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Latest from the Regulator - November 2024

By- Institute of Directors


The Securities and Exchange Board of India (SEBI) introduced amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations in 2024, impacting compliance requirements for listed entities.

The following key compliance obligations are shared below:

1. Market Capitalization-Based Compliance
Regulation 3(2)

• Determination Period: SEBI now calculates market capitalization based on the average from July 1 to December 31 each year. Stock exchanges will publish the list of entities ranked by this average market capitalization as of December 31.

• Compliance Timeline: Entities identified in this list must comply with applicable provisions starting from April 1 of the following year or the beginning of the next financial year, whichever is later. For instance, companies listed as of December 31, 2024, are required to comply by April 1, 2025.

• Cessation of Applicability: If a company remains outside the specified market capitalization threshold for three consecutive years, the related compliance obligations cease to apply.

2. Rumour Verification Framework:
Regulation 30(11) and Regulation 4(1)(d)

• Material Price Movement: Listed entities must verify and respond to rumours in mainstream media that could lead to material price movements, as specified by stock exchanges. This includes confirming, denying, or clarifying such information within 24 hours of becoming aware of the material price movement.

• Obligations of Key Personnel: Promoters, directors, key managerial personnel, and senior management are obligated to provide accurate and timely responses to queries or explanations sought by the listed entity to comply with the rumour verification framework.

3. Risk Management Committee Meetings:
Regulation 21(3A)

• Meeting Frequency: The maximum interval between two consecutive Risk Management Committee meetings has been extended to 210 days, providing more flexibility in scheduling.

4. Filling of Key Managerial Positions:
Regulation 17(1C)

• Vacancy Period: If regulatory, statutory, or government approvals are required, vacancies in positions such as Chief Executive Officer, Managing Director, or Chief Financial Officer must be filled within six months from the date of vacancy.

5. Prior Intimation to Stock Exchanges:
Regulation 29(2)

• Uniform Timeline: A uniform period of two working days' prior intimation is now required for all specified events, excluding the date of the intimation and the date of the meeting. This standardizes the notification process for corporate actions.

6. Business Responsibility and Sustainability Reporting (BRSR) Extension
Regulation 34(2)(f)

• Details: BRSR reporting, earlier mandatory for the top 1000 listed entities by market capitalization, is now being extended to all listed companies in a phased manner.

• Compliance Date:
1. For the top 2500 entities: Mandatory by FY 2024-25. 2. All listed companies: Expected mandatory compliance by FY 2025-26.

7. Material Events Disclosure by Listed Entities
Regulation 30(1) and 30(4)

• Details: Listed entities are now required to disclose material events within 12 hours of their occurrence (reduced from 24 hours).

• Verification Clause: Companies must verify rumours reported in the media and disclose relevant information promptly.

• Board Oversight: Boards must periodically review the materiality policy for events and disclosures.

• Objective: To increase transparency and address price-sensitive information promptly.

8. Related Party Transactions (RPT) Detailed Disclosures
Regulation 23(9)

• Details: Enhanced disclosures for RPTs now include:
1. Justifications for entering into RPTs.
2. Nature and terms of the transaction.
3. Valuation reports for RPTs, if applicable.
4. Financial impacts on the listed entity.

• Reporting time: Disclosures must be submitted within 30 days of the half-year and disclosed on the entity's website for a period of at least 5 years.

• Objective: To strengthen transparency and protect minority shareholders.

9. Special Resolution for Related Party Transactions (RPTs) Exceeding C1000 Crore
Regulation 23(4)

• Details: All RPTs exceeding C1000 crore or 10% of the annual consolidated turnover (whichever is lower) now require prior approval by special resolution of the shareholders.

• Compliance Requirement: All material RPTs must have independent directors' prior approval in the audit committee.

• Voting on special resolutions excludes related parties.

• Objective: To ensure greater scrutiny and reduce potential conflicts of interest.

10. Amendments to Insider Trading Regulations
SEBI (Prohibition of Insider Trading) Regulations, 2015 – Amendments 2024

• Details:

• Structured Digital Database (SDD):

1. All listed entities must maintain a comprehensive Structured Digital Database (SDD) to track unpublished pricesensitive information (UPSI).

2. The database must include details of the recipients of UPSI, the nature of the information shared, and the date and time of sharing.

3. The SDD must be preserved for 8 years or until the conclusion of any legal proceedings, whichever is later.

• Trading Window Restrictions:
1. No trading is allowed during the trading window closure period, which applies to designated persons and their immediate relatives.
2. Window closure timelines for quarterly results are extended to seven days before the board meeting where results are discussed.

• Material UPSI Events: Companies must disclose any material UPSI within 24 hours of it being approved or occurring.

• Pre-Clearance Thresholds: Pre-clearance is now required for transactions beyond C10 lakh in a single quarter, including for immediate relatives of designated persons.

• Compliance Requirement:
1. Establish and maintain an SDD immediately.
2. Disclose all material UPSI and changes in trading windows promptly.
3. Designated persons must update their shareholding disclosures within 2 trading days of execution.

• Objective: To ensure transparency, prevent misuse of UPSI, and enhance monitoring of insider trading.

These comprehensive amendments aim to enhance transparency, strengthen governance frameworks, and foster accountability across listed entities. By addressing critical areas such as sustainability reporting, insider trading, related party transactions, and material disclosures, SEBI seeks to align corporate practices with global standards. Listed entities must thoroughly review these changes and implement robust processes to ensure timely and effective compliance, safeguarding stakeholder trust and meeting regulatory expectations.

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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.

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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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