may need training programs focused on compliance, risk management, ethical decision-making, and emerging trends impacting corporate governance.

Conclusion

These regulatory changes emphasise SEBI's commitment to fostering a transparent, accountable, and sustainable business environment. For boards, this means an increased emphasis on compliance, enhanced corporate governance practices, and a proactive approach towards sustainability reporting. As these regulations come into effect, it is crucial for boards to adapt swiftly, ensuring that they not only meet regulatory requirements but also position themselves as leaders in corporate governance and sustainability within their respective sectors. Future updates will delve deeper into additional regulatory provisions as they unfold.

Compiled by:
Mr. K. Venkataraman
Practicing Company Secretary

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Institute of Directors India

Institute of Directors India

Bringing a Silent Revolution through the Boardroom

Institute of Directors (IOD) is an apex national association of Corporate Directors under the India's 'Societies Registration Act XXI of 1860'​. Currently it is associated with over 30,000 senior executives from Govt, PSU and Private organizations of India and abroad.

Owned by: Institute of Directors, India

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    Institute of Directors India

    Bringing a Silent Revolution through the Boardroom

    Institute of Directors (IOD) is an apex national association of Corporate Directors under the India's 'Societies Registration Act XXI of 1860'​. Currently it is associated with over 30,000 senior executives from Govt, PSU and Private organizations of India and abroad.

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