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Latest from the Regulator - May 2024
A Recap of recent amendments in SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015
The SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, serving as a linchpin for transparency and safeguarding stakeholder interests in listed entities have undergone substantial amendments. Some of the recent amendments over the last few months are given below:
1. Regulation 27(2)(ba): Cybersecurity Disclosures
In a forward-looking move, SEBI has mandated listed entities to disclose details of cybersecurity incidents, breaches, or loss of data in their quarterly Corporate Governance Reports (CGR).
This regulation, effective from July 14, 2023, is aimed to enhance transparency and safeguard the interests of investors and stakeholders in an era of increasing digital dependence. By addressing the growing threat of cyber risks, SEBI demonstrates its commitment to fortifying the resilience of the Indian capital markets
2. Regulations 17(1D), 31B, 37A: Shareholders' Approval
SEBI's amendments usher in a paradigm shift by necessitating shareholders' approval for the continuation of directors on a listed entity's board and for granting special rights to shareholders. This move empowers shareholders in decision-making processes, fostering a sense of governance and aligning the interests of management with those of investors.
Regulation 17(1D) - 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.
Regulation 31B – It provides that any special rights granted to the shareholders of a listed company require the approval of shareholders by way of special resolution in a general meeting, once in every five years from the date of granting of such special rights.
Regulation 37A - The requirement for shareholders' approval for significant business transactions has been introduced to enhance transparency of such decisions, and to safeguard the interest of the shareholder community.
3. Regulation 30(8): Enhanced Scrutiny on Communication Channels
The heightened scrutiny on communication channels, both mainstream and social media, ensures that information disseminated by key stakeholders is promptly disclosed. This move prevents information asymmetry and reinforces the regulator's commitment to maintaining a level playing field for all market participants. By addressing potential gaps in the dissemination of crucial information, SEBI aims to enhance investor confidence and mitigate the risk of market misinformation.
Regulation 30(8) - The listed entity shall disclose on its website all such events or information which has been disclosed to stock exchange(s) under this regulation, and such disclosures shall be hosted on the website of the listed entity for a minimum period of five years and thereafter as per the archival policy of the listed entity, as disclosed on its website.
The top 100 listed entities and thereafter the top 250 listed entities (as per market capitalization at the end of immediately preceding FY), with effect from the date as may be specified by the Board, shall confirm, deny or clarify any reported event or information in the media which is not general in nature and which indicates that rumours of an impending specific material event or information in terms of the provisions of this regulation are circulating amongst the investing public, as soon as reasonably possible and not later than twenty four hours from the reporting of the event or information.
4. Regulation 30(4): Expansion of Deemed Material Events
SEBI's amendments have broadened the scope of deemed material events, compelling listed entities to disclose information related to acquisitions, sale of stake in associate companies, and agreements among stakeholders that impact management or control. This expansion enhances transparency by bringing more critical events under regulatory scrutiny, providing stakeholders with a comprehensive view of a company's strategic decisions.
5. Regulation 30(4)(i)(c): Quantitative Thresholds and Materiality Criteria
The introduction of quantitative thresholds marks a paradigm shift in the regulatory landscape, underscoring SEBI's dedication to transparency in reporting material events. Now, a listed entity must disclose an event or information if its value or expected impact exceeds the lower of 2% of turnover, 2% of net worth, or 5% of the average of absolute value of profit or loss after tax, based on the last three audited consolidated financial statements.
The thorough examination of SEBI's LODR amendments highlights a strategic alignment with the shifting landscape of the Indian financial markets. These amendments serve as a proactive response to the challenges posed by a rapidly changing business environment.
Good Governance cannot remain merely a philosophy. Concrete steps have to be taken for realizing its goals.
Shri. Narendra Modi
Hon'ble Prime Minister, Govt. of India
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Institute of Directors India
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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 31,000 senior executives from Govt, PSU and Private organizations of India and abroad.
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