Sasi K.G.
01. INTRODUCTION
The Securities and Exchange
Board of India (SEBI) is the regulator
for the securities market in India. Companies Act, 2013 confers many statutory
duties to SEBI including prescribing guidelines and to punish the breach of the
same through procedure established by law. Disclosure of certain facts as per
Companies Act is a statutory condition for the listing of companies for which
SEBI is entrusted with its control and supervision. SEBI has issued SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
(Last amended on February 15, 2017) in this regard. The
present study deals with in detail with that guidelines.
02. SECURITIES AND EXCHANGE BOARD OF INDIA
SEBI was established in the year
1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992
and was functional on April 12, 1992 in accordance with the provisions of the
Securities and Exchange Board of India Act, 1992. The Act was amended in the
years 1995, 1996, 1999, 2001, 2002, 2010, 2013, 2014 and 2017 to meet the
requirements of changing needs of the securities market.
SEBI has its headquarters at the
business district of Bandra Kurla Complex in Mumbai,
and has Northern, Eastern, Southern and Western Regional Offices in New Delhi,
Kolkata,
Chennai
and Ahmedabad
respectively. It has opened local offices at Jaipur, Bangalore, Guwahati,
Bhubaneshwar, Patna, Kochi and Chandigarh.
01. Constitution of SEBI
SEBI is
managed by the following members of the board:
- The Chairman who is nominated by the Union Government of India.
- Two members from the Union Finance Ministry
- One member from the Reserve Bank of India
- The remaining 5 members are nominated by the Union Government of India, out of them
SEBI has to
be responsive to 3 groups which constitute the market:
- The issuer of securities
- The investor
- The market intermediaries
Following are
the powers vested in SEBI:
- To regulate and approve by-laws of stock exchanges
- Inspect the books of accounts of recognized stock exchanges and call for periodical returns
- Inspect the books of financial Intermediaries.
- Compel certain companies to get listed on one or more stock exchanges
- To handle the registration of brokers
SEBI
exercises it’s powers by passing any one of the following from time to time
- Orders
- Regulations – A list of all regulations passed by SEBI
- Rules
- SEBI Master Circulars
- SEBI Circulars – A list of all circulars passed by SEBI from time to time
All market
participants are bound by the above.
SEBI
functions and roles have been reviewed along the following major
areas:
- Primary Markets: SEBI has regulated the primary market through
- The regulation of issuers’ access to market
- Regulation of information production at the time of issue
- Regulation of processes and procedures relating to issuance of securities
- Disclosure: Disclosure standards are not limited to accounting information but was extended to other issue related communications such as advertisements.
- Corporate Governance: SEBI has made a constant effort to improve the standards of Corporate Governance in India.
- Settlement Systems
- Dematerialization of securities
- Institutionalization of Trading and ownership of securities
- Market Integrity and Insider Trading
SEBI has commenced
regulating the commodity derivatives market under the Securities Contract
Regulation Act (SCRA) 1956 with effect from September 28 2015, and the Forward
Contracts Regulation Act (FCRA) 1952 got replaced with effect from September 29
2015.
02. Functions of SEBI
SEBI's Preamble describes in detail the functions and powers of the
board. Its Preamble states that SEBI must "protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market and for matters connected there with or incidental there
to." In this light, as a board, SEBI must be responsive and proactive to
the needs and interest of the groups that constitute India's financial and
investment markets: the investors, the market intermediaries and the issuers of
securities.
SEBI is allowed to approve by-laws of stock exchanges. It is its job to
require the stock exchange to follow its by-laws. SEBI also inspects the books
of accounts of financial intermediaries and asks for regular returns from
recognized stock exchanges. SEBI's role covers compelling particular companies
to list their shares in stock exchanges. Aside from these, SEBI is tasked to
manage the registration of brokers.
Ultimately, the board has three powers: quasi-judicial, quasi-legislative
and quasi-executive. SEBI has the right to draft regulations under its
legislative capacity, conduct investigations and impose action under its
executive function, and pass new rules and orders under its judicial capacity.
Despite these powers, the results of SEBI's functions still have to go through
the Securities Appellate Tribunal and the Supreme Court of India.
Below
are a few examples of some of SEBI's functions:
·
Regulating
the business in stock exchanges and other securities exchange markets.
·
Registering
and regulating the work of stock brokers and other intermediaries that may have
an association with securities markets.
·
Prohibit
fraudulent and unfair trade activities within the securities market.
·
Prohibit
insider trading inside the securities market.
03. COMPANIES LAW AND DISCLOSURE
The following
provisions in the Company Law, 2013 and the Companies (Share
Capital and Debentures) Rules, 2014 deal with disclosure.
01. Statutory Provisions on Disclosure as per Company Law
Companies Act, 2013 have numerous provisions necessitating
disclosure of facts. Actually disclosure is a means on transparency and a
safeguard against fraud and corruption. However certain information are kept as
non-revealable.
Section 26. Matters to be stated in prospectus of the Act, Sub
section (1) clause (a) mandates that “every prospectus issued by or on
behalf of a public company either with reference to its formation or
subsequently, or by or on behalf of any person who is or has been engaged or
interested in the formation of a public company, shall be dated and signed and
shall—
(a) state the following information, namely:—
(i) names and addresses of the registered office of
the company, company secretary, Chief Financial Officer, auditors, legal
advisers, bankers, trustees, if any, underwriters and such other persons as may
be prescribed;
(ii) dates of the opening and closing of the issue,
and declaration about the issue of allotment letters and refunds within the
prescribed time;
(iii) a statement by the Board of Directors about the
separate bank account where all monies received out of the issue are to be
transferred and disclosure of details of all monies including utilised and
unutilised monies out of the previous issue in the prescribed manner;
(xiv) disclosures in such manner as may be prescribed
about sources of promoter‘s contribution.”
Section 67. Restriction on purchase by company or giving of
loans by it for purchase of its shares Subsection (3) (c) provides
that disclosures in respect of voting rights not exercised directly by the
employees in respect of shares to which the scheme relates shall be made in the
Board's report in such manner as may be prescribed.
Section 68. Power of company to purchase its own securities Subsection (3)
provides that the notice of the meeting at which the special resolution is
proposed to be passed under clause (b) of sub-section (2) shall
be accompanied by an explanatory statement stating a full and complete
disclosure of all material facts;
Section
69.
Transfer of certain sums to capital redemption reserve account Subsection (1) provides that where a company
purchases its own shares out of free reserves or securities premium account, a
sum equal to the nominal value of the shares so purchased shall be transferred
to the capital redemption reserve account and details of such transfer shall be
disclosed in the balance sheet.
Section
89.
Declaration in respect of beneficial interest in any share Subsection (4) provides that the Central
Government may make rules to provide for the manner of holding and disclosing
beneficial interest and beneficial ownership under this section.
Section
92.
Annual return Subsection (1) Every company shall prepare a
return (hereinafter referred to as the annual return) in the prescribed form
containing the particulars as they stood on the close of the financial year
regarding—
(i) matters relating to certification of compliances,
disclosures as may be prescribed;
(2) The annual return, filed by a listed company or,
by a company having such paid-up capital and turnover as may be prescribed,
shall be certified by a company secretary in practice in the prescribed form,
stating that the annual return discloses the facts correctly and adequately and
that the company has complied with all the provisions of this Act.
Section
102.
Statement to be annexed to notice Subsection
(4)
provides that where as a
result of the non-disclosure or insufficient disclosure in any statement
referred to in sub-section (1), being made by a promoter, director,
manager, if any, or other key managerial personnel, any benefit which accrues
to such promoter, director, manager or other key managerial personnel or their
relatives, either directly or indirectly, the promoter, director, manager or
other key managerial personnel, as the case may be, shall hold such benefit in
trust for the company, and shall, without prejudice to any other action being
taken against him under this Act or under any other law for the time being in
force, be liable to compensate the company to the extent of the benefit
received by him.
Section
129.
Financial statement Subsection (1) provides that the financial
statements shall give a true and fair view of the state of affairs of the
company or companies, comply with the accounting standards notified under
section 133 and shall be in the form or forms as may be provided for different
class or classes of companies in Schedule III:
Provided also that the financial statements shall not be
treated as not disclosing a true and fair view of the state of affairs of the
company, merely by reason of the fact that they do not disclose—
(a) in the case of an insurance company, any matters
which are not required to be disclosed by the Insurance Act, 1938 (4 of 1938),
or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(b) in the case of a banking company, any matters
which are not required to be disclosed by the Banking Regulation Act, 1949 (10
of 1949);
(c) in the case of a company engaged in the generation
or supply of electricity, any matters which are not required to be disclosed by
the Electricity Act, 2003 (36 of 2003);
(d) in the case of a company governed by any other law
for the time being in force, any matters which are not required to be disclosed
by that law.
Subsection (5) provides that “without
prejudice to sub-section (1), where the financial statements of a
company do not comply with the accounting standards referred to in sub-section
(1), the company shall disclose in its financial statements, the
deviation from the accounting standards, the reasons for such deviation and the
financial effects, if any, arising out of such deviation.”
Section
131.
Voluntary revision of financial statements or Board‘s report Subsection (1) provides that “if it appears
to the directors of a company that—
(a) the financial statement of the company; or
(b) the report of the Board,
do not comply with the provisions of section 129 or section
134 they may prepare revised financial statement or a revised report in respect
of any of the three preceding financial years after obtaining approval of the
Tribunal on an application made by the company in such form and manner as may
be prescribed and a copy of the order passed by the Tribunal shall be filed
with the Registrar:
Provided also that the detailed reasons for revision of such
financial statement or report shall also be disclosed in the Board's report in
the relevant financial year in which such revision is being made.”
Section
135.
Corporate Social Responsibility provides
that
“every company having net worth of rupees five hundred crore or more, or
turnover of rupees one thousand crore or more or a net profit of rupees five
crore or more during any financial year shall constitute a Corporate Social
Responsibility Committee of the Board consisting of three or more directors,
out of which at least one director shall be an independent director.
(2) The Board's report under sub-section (3) of
section 134 shall disclose the composition of the Corporate Social
Responsibility Committee. and
“(4) The Board of every company referred to in
sub-section (1) shall,—
(a) after taking into account the recommendations made
by the Corporate Social Responsibility Committee, approve the Corporate Social
Responsibility Policy for the company and disclose contents of such Policy in
its report and also place it on the company's website, if any, in such manner
as may be prescribed.”
Section
149.
Company to have Board of Directors Subsection
(10) provides that “subject to the provisions of section 152, an independent
director shall hold office for a term up to five consecutive years on the Board
of a company, but shall be eligible for reappointment on passing of a special
resolution by the company and disclosure of such appointment in the Board's
report.”
Section
167.
Vacation of office of director Subsection (1) (d) provides that the office of a director shall become
vacant “in case he fails to disclose his interest in any contract or
arrangement in which he is directly or indirectly interested, in contravention
of the provisions of section 184.”
Section
177.
Audit Committee Subsection (8) provides that “the Board‘s
report under sub-section (3) of section 134 shall disclose the
composition of an Audit Committee and where the Board had not accepted any
recommendation of the Audit Committee, the same shall be disclosed in such
report along with the reasons therefor. Subsection
(10)
provides that “the vigil mechanism under sub-section (9) shall provide
for adequate safeguards against victimisation of persons who use such mechanism
and make provision for direct access to the chairperson of the Audit Committee
in appropriate or exceptional cases:
Provided that the details of establishment of such mechanism
shall be disclosed by the company on its website, if any, and in the Board‘s
report.”
Section
182.
Prohibitions and restrictions regarding political contributions Subsection (3) provides that “every company
shall disclose in its profit and loss account any amount or amounts contributed
by it to any political party during the financial year to which that account
relates, giving particulars of the total amount contributed and the name of the
party to which such amount has been contributed.”
Section
183.
Power of Board and other persons to make contributions to national defence
fund, etc. Subsection
(2) provides that “every company shall disclose in its profits and loss
account the total amount or amounts contributed by it to the National Defence Fund referred to in
sub-section (1) during the financial year to which the amount relates.”
Section
184.
Disclosure of interest by director provides
that
“(1) Every director shall at the first meeting of the Board in which he
participates as a director and thereafter at the first meeting of the Board in
every financial year or whenever there is any change in the disclosures already
made, then at the first Board meeting held after such change, disclose his
concern or interest in any company or companies or bodies corporate, firms, or
other association of individuals which shall include the shareholding, in such
manner as may be prescribed.
(2) Every director of a company who is in any way,
whether directly or indirectly, concerned or interested in a contract or
arrangement or proposed contract or arrangement entered into or to be entered
into—
(a) with a body corporate in which such director or
such director in association with any other director, holds more than two per
cent. shareholding of that body corporate, or is a promoter, manager, Chief
Executive Officer of that body corporate; or
(b) with a firm or other entity in which, such
director is a partner, owner or member, as the case may be,
shall disclose the nature of his concern or interest at the
meeting of the Board in which the contract or arrangement is discussed and
shall not participate in such meeting:
Provided that where any director who is not so concerned or
interested at the time of entering into such contract or arrangement, he shall,
if he becomes concerned or interested after the contract or arrangement is
entered into, disclose his concern or interest forthwith when he becomes
concerned or interested or at the first meeting of the Board held after he
becomes so concerned or interested.
(3) A contract or arrangement entered into by the
company without disclosure under sub-section (2) or with participation
by a director who is concerned or interested in any way, directly or indirectly,
in the contract or arrangement, shall be voidable at the option of the company.
(4) If a director of the company contravenes the
provisions of sub-section (1) or subsection (2), such director
shall be punishable with imprisonment for a term which may extend to one year
or with fine which shall not be less than fifty thousand rupees but which may
extend to one lakh rupees, or with both.
(5) Nothing in this section—
(a) shall be taken to prejudice the operation of any
rule of law restricting a director of a company from having any concern or
interest in any contract or arrangement with the company;
(b) shall apply to any contract or arrangement entered
into or to be entered into between two companies where any of the directors of
the one company or two or more of them.”
Section
189.
Register of contracts or arrangements in which directors are interested Subsection (2) provides that “every director
or key managerial personnel shall, within a period of thirty days of his
appointment, or relinquishment of his office, as the case may be, disclose to
the company the particulars specified in sub-section (1) of section 184
relating to his concern or interest in the other associations which are
required to be included in the register under that sub-section or such other
information relating to himself as may be prescribed.”
Section
197.
Overall maximum managerial remuneration and managerial remuneration in case of
absence or inadequacy of profits Subsection
12 and 14 provide that
“(12) Every listed company shall disclose in the
Board‘s report, the ratio of the remuneration of each director to the median
employee‘s remuneration and such other details as may be prescribed.
(14) Subject to the provisions of this section, any
director who is in receipt of any commission from the company and who is a
managing or whole-time director of the company shall not be disqualified from
receiving any remuneration or commission from any holding company or subsidiary
company of such company subject to its disclosure by the company in the Board‘s
report.”
Section
206.
Power to call for information, inspect books and conduct inquiries Subsection (3) provides that “if no
information or explanation is furnished to the Registrar within the time
specified under sub-section (1) or if the Registrar on an examination of
the documents furnished is of the opinion that the information or explanation
furnished is inadequate or if the Registrar is satisfied on a scrutiny of the
documents furnished that an unsatisfactory state of affairs exists in the
company and does not disclose a full and fair statement of the information
required, he may, by another written notice, call on the company to produce for
his inspection such further books of account, books, papers and explanations as
he may require at such place and at such time as he may specify in the notice:
Provided that before any notice is served under this
sub-section, the Registrar shall record his reasons in writing for issuing such
notice.”
Section
227.
Legal advisors and bankers not to disclose certain information provides that “nothing in
this Chapter shall require the disclosure to the Tribunal or to the Central
Government or to the Registrar or to an inspector appointed by the Central
Government—
(a) by a legal adviser, of any privileged
communication made to him in that capacity, except as respects the name and
address of his client; or
(b) by the bankers of any company, body corporate, or
other person, of any information as to the affairs of any of their customers,
other than such company, body corporate, or person.”
Section
230.
Power to compromise or make arrangements with creditors and members Subsection (2) provides that “(2) The
company or any other person, by whom an application is made under subsection (1),
shall disclose to the Tribunal by affidavit—
(a) all material facts relating to the company, such
as the latest financial position of the company, the latest auditor‘s report on
the accounts of the company and the pendency of any investigation or
proceedings against the company;
(b) reduction of share capital of the company, if any,
included in the compromise or arrangement;
(c) any scheme of corporate debt restructuring
consented to by not less than seventy-five per cent. of the secured creditors
in value, including—
(i) a creditor‘s responsibility statement in the
prescribed form;
(ii) safeguards for the protection of other secured
and unsecured creditors;
(iii) report by the auditor that the fund requirements
of the company after the corporate debt restructuring as approved shall conform
to the liquidity test based upon the estimates provided to them by the Board;
(iv) where the company proposes to adopt the corporate
debt restructuring guidelines specified by the Reserve Bank of India, a
statement to that effect; and
(v) a valuation report in respect of the shares and
the property and all assets, tangible and intangible, movable and immovable, of
the company by a registered valuer.
(3) Where a meeting is proposed to be called in
pursuance of an order of the Tribunal under sub-section (1), a notice of
such meeting shall be sent to all the creditors or class of creditors and to
all the members or class of members and the debenture-holders of the company,
individually at the address registered with the company which shall be
accompanied by a statement disclosing the details of the compromise or
arrangement, a copy of the valuation report, if any, and explaining their
effect on creditors, key managerial personnel, promoters and non-promoter
members, and the debenture-holders and the effect of the compromise or
arrangement on any material interests of the directors of the company or the
debenture trustees, and such other matters as may be prescribed.”
Section 238. Registration of offer of schemes involving
transfer of shares,
Section 272.
Petition for winding up, Section
275.
Company Liquidators and their appointments, Section 291. Provision for professional assistance to Company
Liquidator, Section 336. Offences by
officers of companies in liquidation etc contain similar provisions
Section
457.
Non-disclosure of information in certain cases however provides
the contrary that “notwithstanding anything contained in any other law for the
time being in force, the Registrar, any officer of the Government or any other
person shall not be compelled to disclose to any court, Tribunal or other
authority, the source from where he got any information which—
(a) has led the Central Government to order an
investigation under section 210; or
(b) is or has been material or relevant in connection
with such investigation.”
01. Provisions on Disclosure vide Companies (Share Capital and Debentures) Rules, 2014
Central government by its Rule making power has made Companies (Share Capital and
Debentures) Rules, 2014 which contains disclosure provisions.
Rule 12. Issue
of employee stock options prescribes that if the
issue of Employees Stock Option Scheme has been approved by the shareholders of
the company by passing a special resolution, “(2) The company shall make the
following disclosures in the explanatory statement annexed to the notice for
passing of the resolution—
(a) the total
number of stock options to be granted;
(b) identification
of classes of employees entitled to participate in the Employees Stock Option
Scheme;
(c) the
appraisal process for determining the eligibility of employees to the Employees
Stock Option Scheme;
(d) the
requirements of vesting and period of vesting;
(e) the maximum
period within which the options shall be vested;
(f) the exercise
price or the formula for arriving at the same;
(g) the exercise
period and process of exercise;
(h) the Lock-in
period, if any;
(i) the maximum
number of options to be granted per employee and in aggregate;
(j) the method
which the company shall use to value its options;
(k) the
conditions under which option vested in employees may lapse e.g. in case
of termination of employment for misconduct;
(l) the
specified time period within which the employee shall exercise the vested
options in the event of a proposed termination of employment or resignation of
employee; and
(m) a statement
to the effect that the company shall comply with the applicable accounting
standards.
Rule 13. Issue of
shares on preferential basis, Sub Rule (2) (d) prescribes that “the company shall make the
following disclosures in the explanatory statement to be annexed to the notice
of the general meeting pursuant to section 102 of the Act:
(i) . the
objects of the issue;
(ii) the total
number of shares or other securities to be issued;
(i)
the price or price band at/within which the allotment is
proposed;
(ii)
basis on which the price has been arrived at along with
report of the registered valuer;
(iii)
relevant date with reference to which the price has been
arrived at;
(iv)
the class or classes of persons to whom the allotment is
proposed to be made;
(v)
intention of promoters, directors or key managerial personnel
to subscribe to the offer;
(vi)
the proposed time within which the allotment shall be
completed;
(vii)
the names of the proposed allottees and the percentage of
post preferential offer capital that may be held by them;
(viii)
the change in control, if any, in the company that would
occur consequent to the preferential offer;
(ix)
the number of persons to whom allotment on preferential basis
have already been made during the year, in terms of number of securities as
well as price;
(x)
the justification for the allotment proposed to be made for
consideration other than cash together with valuation report of the registered
valuer;
(xi)
The pre issue and post issue shareholding pattern of the
company in the following format—
Sr. No.
|
Category
|
No. of Shares held
|
Pre Issue % of
shareholding
|
No. of Shares held
|
Post Issue % of
shareholding
|
A
|
Promoters' holding
|
||||
1
|
Indian :
|
||||
Individual
|
|||||
Bodies Corporate
|
|||||
Sub-Total
|
|||||
2
|
Foreign Promoters
|
||||
Sub-Total (A)
|
|||||
B
|
Non-Promoters' holding
|
||||
1
|
Institutional Investors
|
||||
2
|
Non-Institution :
|
||||
Private Corporate Bodies
|
|||||
Directors and Relatives
|
|||||
Indian Public
|
|||||
Others (Including NRIs)
|
|||||
Sub-Total (B)
|
|||||
GRAND TOTAL
|
(h) where
convertible securities are offered on a preferential basis with an option to
apply for and get equity shares allotted, the price of the resultant shares
pursuant to conversion shall be determined—
(i) either
upfront at the time when the offer of convertible securities is made, on the
basis of valuation report of the registered valuer given at the stage of such
offer, or
(ii) at the
time, which shall not be earlier than thirty days to the date when the holder
of convertible security becomes entitled to apply for shares, on the basis of
valuation report of the registered valuer given not earlier than sixty days of
the date when the holder of convertible security becomes entitled to apply for
shares:
Provided that the company
shall take a decision on sub-clauses (i) or (ii) at the time of offer of
convertible security itself and make such disclosure under sub-clause (v) of clause
(d) of sub-rule (2) of this rule.]
Rule 17. Buy-back of shares or
other securities prescribes
that, “Unless stated otherwise, the following norms shall be complied with by
the private companies and unlisted public companies for buy-back of their
securities—
(1) The explanatory statement to be annexed to the notice
of the general meeting pursuant to section 102 shall contain the following
disclosures, namely:—
(a)
|
the date of the board meeting at which the proposal for
buy-back was approved by the board of directors of the company;
|
(b)
|
the objective of the buy-back;
|
(c)
|
the class of shares or other securities intended to be
purchased under the buy-back;
|
(d)
|
the number of securities that the company proposes to
buy-back;
|
(e)
|
the method to be adopted for the buy-back;
|
(f)
|
the price at which the buy-back of shares or other
securities shall be made;
|
(g)
|
the basis of arriving at the buy-back price;
|
(h)
|
the maximum amount to be paid for the buy-back and the
sources of funds from which the buy-back would be financed;
|
(i)
|
the time-limit for the completion of buy-back;
|
(j)
|
(i) the aggregate shareholding of the promoters
and of the directors of the promoter, where the promoter is a company and of
the directors and key managerial personnel as on the date of the notice convening
the general meeting;
|
(ii) the aggregate number of equity shares purchased or sold by
persons mentioned in sub-clause (i) during a period of twelve months
preceding the date of the board meeting at which the buy-back was approved
and from that date till the date of notice convening the general meeting;
|
|
(iii) the maximum and minimum price at which purchases and sales
referred to in sub-clause (ii) were made along with the relevant date;
|
|
(k)
|
if the persons mentioned in sub-clause (i) of
clause (j) intend to tender their shares for buy-back—
|
(i)
|
the quantum of shares proposed to be tendered;
|
(ii)
|
the details of their transactions and their holdings
for the last twelve months prior to the date of the board meeting at which
the buy-back was approved including information of number of shares acquired,
the price and the date of acquisition;
|
(l)
|
a confirmation that there are no defaults subsisting in
repayment of deposits, interest payment thereon, redemption of debentures or
payment of interest thereon or redemption of preference shares or payment of
dividend due to any shareholder, or repayment of any term loans or interest
payable thereon to any financial institution or banking company;
|
(m)
|
a confirmation that the Board of directors have made a
full enquiry into the affairs and prospects of the company and that they have
formed the opinion—
|
(i)
|
that immediately following the date on which the
general meeting is convened there shall be no grounds on which the company
could be found unable to pay its debts;
|
(ii)
|
as regards its prospects for the year immediately
following that date, that, having regard to their intentions with respect to
the management of the company's business during that year and to the amount
and character of the financial resources which will in their view be
available to the company during that year, the company shall be able to meet
its liabilities as and when they fall due and shall not be rendered insolvent
within a period of one year from that date; and
|
(iii)
|
the directors have taken into account the liabilities
(including prospective and contingent liabilities), as if the company were
being wound up under the provisions of the Companies Act, 2013
|
(n)
|
a report addressed to the Board of directors by the
company's auditors stating that—
|
(i)
|
they have inquired into the company's state of affairs;
|
(ii)
|
the amount of the permissible capital payment for the
securities in question is in their view properly determined;
|
(iii)
|
that the audited accounts on the basis of which
calculation with reference to buy back is done is not more than six months
old from the date of offer document:
|
1 [Provided that where the audited accounts
are more than six months old, the calculations with reference to buy back
shall be on the basis of un-audited accounts not older than six months from
the date of offer document which are subjected to limited review by the
auditors of the company.]
|
|
(iv)
|
the Board of directors have formed the opinion as specified
in clause (m) on reasonable grounds and that the company, having
regard to its state of affairs, shall not be rendered insolvent within a
period of one year from that date.
|
04. SEBI GUIDELINES ON DISCLOSURE REQUIREMENTS
01. SEBI Some Recent Interventions
SEBI
on the first week of November, 2015, issued a series of circulars pursuant to
the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
(“Listing Regulations”), which seek to streamline and enhance the disclosure
obligations of listed companies. The three different circulars are briefly
discussed below.
01. Shareholder Voting Results
In
the case of shareholders’ meetings, SEBI has prescribed that a listed company
must submit to the stock exchange the results of voting within 48 hours of the
meeting. The details submitted must include the date of the meeting, the total
number of shareholders as on the record date, and the numbers of those who
attend in person or by proxy and those via video conferencing. The details
should also include an agenda-wise break-up and whether a matter requires an
ordinary resolution or special resolution.
More
importantly, the total number of votes polled must be split into three
categories, namely (i) promoter and promoter group, (ii) public institutions,
and (iii) public non-institutions.
This
way, shareholders and the investing public will be clearly in a position to
ascertain the manner in which votes were cast, and also the attitude of
promoters as well as institutional shareholders. Since institutional
shareholders are becoming more influential in the voting process, this
disaggregated information will be helpful to the investors.
Another
piece of information to be disclosed is whether the promoter or promoter group
are interested in the agenda or resolution. This would become crucial in
related party transactions as well as M&A deals between group companies.
Overall, the transparency initiatives are welcome as it could help boost
shareholder participation.
02. Business Responsibility Reporting
In
addition to shareholder value, both the Companies Act as well as SEBI’s
regulations have focused on stakeholder responsibility. Hitherto, the reporting
of these aspects was
governed through the Government of India’s “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business”. The reporting requirements have now been subsumed into the Listing Regulations, due to which SEBI has streamlined the disclosures as well.
governed through the Government of India’s “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business”. The reporting requirements have now been subsumed into the Listing Regulations, due to which SEBI has streamlined the disclosures as well.
SEBI’s
objectives are evident in its statement as follows:
At
a time and age when enterprises are increasingly seen as critical components of
the social system, they are accountable not merely to their shareholders from a
revenue and profitability perspective but also to the larger society which is
also its stakeholder. Hence, adoption of responsible business practices in the
interest of the social set –up and the environment are as vital as their
financial and operational performance. This is all the more relevant for listed
entities which, considering the fact that they have accessed funds from the
public, have an element of public interest involved, and are obligated to make
exhaustive continuous disclosures on a regular basis.
The
disclosure requirements span a number of different aspects of social
responsibility such as ethics, bribery and corruption, product matters,
employment, human rights and the like. SEBI’s circular also contains detailed
Principles to Assess Compliance with Environmental, Social and Governance
Norms.
03. Reporting for IDRs
Listed
companies with Indian Depository Receipts (IDRs) are required to file with the
stock exchange the holding pattern of IDRs within 15 days of the end of each
quarter. They are also required to submit to the stock exchange a comparative
analysis of the corporate governance provisions that are applicable in its home
country and in other jurisdictions in which its equity shares are listed along
with the compliance of the same vis-à-vis the corporate governance requirements
under the Listing Regulations. This will provide more information to the
investors regarding governance requirements and compliance. SEBI has also
prescribed detailed procedures for two-way fungibility of IDRs. Among the
various disclosures requirements, those pertaining to IDRs may be least
significant given that hardly any companies have made use of the market for IDR
offerings.
These
actions were based on a recent amendment of SEBI guidelines.
02. Company Law and SEBI
There are numerous provisions in Companies Act, 2013
empowering SEBI in various aspects of the functioning of companies.
Section 23 provides
that “(1) A public company may issue securities—
(a) to public through prospectus (herein referred
to as "public offer") by complying with the provisions of this Part;
or
(b) through private placement by complying with
the provisions of Part II of this Chapter; or
(c) through a rights issue or a bonus issue in
accordance with the provisions of this Act and in case of a listed company or a
company which intends to get its securities listed also with the provisions of
the Securities and Exchange Board of India Act, 1992 and the rules and
regulations made thereunder.”
Section 24. Power of
Securities and Exchange Board to regulate issue and transfer of securities, etc
provides that “(1) The provisions contained in this
Chapter, Chapter IV and in section 127 shall,—
(a) in so far as they relate to —
(i) issue and transfer of securities; and
(ii) non-payment of dividend, by listed companies or
those companies which intend to get their securities listed on any recognised stock exchange in India, except as provided under this Act, be administered by
the Securities and Exchange Board by making regulations in this behalf;
(b) in any other case, be administered by the Central
Government.
Explanation.— For the removal of doubts, it is hereby
declared that all powers relating to all other matters relating to prospectus,
return of allotment, redemption of preference shares and any other matter specifically provided in this Act, shall be
exercised by the Central Government, the Tribunal or the Registrar, as the case
may be.
(2) The Securities and Exchange Board shall, in respect
of matters specified in subsection (1) and the matters delegated to it
under proviso to sub-section (1) of section 458, exercise the powers
conferred upon it under sub-sections (1), (2A), (3) and (4)
of section 11, sections 11A, 11B and 11D of the Securities and Exchange Board
of India Act, 1992.”
Section 26 provides
that “(1) Every prospectus issued by or on behalf of a public
company either with reference to its formation or subsequently, or by or on
behalf of any person who is or has been engaged or interested in the formation
of a public company, shall be dated and signed and shall—
……………..
(c) make a declaration about the compliance of the
provisions of this Act and a statement to the effect that nothing in the
prospectus is contrary to the provisions of this Act, the Securities Contracts
(Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992
and the rules and regulations made thereunder.
Section 42 (4) provides that “any offer or invitation not in compliance
with the provisions of this section shall be treated as a public offer and all
provisions of this Act, and the Securities Contracts (Regulation) Act, 1956 and
the Securities and Exchange Board of India Act, 1992 shall be required to be complied
with.”
Section 59 (4) provides that “where the transfer of securities is in contravention of any
of the provisions of the Securities Contracts (Regulation) Act, 1956, the
Securities and Exchange Board of India Act, 1992 or this Act or any other law
for the time being in force, the Tribunal may, on an application made by the
depository, company, depository participant, the holder of the securities or
the Securities and Exchange Board, direct any company or a depository to set right
the contravention and rectify its register or records concerned.”
Section 186 (6) provides that “no company, which is registered under section 12 of the
Securities and Exchange Board of India Act, 1992 and covered under such class
or classes of companies as may be prescribed, shall take inter-corporate loan
or deposits exceeding the prescribed limit and such company shall furnish in
its financial statement the details of the loan or deposits.”
Section 236. (8) Explanation provides that “for the purposes of this section, the
expressions “acquirer” and “person acting in concert” shall have the meanings
respectively assigned to them in clause (b) and clause (e) of
sub-regulation (1) of regulation 2 of the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.”
Section 236 (9) (b) speaks about the elapsing of “the period of one year or the period
specified in the regulations made by the Securities and Exchange Board under
the Securities and Exchange Board of India Act, 1992.”
Proviso to Section 439 (2) provides that the court may take cognizance of offences
relating to issue and transfer of securities and non-payment of dividend, on a
complaint in writing, by a person authorized by the Securities and Exchange
Board of India.
There are several other provisions such as Non eligibility
of a person for being eligible for appointment as a managing or whole-time
director or a manager (hereinafter referred to as managerial person) of a
company unless he he had not been sentenced to imprisonment for any period, or
to a fine exceeding one thousand rupees, for the conviction of an offence under
any of the following Acts, including (xiv) the Securities and Exchange
Board of India Act, 1992 (15 of 1992).
03. SEBI Guidelines of Disclosure
01. Preliminary
In exercise of the powers conferred by section 11,
sub-section (2) of section 11A and section 30 of the Securities and Exchange
Board of India Act, 1992 (15 of 1992) read with section 31 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange
Board of India made the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015. They came into
force on the ninetieth day from the date of their publication in the Official
Gazette, but the provisions of sub-regulation (4) of regulation 23 and
regulation 31A shall come into force on the date of notification of these
regulations. These regulations shall apply to the listed entity who has listed
any of the following designated securities on recognised stock exchange(s):
(a) specified securities listed on main board or SME Exchange
or institutional trading platform;
(b) non-convertible debt securities, non-convertible
redeemable preference shares, perpetual debt instrument, perpetual
non-cumulative preference shares;
(c) Indian depository receipts;
(d) securitised debt instruments;
(e) units issued by mutual funds;
(f) any other securities as may be specified by the Board.
02. Principles governing disclosures and obligations
Regulation 4 mentions certain principles as, “(1) The listed
entity which has listed securities shall make disclosures and abide by its
obligations under these regulations, in accordance with the following
principles:
(a) Information shall be prepared and disclosed in accordance
with applicable standards of accounting and financial disclosure.
(b) The listed entity shall implement the prescribed
accounting standards in letter and spirit in the preparation of financial
statements taking into consideration the interest of all stakeholders and shall
also ensure that the annual audit is conducted by an independent, competent and
qualified auditor.
(c) The listed entity shall refrain from misrepresentation
and ensure that the information provided to recognised stock exchange(s) and
investors is not misleading.
(d) The listed entity shall provide adequate and timely
information to recognised stock exchange(s) and investors.
(e) The listed entity shall ensure that disseminations made
under provisions of these regulations and circulars made thereunder, are
adequate, accurate, explicit, timely and presented in a simple language.
(f) Channels for disseminating information shall provide for
equal, timely and cost efficient access to relevant information by investors.
(g) The listed entity shall abide by all the provisions of
the applicable laws including the securities laws and also such other
guidelines as may be issued from time to time by the Board and the recognised
stock exchange(s) in this regard and as may be applicable.
(h) The listed entity shall make the specified disclosures
and follow its obligations in letter and spirit taking into consideration the
interest of all stakeholders.
(i) Filings, reports, statements, documents and information
which are event based or are filed periodically shall contain relevant
information.
(j) Periodic filings, reports, statements, documents and
information reports shall contain information that shall enable investors to
track the performance of a listed entity over regular intervals of time and
shall provide sufficient information to enable investors to assess the current
status of a listed entity.
(2) The listed entity which has listed its specified
securities shall comply with the corporate governance provisions as specified
in chapter IV which shall be implemented in a manner so as to achieve the
objectives of the principles as mentioned below.
(a) The rights of shareholders: The listed entity
shall seek to protect and facilitate the exercise of the following rights of
shareholders:
(i) right to participate in, and to be sufficiently informed
of, decisions concerning fundamental corporate changes.
(ii) opportunity to participate effectively and vote in
general shareholder meetings.
(iii)being informed of the rules, including voting procedures
that govern general shareholder meetings.
(iv) opportunity to ask questions to the board of directors,
to place items on the agenda of general meetings, and to propose resolutions,
subject to reasonable limitations.
(v) Effective shareholder participation in key corporate
governance decisions, such as the nomination and election of members of board
of directors.
(vi) exercise of ownership rights by all shareholders,
including institutional investors.
(vii) adequate mechanism to address the grievances of the
shareholders.
(viii) protection of minority shareholders from abusive
actions by, or in the interest of, controlling shareholders acting either
directly or indirectly, and effective means of redress.
(b) Timely information: The listed entity shall
provide adequate and timely information to shareholders, including but not
limited to the following:
(i) sufficient and timely information concerning the date,
location and agenda of general meetings, as well as full and timely information
regarding the issues to be discussed at the meeting.
(ii) Capital structures and arrangements that enable certain
shareholders to obtain a degree of control disproportionate to their equity
ownership.
(iii)rights attached to all series and classes of shares,
which shall be disclosed to investors before they acquire shares.
(c) Equitable treatment: The listed entity shall
ensure equitable treatment of all shareholders, including minority and foreign
shareholders, in the following manner:
(i) All shareholders of the same series of a class shall be
treated equally.
(ii) Effective shareholder participation in key corporate
governance decisions, such as the nomination and election of members of board
of directors, shall be facilitated.
(iii)Exercise of voting rights by foreign shareholders shall
be facilitated.
(iv) The listed entity shall devise a framework to avoid
insider trading and abusive self-dealing.
(v) Processes and procedures for general shareholder meetings
shall allow for equitable treatment of all shareholders.
(vi) Procedures of listed entity shall not make it unduly
difficult or expensive to cast votes.
(d) Role of stakeholders in corporate governance: The
listed entity shall recognise the rights of its stakeholders and encourage
co-operation between listed entity and the stakeholders, in the following
manner:
(i) The listed entity shall respect the rights of
stakeholders that are established by law or through mutual agreements.
(ii) Stakeholders shall have the opportunity to obtain
effective redress for violation of their rights.
(iii)Stakeholders shall have access to relevant, sufficient
and reliable information on a timely and regular basis to enable them to
participate in corporate governance process.
(iv) The listed entity shall devise an effective whistle
blower mechanism enabling stakeholders, including individual employees and
their representative bodies, to freely communicate their concerns about illegal
or unethical practices.
(e) Disclosure and transparency: The listed entity
shall ensure timely and accurate disclosure on all material matters including
the financial situation, performance, ownership, and governance of the listed
entity, in the following manner:
(i) Information shall be prepared and disclosed in accordance
with the prescribed standards of accounting, financial and non-financial
disclosure.
(ii) Channels for disseminating information shall provide for
equal, timely and cost efficient access to relevant information by users.
(iii) Minutes of the meeting shall be maintained explicitly
recording dissenting opinions, if any.
(f) Responsibilities of the board of directors: The
board of directors of the listed entity shall have the following
responsibilities:
(i) Disclosure of information:
(1) Members of board of directors and key managerial
personnel shall disclose to the board of directors whether they, directly,
indirectly, or on behalf of third parties, have a material interest in any
transaction or matter directly affecting the listed entity.
(2) The board of directors and senior management shall
conduct themselves so as to meet the expectations of operational transparency
to stakeholders while at the same time maintaining confidentiality of
information in order to foster a culture of good decision-making.
(ii) Key functions of the board of directors-
(1) Reviewing and guiding corporate strategy, major plans of
action, risk policy, annual budgets and business plans, setting performance
objectives, monitoring implementation and corporate performance, and overseeing
major capital expenditures, acquisitions and divestments.
(2) Monitoring the effectiveness of the listed entity’s
governance practices and making changes as needed.
(3) Selecting, compensating, monitoring and, when necessary,
replacing key managerial personnel and overseeing succession planning.
(4) Aligning key managerial personnel and remuneration of
board of directors with the longer term interests of the listed entity and its
shareholders.
(5) Ensuring a transparent nomination process to the board of
directors with the diversity of thought, experience, knowledge, perspective and
gender in the board of directors.
(6) Monitoring and managing potential conflicts of interest
of management, members of the board of directors and shareholders, including
misuse of corporate assets and abuse in related party transactions.
(7) Ensuring the integrity of the listed entity’s accounting
and financial reporting systems, including the independent audit, and that
appropriate systems of control are in place, in particular, systems for risk
management, financial and operational control, and compliance with the law and
relevant standards.
(8) Overseeing the process of disclosure and communications.
(9) Monitoring and reviewing board of director’s evaluation
framework.
(iii) Other responsibilities:
(1) The board of directors shall provide strategic guidance
to the listed entity, ensure effective monitoring of the management and shall
be accountable to the listed entity and the shareholders.
(2) The board of directors shall set a corporate culture and
the values by which executives throughout a group shall behave.
(3) Members of the board of directors shall act on a fully
informed basis, in good faith, with due diligence and care, and in the best
interest of the listed entity and the shareholders.
(4) The board of directors shall encourage continuing
directors training to ensure that the members of board of directors are kept up
to date.
(5) Where decisions of the board of directors may affect
different shareholder groups differently, the board of directors shall treat
all shareholders fairly.
(6) The board of directors shall maintain high ethical
standards and shall take into account the interests of stakeholders.
(7) The board of directors shall exercise objective
independent judgement on corporate affairs.
(8) The board of directors shall consider assigning a
sufficient number of non-executive members of the board of directors capable of
exercising independent judgement to tasks where there is a potential for
conflict of interest.
(9) The board of directors shall ensure that, while rightly
encouraging positive thinking, these do not result in over-optimism that either
leads to significant risks not being recognised or exposes the listed entity to
excessive risk.
(10) The board of directors shall have ability to ‘step back’
to assist executive management by challenging the assumptions underlying:
strategy, strategic initiatives (such as acquisitions), risk appetite,
exposures and the key areas of the listed entity’s focus.
(11) When committees of the board of directors are
established, their mandate, composition and working procedures shall be well
defined and disclosed by the board of directors.
(12) Members of the board of directors shall be able to
commit themselves effectively to their responsibilities.
(13) In order to fulfil their responsibilities, members of
the board of directors shall have access to accurate, relevant and timely
information.
(14) The board of directors and senior management shall
facilitate the independent directors to perform their role effectively as a
member of the board of directors and also a member of a committee of board of
directors.
(3) In case of any ambiguity or incongruity between the
principles and relevant regulations, the principles specified in this Chapter
shall prevail.
03. Common Obligations of Listed Entities
Regulation
5
prescribes,
“The listed entity shall ensure that key managerial personnel, directors,
promoters or any other person dealing with the listed entity, complies with
responsibilities or obligations, if any, assigned to them under these
regulations.
Compliance Officer and his Obligations
Regulation
6.
Prescribes, “(1) A listed
entity shall appoint a qualified company secretary as the compliance officer.
(2) The compliance officer of the listed entity shall be
responsible for-
(a) ensuring conformity with the regulatory provisions
applicable to the listed entity in letter and spirit.
(b) co-ordination with and reporting to the Board, recognised
stock exchange(s) and depositories with respect to compliance with rules,
regulations and other directives of these authorities in manner as specified
from time to time.
(c) ensuring that the correct procedures have been followed
that would result in the correctness, authenticity and comprehensiveness of the
information, statements and reports filed by the listed entity under these regulations.
(d) monitoring email address of grievance redressal division
as designated by the listed entity for the purpose of registering complaints by
investors:
Provided that the requirements of this regulation shall not
be applicable in the case of units issued by mutual funds which are listed on
recognised stock exchange(s) but shall be governed by the provisions of the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.”
Share Transfer Agent
Regulation
7.
(1)
The listed entity shall appoint a share transfer agent or manage the share
transfer facility in-house:
Provided that, in the case of in-house share transfer
facility, as and when the total number of holders of securities of the listed
entity exceeds one lakh, the listed entity shall either register with the Board
as a Category II share transfer agent or appoint Registrar to an issue and
share transfer agent registered with the Board.
(2) The listed entity shall ensure that all activities in
relation to both physical and electronic share transfer facility are maintained
either in house or by Registrar to an issue and share transfer agent registered
with the Board.
(3) The listed entity shall submit a compliance certificate
to the exchange, duly signed by both the compliance officer of the listed
entity and the authorised representative of the
share transfer
agent, wherever applicable, within one month of end of each half of the
financial year, certifying compliance with the requirements of sub- regulation
(2).
(4) In case of any change or appointment of a new share
transfer agent, the listed entity shall enter into a tripartite agreement
between the existing share transfer agent, the new share transfer agent and the
listed entity, in the manner as specified by the Board from time to time:
Provided that in case the existing share transfer facility is
managed in-house, the agreement referred above shall be entered into between
the listed entity and the new share transfer agent.
(5) The listed entity shall intimate such appointment,
referred to in sub-regulation (4), to the stock exchange(s) within seven days of
entering into the agreement.
(6) The agreement referred to in sub-regulation (4) shall be
placed in the subsequent meeting of the board of directors:
Provided that the requirements of this regulation shall not
be applicable to the units issued by mutual funds that are listed on recognised
stock exchange(s).
Co-operation with intermediaries registered with the Board
Regulation
8.
The
listed entity, wherever applicable, shall co-operate with and submit correct
and adequate information to the intermediaries registered with the Board such
as credit rating agencies, registrar to an issue and share transfer agents,
debenture trustees etc, within timelines and procedures specified under the
Act, regulations and circulars issued there under:
Provided that requirements of this regulation shall not be
applicable to the units issued by mutual funds listed on a recognised stock
exchange(s) for which the provisions of the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996 shall be applicable.
Preservation of documents
Regulation
9.
The
listed entity shall have a policy for preservation of documents, approved by
its board of directors, classifying them in at least two categories as follows-
(a) documents whose preservation shall be permanent in nature
;
(b) documents with preservation period of not less than eight
years after completion of the relevant transactions:
Provided that the listed entity may keep documents specified
in clauses (a) and (b) in electronic mode.
Filing of information
Regulation
10.
(1)
The listed entity shall file the reports, statements, documents, filings and
any other information with the recognised stock exchange(s) on the electronic
platform as specified by the Board or the recognised stock exchange(s).
(2) The listed entity shall put in place infrastructure as
required for compliance with sub-regulation (1). Scheme of Arrangement
Regulation
11.
The
listed entity shall ensure that any scheme of arrangement /amalgamation /merger
/reconstruction /reduction of capital etc. to be presented to any Court or
Tribunal does not in any way violate, override or limit the provisions of
securities laws or requirements of the stock exchange(s):
Provided that this regulation shall not be applicable for the
units issued by Mutual Fund which are listed on a recognised stock exchange(s).
Payment of dividend or interest or redemption or repayment
Regulation
12.
The
listed entity shall use any of the electronic mode of payment facility approved
by the Reserve Bank of India, in the manner specified in Schedule I, for the
payment of the following:
(a) dividends;
(b) interest;
(c) redemption or repayment amounts:
Provided that where it is not possible to use electronic mode
of payment, ‘payable-at-par’ warrants or cheques may be issued:
Provided further that where the amount payable as dividend
exceeds one thousand and five hundred rupees, the ‘payable-at-par’ warrants or
cheques shall be sent by speed post.
Grievance Redressal Mechanism
Regulation
13.
(1)
The listed entity shall ensure that adequate steps are taken for expeditious
redressal of investor complaints.
(2) The listed entity shall ensure that it is registered on
the SCORES platform or such other electronic platform or system of the Board as
shall be mandated from time to time, in order to handle investor complaints
electronically in the manner specified by the Board.
(3) The listed entity shall file with the recognised stock
exchange(s) on a quarterly basis, within twenty one days from the end of each
quarter, a statement giving the number of investor complaints pending at the
beginning of the quarter, those received during the quarter, disposed of during
the quarter and those remaining unresolved at the end of the quarter.
(4) The statement as specified in sub-regulation (3) shall be
placed, on quarterly basis, before the board of directors of the listed entity.
Fees and other charges to be paid to the recognized stock
exchange(s).
Regulation
14.
The
listed entity shall pay all such fees or charges, as applicable, to the
recognised stock exchange(s), in the manner specified by the Board or the
recognised stock exchange(s).
04. Obligations of Listed Entity Which Has Listed Its Specified Securities
Applicability
Regulation
15.
(1)
The provisions of this chapter shall apply to a listed entity which has listed
its specified securities on any recognised stock exchange(s) either on the main
board or on SME Exchange or on institutional trading platform:
(2) The compliance with the corporate governance provisions
as specified in regulations 17, 18, 19, 20, 21,22, 23, 24, 25, 26, 27 and
clauses (b) to (i) of sub-regulation (2) of regulation 46 and para C , D and E
of Schedule V shall not apply, in respect of -
(a) the listed entity having paid up equity share capital not
exceeding rupees ten crore and net worth not exceeding rupees twenty five
crore, as on the last day of the previous financial year:
Provided that where the provisions of the regulations
specified in this regulation becomes applicable to a listed entity at a later
date, such listed entity shall comply with the requirements those regulations
within six months from the date on which the provisions became applicable to
the listed entity.
(b) the listed entity which has listed its specified
securities on the SME Exchange:
Provided that for other listed entities which are not
companies, but body corporate or are subject to regulations under other
statues, the provisions of corporate governance provisions as specified in
regulation 17, 18, 19, 20, 21,22, 23, 24, 25, 26, 27 and clauses (b) to (i) of
sub-regulation (2) of regulation 46 and para C , D and E of Schedule V shall
apply to the extent that it does not violate their respective statutes and
guidelines or directives issued by the relevant authorities.
(3) Notwithstanding sub-regulation (2) above, the provisions
of Companies Act, 2013 shall continue to apply, wherever applicable.
Definitions
Regulation
16.
(1)
For the purpose of this chapter , unless the context otherwise requires -
(a) "control" shall have the same meaning as
assigned to it under the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011;
(b) "independent director" means a non-executive
director, other than a nominee director of the listed entity:
(i) who, in the opinion of the board of directors, is a
person of integrity and possesses relevant expertise and experience;
(ii) who is or was not a promoter of the listed entity or its
holding, subsidiary or associate company;
(iii) who is not related to promoters or directors in the
listed entity, its holding, subsidiary or associate company;
(iv) who, apart from receiving director's remuneration, has
or had no material pecuniary relationship with the listed entity, its holding,
subsidiary or associate company, or their promoters, or directors, during the
two immediately preceding financial years or during the current financial year;
(v) none of whose relatives has or had pecuniary relationship
or transaction with the listed entity, its holding, subsidiary or associate
company, or their promoters, or directors, amounting to two per cent. or more
of its gross turnover or total income or fifty lakh rupees or such higher
amount as may be prescribed from time to time, whichever is lower, during the
two immediately preceding financial years or during the current financial year;
(vi) who, neither himself, nor whose relative(s) —
(A) holds or has held the position of a key managerial
personnel or is or has been an employee of the listed entity or its holding,
subsidiary or associate company in any of the three financial years immediately
preceding the financial year in which he is proposed to be appointed;
(B) is or has been an employee or proprietor or a partner, in
any of the three financial years immediately preceding the financial year in
which he is proposed to be appointed, of —
(1) a firm of auditors or company secretaries in practice or
cost auditors of the listed entity or its holding, subsidiary or associate
company; or
(2) any legal or a consulting firm that has or had any
transaction with the listed entity, its holding, subsidiary or associate
company amounting to ten per cent or more of the gross turnover of such firm;
(C) holds together with his relatives two per cent or more of
the total voting power of the listed entity; or
(D) is a chief executive or director, by whatever name
called, of any non-profit organisation that receives twenty-five per cent or
more of its receipts or corpus from the listed entity, any of its promoters,
directors or its holding, subsidiary or associate company or that holds two per
cent or more of the total voting power of the listed entity;
(E) is a material supplier, service provider or customer or a
lessor or lessee of the listed entity;
(vii) who is not less than 21 years of age.
(c) “material subsidiary” shall mean a
subsidiary, whose income or net worth exceeds twenty percent of the
consolidated income or net worth respectively, of the listed entity and its
subsidiaries in the immediately preceding accounting year.
Explanation.- The listed entity shall formulate a policy for determining
‘material’ subsidiary.
(d) “senior management” shall mean officers/personnel of the
listed entity who are members of its core management team excluding board of
directors and normally this shall comprise all members of management one level
below the executive directors, including all functional heads.
Board of Directors
Regulation
17.
(1)
The composition of board of directors of the listed entity shall be as follows:
(a) board of directors shall have an optimum combination of
executive and non-executive directors with at least one woman director and not
less than fifty per cent. of the board of directors shall comprise of
non-executive directors;
(b) where the chairperson of the board of directors is a
non-executive director, at least one-third of the board of directors shall
comprise of independent directors and where the listed entity does not have a
regular non-executive chairperson, at least half of the board of directors
shall comprise of independent directors:
Provided that where the regular non-executive chairperson is
a promoter of the listed entity or is related to any promoter or person
occupying management positions at the level of board of director or at one
level below the board of directors, at least half of the board of directors of
the listed entity shall consist of independent directors.
Explanation.- For the purpose of this clause, the expression “related to
any promoter" shall have the following meaning:
(i) if the promoter is a listed entity, its directors other
than the independent directors, its employees or its nominees shall be deemed
to be related to it;
(ii) if the promoter is an unlisted entity, its directors,
its employees or its nominees shall be deemed to be related to it.
(2) The board of directors shall meet at least four times a
year, with a maximum time gap of one hundred and twenty days between any two
meetings.
(3) The board of directors shall periodically review
compliance reports pertaining to all laws applicable to the listed entity,
prepared by the listed entity as well as steps taken by the listed entity to
rectify instances of non-compliances.
(4) The board of directors of the listed entity shall satisfy
itself that plans are in place for orderly succession for appointment to the
board of directors and senior management.
(5) (a) The board of directors shall lay down a code of
conduct for all members of board of directors and senior management of the
listed entity.
(b) The code of conduct shall suitably incorporate the duties
of independent directors as laid down in the Companies Act, 2013.
(6) (a) The board of directors shall recommend all fees or
compensation, if any, paid to non-executive directors, including independent
directors and shall require approval of shareholders in general meeting.
(b) The requirement of obtaining approval of shareholders in
general meeting shall not apply to payment of sitting fees to non-executive
directors, if made within the limits prescribed under the Companies Act, 2013
for payment of sitting fees without approval of the Central Government.
(c) The approval of shareholders mentioned in clause (a),
shall specify the limits for the maximum number of stock options that may be
granted to non-executive directors, in any financial year and in aggregate.
(d) Independent directors shall not be entitled to any stock
option.
(7) The minimum information to be placed before the board of
directors is specified in Part A of Schedule II.
(8) The chief executive officer and the chief financial
officer shall provide the compliance certificate to the board of directors as
specified in Part B of Schedule II.
(9) (a) The listed entity shall lay down procedures to inform
members of board of directors about risk assessment and minimization
procedures.
(b) The board of directors shall be responsible for framing,
implementing and monitoring the risk management plan for the listed entity.
(10) The performance evaluation of independent directors shall
be done by the entire board of directors:
Provided that in the above evaluation the directors who are
subject to evaluation shall not participate:
Audit Committee
Regulation
18.
(1)
Every listed entity shall constitute a qualified and independent audit
committee in accordance with the terms of reference, subject to the following:
(a) The audit committee shall have minimum three directors as
members.
(b) Two-thirds of the members of audit committee shall be
independent directors.
(c) All members of audit committee shall be financially
literate and at least one member shall have accounting or related financial
management expertise.
Explanation (1).- For the purpose of this regulation, “financially literate”
shall mean the ability to read and understand basic financial statements i.e.
balance sheet, profit and loss account, and statement of cash flows.
Explanation (2).- For the purpose of this regulation , a member shall be
considered to have accounting or related financial management expertise if he or
she possesses experience in finance or accounting, or requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual’s financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
(d) The chairperson of the audit committee shall be an
independent director and he shall be present at Annual general meeting to
answer shareholder queries.
(e) The Company Secretary shall act as the secretary to the
audit committee.
(f) The audit committee at its discretion shall invite the
finance director or head of the finance function, head of internal audit and a
representative of the statutory auditor and any other such executives to be
present at the meetings of the committee:
Provided that occasionally the audit committee may meet
without the presence of any executives of the listed entity.
(2) The listed entity shall conduct the meetings of the audit
committee in the following manner:
(a) The audit committee shall meet at least four times in a
year and not more than one hundred and twenty days shall elapse between two
meetings.
(b) The quorum for audit committee meeting shall either be
two members or one third of the members of the audit committee, whichever is
greater, with at least two independent directors.
(c) The audit committee shall have powers to investigate any
activity within its terms of reference, seek information from any employee,
obtain outside legal or other professional advice and secure attendance of
outsiders with relevant expertise, if it considers necessary.
(3) The role of the audit committee and the information to be
reviewed by the audit committee shall be as specified in Part C of Schedule II.
Nomination and remuneration committee
Regulation
19.
(1)
The board of directors shall constitute the nomination and remuneration
committee as follows:
(a) the committee shall comprise of at least three directors
;
(b) all directors of the committee shall be non-executive
directors; and
(c) at least fifty percent of the directors shall be
independent directors.
(2) The Chairperson of the nomination and remuneration
committee shall be an independent director:
Provided that the chairperson of the listed entity, whether
executive or non-executive, may be appointed as a member of the Nomination and
Remuneration Committee and shall not chair such Committee.
(3) The Chairperson of the nomination and remuneration committee
may be present at the annual general meeting, to answer the shareholders'
queries; however, it shall be up to the chairperson to decide who shall answer
the queries.
(4) The role of the nomination and remuneration committee
shall be as specified as in Part D of the Schedule II.
Stakeholders Relationship Committee
Regulation
20.
(1)
The listed entity shall constitute a Stakeholders Relationship Committee to
specifically look into the mechanism of redressal of grievances of
shareholders, debenture holders and other security holders.
(2) The chairperson of this committee shall be a
non-executive director.
(3) The board of directors shall decide other members of this
committee.
(4) The role of the Stakeholders Relationship Committee shall
be as specified as in Part D of the Schedule II.
Risk Management Committee
Regulation
21.
(1)
The board of directors shall constitute a Risk Management Committee.
(2) The majority of members of Risk Management Committee
shall consist of members of the board of directors.
(3) The Chairperson of the Risk management committee shall be
a member of the board of directors and senior executives of the listed entity
may be members of the committee.
(4) The board of directors shall define the role and
responsibility of the Risk Management Committee and may delegate monitoring and
reviewing of the risk management plan to the committee and such other functions
as it may deem fit.
(5) The provisions of this regulation shall be applicable to
top 100 listed entities, determined on the basis of market capitalisation, as
at the end of the immediate previous financial year.
Vigil mechanism
Regulation
22.
(1)
The listed entity shall formulate a vigil mechanism for directors and employees
to report genuine concerns.
(2) The vigil mechanism shall provide for adequate safeguards
against victimization of director(s) or employee(s) or any other person who
avail the mechanism and also provide for direct access to the chairperson of
the audit committee in appropriate or exceptional cases.
Related party transactions
Regulation
23.
(1)
The listed entity shall formulate a policy on materiality of related party
transactions and on dealing with related party transactions:
Explanation.- A transaction with a related party shall be considered
material if the transaction(s) to be entered into individually or taken
together with previous transactions during a financial year, exceeds ten
percent of the annual consolidated turnover of the listed entity as per the
last audited financial statements of the listed entity.
(2) All related party transactions shall require prior
approval of the audit committee.
(3) Audit committee may grant omnibus approval for related
party transactions proposed to be entered into by the listed entity subject to
the following conditions, namely-
(a) the audit committee shall lay down the criteria for
granting the omnibus approval in line with the policy on related party
transactions of the listed entity and such approval shall be applicable in
respect of transactions which are repetitive in nature;
(b) the audit committee shall satisfy itself regarding the
need for such omnibus approval and that such approval is in the interest of the
listed entity;
(c) the omnibus approval shall specify:
(i) the name(s) of the related party, nature of transaction,
period of transaction, maximum amount of transactions that shall be entered
into,
(ii) the indicative base price / current contracted price and
the formula for variation in the price if any; and
(iii) such other conditions as the audit committee may deem
fit:
Provided that where the need for related party transaction
cannot be foreseen and aforesaid details are not available, audit committee may
grant omnibus approval for such transactions subject to their value not
exceeding rupees one crore per transaction.
(d) the audit committee shall review, at least on a quarterly
basis, the details of related party transactions entered into by the listed
entity pursuant to each of the omnibus approvals given.
(e) Such omnibus approvals shall be valid for a period not exceeding one year and shall require
fresh approvals after the expiry of one year:
(4) All material related party transactions shall require
approval of the shareholders through resolution and the related parties shall
abstain from voting on such resolutions whether the entity is a related party
to the particular transaction or not.
(5) The provisions of sub-regulations (2), (3) and (4) shall
not be applicable in the following cases:
(a) transactions entered into between two government
companies;
(b) transactions entered into between a holding company and
its wholly owned subsidiary whose accounts are consolidated with such holding
company and placed before the shareholders at the general meeting for approval.
Explanation.- For the purpose of clause (a), "government
company(ies)" means Government company as defined in sub-section (45) of
section 2 of the Companies Act, 2013.
(6) The provisions of this regulation shall be applicable to
all prospective transactions.
(7) For the purpose of this regulation, all entities falling
under the definition of related parties shall abstain from voting irrespective
of whether the entity is a party to the particular transaction or not.
(8) All existing material related party contracts or
arrangements entered into prior to the date of notification of these
regulations and which may continue beyond such date shall be placed for
approval of the shareholders in the first General Meeting subsequent to
notification of these regulations.
Corporate governance requirements with respect to subsidiary
of listed entity
Regulation
24.
(1)
At least one independent director on the board of directors of the listed
entity shall be a director on the board of directors of an unlisted material
subsidiary, incorporated in India.
(2) The audit committee of the listed entity shall also
review the financial statements, in particular, the investments made by the
unlisted subsidiary.
(3) The minutes of the meetings of the board of directors of
the unlisted subsidiary shall be placed at the meeting of the board of
directors of the listed entity.
(4) The management of the unlisted subsidiary shall
periodically bring to the notice of the board of directors of the listed
entity, a statement of all significant transactions and arrangements entered into
by the unlisted subsidiary.
Explanation.- For the purpose of this regulation, the term “significant
transaction or arrangement” shall mean any individual transaction or
arrangement that exceeds or is likely to exceed ten percent of the total
revenues or total expenses or total assets or total liabilities, as the case
may be, of the unlisted material subsidiary for the immediately preceding
accounting year.
(5) A listed entity shall not dispose of shares in its
material subsidiary resulting in reduction of its shareholding (either on its
own or together with other subsidiaries) to less than fifty percent or cease
the exercise of control over the subsidiary without passing a special
resolution in its General Meeting except in cases where such divestment is made
under a scheme of arrangement duly approved by a Court/Tribunal.
(6) Selling, disposing and leasing of assets amounting to
more than twenty percent of the assets of the material subsidiary on an
aggregate basis during a financial year shall require prior approval of
shareholders by way of special resolution, unless the sale/disposal/lease is
made under a scheme of arrangement duly approved by a Court/Tribunal.
(7) Where a listed entity has a listed subsidiary, which is
itself a holding company, the provisions of this regulation shall apply to the
listed subsidiary in so far as its subsidiaries are concerned.
Obligations with respect to independent directors
Regulation
25.
(1)
A person shall not serve as an independent director in more than seven listed
entities:
Provided that any person who is serving as a whole time
director in any listed entity shall serve as an independent director in not
more than three listed entities.
(2) The maximum tenure of independent directors shall be in
accordance with the Companies Act, 2013 and rules made thereunder, in this
regard, from time to time.
(3) The independent directors of the listed entity shall hold
at least one meeting in a year, without the presence of non-independent
directors and members of the management and all the independent directors shall
strive to be present at such meeting.
(4) The independent directors in the meeting referred in
sub-regulation (3) shall, inter alia-
(a) review the performance of non-independent directors and
the board of directors as a whole;
(b) review the performance of the chairperson of the listed
entity, taking into account the views of executive directors and non-executive
directors;
(c) assess the quality, quantity and timeliness of flow of
information between the management of the listed entity and the board of
directors that is necessary for the board of directors to effectively and
reasonably perform their duties.
(5) An independent director shall be held liable, only in
respect of such acts of omission or commission by the listed entity which had
occurred with his knowledge, attributable through processes of board of
directors, and with his consent or connivance or where he had not acted
diligently with respect to the provisions contained in these regulations.
(6) An independent director who resigns or is removed from
the board of directors of the listed entity shall be replaced by a new
independent director by listed entity at the earliest but not later than the
immediate next meeting of the board of directors or three months from the date
of such vacancy, whichever is later:
Provided that where the listed entity fulfils the requirement
of independent directors in its board of directors without filling the vacancy
created by such resignation or removal, the requirement of replacement by a new
independent director shall not apply.
(7) The listed entity shall familiarise the independent
directors through various programmes about the listed entity, including the
following:
(a) nature of the industry in which the listed entity
operates;
(b) business model of the listed entity;
(c) roles, rights, responsibilities of independent directors;
and
(d) any other relevant information.
05. Obligations with respect to employees including senior management, key managerial persons, directors and promoters.[i], [ii]
Regulation
26.
(1)
A director shall not be a member in more than ten committees or act as
chairperson of more than five committees across all listed entities in which he
is a director which shall be determined as follows:
(a) the limit of the committees on which a director may serve
in all public limited companies, whether listed or not, shall be included and
all other companies including private limited companies, foreign companies and
companies under Section 8 of the Companies Act, 2013 shall be excluded;
(b) for the purpose of determination of limit,
chairpersonship and membership of the audit committee and the Stakeholders'
Relationship Committee alone shall be considered.
(2) Every director shall inform the listed entity about the
committee positions he or she occupies in other listed entities and notify
changes as and when they take place.
(3) All members of the board of directors and senior
management personnel shall affirm compliance with the code of conduct of board
of directors and senior management on an annual basis.
(4) Non-executive directors shall disclose their
shareholding, held either by them or on a beneficial basis for any other
persons in the listed entity in which they are proposed to be appointed as
directors, in the notice to the general meeting called for appointment of such
director.
(5) Senior management shall make disclosures to the board of
directors relating to all material, financial and commercial transactions,
where they have personal interest that may have a potential conflict with the
interest of the listed entity at large.
Explanation.- For the purpose of this sub-regulation, conflict of interest
relates to dealing in the shares of listed entity, commercial dealings with
bodies, which have shareholding of management and their relatives etc.
(6) No employee including key managerial personnel or
director or promoter of a listed entity shall enter into any agreement for
himself or on behalf of any other person, with any shareholder or any other
third party with regard to compensation or profit sharing in connection with
dealings in the securities of such listed entity, unless prior approval for the
same has been obtained from the Board of Directors as well as public
shareholders by way of an ordinary resolution:
Provided that such agreement, if any, whether subsisting or
expired, entered during the preceding three years from the date of coming into
force of this sub-regulation, shall be disclosed to the stock exchanges for
public dissemination:
Provided further that subsisting agreement, if any, as on the
date of coming into force of this sub-regulation shall be placed for approval
before the Board of Directors in the forthcoming Board meeting:
Provided further that if the Board of Directors approve such
agreement, the same shall be placed before the public shareholders for approval
by way of an ordinary resolution in the forthcoming general meeting:
Provided further that all interested persons involved in the
transaction covered under the agreement shall abstain from voting in the
general meeting.
Explanation - For the purposes of this sub-regulation, ‘interested person’
shall mean any person holding voting rights in the listed entity and who is in
any manner, whether directly or indirectly, interested in an agreement or
proposed agreement, entered into or to be entered into by such a person or by
any employee or key managerial personnel or director or promoter of such listed
entity with any shareholder or any other third party with respect to
compensation or profit sharing in connection with the securities of such listed
entity.
Other corporate governance requirements
Regulation
27.
(1)
The listed entity may, at its discretion, comply with requirements as specified
in Part E of Schedule II.
(2) (a) The listed entity shall submit a quarterly compliance
report on corporate governance in the format as specified by the Board from
time to time to the recognised stock exchange(s) within fifteen days from close
of the quarter.
(b) Details of all material transactions with related parties
shall be disclosed along with the report mentioned in clause (a) of
sub-regulation (2).
(c) The report mentioned in clause (a) of sub-regulation (2)
shall be signed either by the compliance officer or the chief executive officer
of the listed entity.
In-principle approval of recognized stock exchange(s)
Regulation
28.
(1)
The listed entity, before issuing securities, shall obtain an ‘in-principle’
approval from recognised stock exchange(s) in the following manner:
(a) where the securities are listed only on recognised stock
exchange(s) having nationwide trading terminals, from all such stock
exchange(s);
(b) where the securities are not listed on any recognised
stock exchange having nationwide trading terminals, from all the stock
exchange(s) in which the securities of the issuer are proposed to be listed;
(c) where the securities are listed on recognised stock
exchange(s) having nationwide trading terminals as well as on the recognised
stock exchange(s) not having nationwide trading terminals, from all recognised
stock exchange(s) having nationwide trading terminals:
(2) The requirement of obtaining in-principle approval from
recognised stock exchange(s), shall not be applicable for securities issued
pursuant to the scheme of arrangement for which the listed entity has already
obtained No-Objection Letter from recognised stock exchange(s) in accordance
with regulation 37.
Prior Intimations.
Regulation
29.
(1)
The listed entity shall give prior intimation to stock exchange about the
meeting of the board of directors in which any of the following proposals is
due to be considered:
(a) financial results viz. quarterly, half yearly, or annual,
as the case may be;
(b) proposal for buyback of securities;
(c) proposal for voluntary delisting by the listed entity
from the stock exchange(s);
(d) fund raising by way of further public offer, rights
issue, American Depository Receipts/Global Depository Receipts/Foreign Currency
Convertible Bonds, qualified institutions placement, debt issue, preferential
issue or any other method and for determination of issue price:
Provided that intimation shall also be given in case of any
annual general meeting or extraordinary general meeting or postal ballot that
is proposed to be held for obtaining shareholder approval for further fund
raising indicating type of issuance.
(e) declaration/ recommendation of dividend, issue of
convertible securities including convertible debentures or of debentures
carrying a right to subscribe to equity shares or the passing over of dividend.
(f) the proposal for declaration of bonus securities where
such proposal is communicated to the board of directors of the listed entity as
part of the agenda papers:
Provided that in case the declaration of bonus by the listed
entity is not on the agenda of the meeting of board of directors, prior
intimation is not required to be given to the stock exchange(s).
(2) The intimation required under sub-regulation (1), shall
be given at least two working days in advance, excluding the date of the
intimation and date of the meeting:
Provided that intimation regarding item specified in clause
(a) of sub-regulation (1), to be discussed at the meeting of board of directors
shall be given at least five days in advance (excluding the date of the
intimation and date of the meeting), and such intimation shall include the date
of such meeting of board of directors.
(3) The listed entity shall give intimation to the stock
exchange(s) at least eleven working days before any of the following proposal
is placed before the board of directors -
(a) any alteration in the form or nature of any of its
securities that are listed on the stock exchange or in the rights or privileges
of the holders thereof.
(b) any alteration in the date on which, the interest on
debentures or bonds, or the redemption amount of redeemable shares or of
debentures or bonds, shall be payable.
Disclosure of events or information
Regulation
30.
(1)
Every listed entity shall make disclosures of any events or information which,
in the opinion of the board of directors of the listed company, is material.
Holding of specified securities and shareholding pattern
Regulation 31. (1) The listed entity shall submit to the stock exchange(s) a
statement showing holding of securities and shareholding pattern separately for
each class of securities, in the format specified by the Board from time to
time within the following timelines -
(a) one day prior to listing of its securities on the stock
exchange(s);
(b) on a quarterly basis, within twenty one days from the end
of each quarter; and,
(c) within ten days of any capital restructuring of the
listed entity resulting in a change exceeding two per cent of the total paid-up
share capital:
Disclosure of Class of shareholders and Conditions for
Reclassification
Regulation
31A.
(1)
All entities falling under promoter and promoter group shall be disclosed
separately in the shareholding pattern appearing on the website of all stock
exchanges having 27 nationwide trading terminals where the specified securities
of the entity are listed, in accordance with the formats specified by SEBI.
(2) The stock exchange, specified in sub-regulation (1),
shall allow modification or reclassification of the status of the shareholders,
only upon receipt of a request from the concerned listed entity or the
concerned shareholders along with all relevant evidence and on being satisfied
with the compliance of conditions mentioned in this regulation.
(3) In case of entities listed on more than one stock
exchange, the concerned stock exchanges shall jointly decide on the application
of the entity/ shareholders, as specified in sub-regulation(2).
(4) In case of transmission/succession/inheritance, the
inheritor shall be classified as promoter.
(5) When a new promoter replaces the previous promoter
subsequent to an open offer or in any other manner, re-classification may be
permitted subject to approval of shareholders in the general meeting and
compliance of the following conditions:
(a) Such promoter along with the promoter group and the
Persons acting in Concert shall not hold more than ten per cent of the paid-up
equity capital of the entity.
(b) Such promoter shall not continue to have any special
rights through formal or informal arrangements. All shareholding agreements
granting special rights to such entities shall be terminated.
(c) Such promoters and their relatives shall not act as key
managerial person for a period of more than three years from the date of
shareholders’ approval:
Provided that the resolution of the said shareholders'
meeting must specifically grant approval for such promoter to act as key
managerial person.
(6) Where an entity becomes professionally managed and does
not have any identifiable promoter the existing promoters may be re-classified
as public shareholders subject to approval of the shareholders in a general
meeting.
Explanation.- For the purposes of this sub-regulation an
entity may be considered as professionally managed, if-
(i) No person or group along with persons acting in concert
taken together shall hold more than one per cent paid-up equity capital of the
entity including any holding of convertibles/outstanding warrants/ Depository
Receipts:
Provided that any mutual fund, bank, insurance company,
financial institution, foreign portfolio investor may individually hold up to
ten per cent paid-up equity capital of the entity including any holding of
convertibles/outstanding warrants/Depository Receipts.
(ii) The promoters seeking reclassification and their
relatives may act as key managerial personnel in the entity only subject to
shareholders’ approval and for a period not exceeding three years from the date
of shareholders’ approval.
(iii) The promoter seeking reclassification along with his
promoter group entities and the persons acting in concert shall not have any
special right through formal or informal arrangements. All shareholding
agreements granting special rights to such outgoing entities shall be
terminated.
Statement of deviation(s) or variation(s)
Regulation
32.
(1)
The listed entity shall submit to the stock exchange the following statement(s)
on a quarterly basis for public issue, rights issue, preferential issue etc. ,-
(a) indicating deviations, if any, in the use of proceeds
from the objects stated in the offer document or explanatory statement to the
notice for the general meeting, as applicable;
(b) indicating category wise variation (capital expenditure,
sales and marketing, working capital etc.) between projected utilisation of
funds made by it in its offer document or explanatory statement to the notice
for the general meeting, as applicable and the actual utilisation of funds.
(2) The statement(s) specified in sub-regulation (1), shall
be continued to be given till such time the issue proceeds have been fully
utilised or the purpose for which these proceeds were raised has been achieved.
Financial results
Regulation
33.
(1)
While preparing financial results, the listed entity shall comply with the
following:
(a) The financial results shall be prepared on the basis of
accrual accounting policy and shall be in accordance with uniform accounting
practices adopted for all the periods.
(b) The quarterly and year to date results shall be prepared
in accordance with the recognition and measurement principles laid down in
Accounting Standard 25 or Indian Accounting Standard 31 (AS 25/ Ind AS 34 –
Interim Financial Reporting), as applicable, specified in Section 133 of the
Companies Act, 2013 read with relevant rules framed thereunder or as specified
by the Institute of Chartered Accountants of India, whichever is applicable.
(c) The standalone financial results and consolidated
financial results shall be prepared as per Generally Accepted Accounting
Principles in India:
Provided that in addition to the above, the listed entity may
also submit the financial results, as per the International Financial Reporting
Standards notified by the International Accounting Standards Board.
(d) The listed entity shall ensure that the limited review or
audit reports submitted to the stock exchange(s) on a quarterly or annual basis
are to be given only by an auditor who has subjected himself to the peer review
process of Institute of Chartered Accountants of India and holds a valid certificate
issued by the Peer Review Board of the Institute of Chartered Accountants of
India.
(e) The listed entity shall make the disclosures specified in
Part A of Schedule IV.
(2) The approval and authentication of the financial results
shall be done by listed entity in the following manner:
(a) The quarterly financial results submitted shall be
approved by the board of directors:
Provided that while placing the financial results before the
board of directors, the chief executive officer and chief financial officer of
the listed entity shall certify that the financial results do not contain any
false or misleading statement or figures and do not omit any material fact
which may make the statements or figures contained therein misleading.
(b) The financial results submitted to the stock exchange
shall be signed by the chairperson or managing director, or a whole time
director or in the absence of all of them; it shall be signed by any other
director of the listed entity who is duly authorized by the board of directors
to sign the financial results.
(c) The limited review report shall be placed before the
board of directors, at its meeting which approves the financial results, before
being submitted to the stock exchange(s).
(d) The annual audited financial results shall be approved by
the board of directors of the listed entity and shall be signed in the manner
specified in clause (b) of sub-regulation (2).
(3) The listed entity shall submit the financial results in
the following manner:
(a) The listed entity shall submit quarterly and year-to-date
standalone financial results to the stock exchange within forty-five days of
end of each quarter, other than the last quarter.
(b) In case the listed entity has subsidiaries, in addition
to the requirement at clause (a) of sub-regulation (3), the listed entity may
also submit quarterly/year-to-date consolidated financial results subject to
following:
(i) the listed entity shall intimate to the stock exchange,
whether or not listed entity opts to additionally submit quarterly/year-to-date
consolidated financial results in the first quarter of the financial year and
this option shall not be changed during the financial year.
Provided that this option shall also be applicable to listed
entity that is required to prepare consolidated financial results for the first
time at the end of a financial year in respect of the quarter during the
financial year in which the listed entity first acquires the subsidiary.
(ii) in case the listed entity changes its option in any
subsequent year, it shall furnish comparable figures for the previous year in
accordance with the option exercised for the current financial year.
(c) The quarterly and year-to-date financial results may be
either audited or unaudited subject to the following:
(i) In case the listed entity opts to submit unaudited
financial results, they shall be subject to limited review by the statutory
auditors of the listed entity and shall be accompanied by the limited review
report.
Provided that in case of public sector undertakings this
limited review may be undertaken by any practicing Chartered Accountant.
(ii) In case the listed entity opts to submit audited
financial results, they shall be accompanied by the audit report.
(d) The listed entity shall submit [annual]3 audited
standalone financial results for the financial year, within sixty days from the
end of the financial year along with the audit report and [Statement on Impact
of Audit Qualifications (applicable only]4 for audit report with modified opinion):
Annual Report
Regulation
34.
(1)
The listed entity shall submit the annual report to the stock exchange within
twenty one working days of it being approved and adopted in the annual general
meeting as per the provisions of the Companies Act, 2013.
(2) The annual report shall contain the following:
(a) audited financial statements i.e. balance sheets, profit
and loss accounts etc [,and Statement on Impact of Audit Qualifications as
stipulated in regulation 33(3)(d), if applicable;]13
(b) consolidated financial statements audited by its
statutory auditors;
(c) cash flow statement presented only under the indirect
method as prescribed in Accounting Standard-3 or Indian Accounting Standard 7,
as applicable, specified in Section 133 of the Companies Act, 2013 read with
relevant rules framed thereunder or as specified by the Institute of Chartered
Accountants of India, whichever is applicable;
(d) directors report;
(e) management discussion and analysis report - either as a
part of directors report or addition thereto;
(f) for the top 14[five hundred] listed entities based on
market capitalization (calculated as on March 31 of every financial year),
business responsibility report describing the initiatives taken by them from an
environmental, social and governance perspective, in the format as specified by
the Board from time to time:
Provided that listed entities other than top 15[five hundred]
listed companies based on market capitalization and listed entities which have
listed their specified securities on SME Exchange, may include these business
responsibility reports on a voluntary basis in the format as specified.
(3) The annual report shall contain any other disclosures
specified in Companies Act, 2013 along with other requirements as specified in
Schedule V of these regulations.
Annual Information Memorandum
Regulation
35.
The
listed entity shall submit to the stock exchange(s) an Annual Information
Memorandum in the manner specified by the Board from time to time.
Documents & Information to shareholders
Regulation
36.
(1)
The listed entity shall send the annual report in the following manner to the
shareholders:
(a) Soft copies of full annual report to all those
shareholder(s) who have registered their email address(es) for the purpose;
(b) Hard copy of statement containing the salient features of
all the documents, as prescribed in Section 136 of Companies Act, 2013 or rules
made thereunder to those shareholder(s) who have not so registered;
(c) Hard copies of full annual reports to those shareholders,
who request for the same.
(2) The listed entity shall send annual report referred to in
sub-regulation (1), to the holders of securities, not less than twenty-one days
before the annual general meeting.
(3) In case of the appointment of a new director or
re-appointment of a director the shareholders must be provided with the
following information:
(a) a brief resume of the director;
(b) nature of his expertise in specific functional areas;
(c) disclosure of relationships between directors inter-se;
(d) names of listed entities in which the person also holds
the directorship and the membership of Committees of the board; and
(e) shareholding of non-executive directors.
Draft Scheme of Arrangement & Scheme of Arrangement
Regulation
37.
(1)Without
prejudice to provisions of regulation 11, the listed entity desirous of
undertaking a scheme of arrangement or involved in a scheme of arrangement,
shall file the draft scheme of arrangement, proposed to be filed before any
Court or Tribunal under sections 391-394 and 101 of the Companies Act, 1956 or
under Sections 230-234 and Section 66 of Companies Act, 2013, whichever
applicable, with the stock exchange(s) for obtaining Observation Letter or
No-objection letter, before filing such scheme with any Court or Tribunal, in terms
of requirements specified by the Board or stock exchange(s) from time to time.
(2) The listed entity shall not file any scheme of
arrangement under sections 391-394 and 101 of the Companies Act, 1956 or under
Sections 230-234 and Section 66 of Companies Act, 2013 ,whichever applicable,
with any Court or Tribunal unless it has obtained observation letter or
No-objection letter from the stock exchange(s).
(3) The listed entity shall place the Observation letter or
No-objection letter of the stock exchange(s) before the Court or Tribunal at
the time of seeking approval of the scheme of arrangement:
Provided that the validity of the ‘Observation Letter’ or
No-objection letter of stock exchanges shall be six months from the date of
issuance, within which the draft scheme of arrangement shall be submitted to
the Court or Tribunal.
(4)The listed entity shall ensure compliance with the other
requirements as may be prescribed by the Board from time to time.
(5) Upon sanction of the Scheme by the Court or Tribunal, the
listed entity shall submit the documents, to the stock exchange(s), as
prescribed by the Board and/or stock exchange(s) from time to time.
(6) Nothing contained in this regulation shall apply to draft
schemes which solely provide for merger of a wholly owned subsidiary with its
holding company:[iii]
Provided that such draft schemes shall be filed with the
stock exchanges for the purpose of disclosures.]
Minimum Public Shareholding
Regulation
38.
The
listed entity shall comply with the minimum public shareholding requirements
specified in Rule 19(2) and Rule 19A of the Securities Contracts (Regulation)
Rules, 1957 in the manner as specified by the Board from time to time:
Provided that provisions of this regulation shall not apply
to entities listed on institutional trading platform without making a public
issue.
Issuance of Certificates or Receipts/Letters/Advices for
securities and dealing with unclaimed securities
Regulation
39.
(1)
The listed entity shall comply with Rule 19(3) of Securities Contract
(Regulations) Rules, 1957 in respect of Letter/Advices of Allotment, Acceptance
or Rights, transfers, subdivision, consolidation, renewal, exchanges, issuance
of duplicates thereof or any other purpose.
(2) The listed entity shall issue certificates or receipts or
advices, as applicable, of subdivision, split, consolidation, renewal,
exchanges, endorsements, issuance of duplicates thereof or issuance of new
certificates or receipts or advices, as applicable, in cases of loss or old
decrepit or worn out certificates or receipts or advices, as applicable within
a period of thirty days from the date of such lodgement.
(3) The listed entity shall submit information regarding loss
of share certificates and issue of the duplicate certificates, to the stock
exchange within two days of its getting information.
(4) The listed entity shall comply with the procedural
requirements specified in Schedule VI while dealing with securities issued
pursuant to the public issue or any other issue, physical or otherwise, which
remain unclaimed and/or are lying in the escrow account, as applicable.
Transfer or transmission or transposition of securities
Regulation
40.
(1)
Save as otherwise specified in provisions of securities laws or Companies Act,
2013 and rules made thereunder, the listed entity shall also comply with the
requirements as specified in this regulation for effecting transfer of
securities.
(2) The board of directors of a listed entity may delegate
the power of transfer of securities to a committee or to compliance officer or
to the registrar to an issue and/or share transfer agent(s):
Provided that the board of directors and/or the delegated
authority shall attend to the formalities pertaining to transfer of securities
at least once in a fortnight:
Provided further that the delegated authority shall report on
transfer of securities to the board of directors in each meeting.
(3) On receipt of proper documentation, the listed entity
shall register transfers of its securities in the name of the transferee(s) and
issue certificates or receipts or advices, as applicable, of transfers; or
issue any valid objection or intimation to the transferee or transferor, as the
case may be, within a period of fifteen days from the date of such receipt of
request for transfer:
Provided that the listed entity shall ensure that
transmission requests are processed for securities held in dematerialized mode
and physical mode within seven days and twenty one days respectively, after
receipt of the specified documents:
Provided further that proper verifiable dated records of all
correspondence with the investor shall be maintained by the listed entity.
(4) The listed entity shall not register transfer when any
statutory prohibition or any attachment or prohibitory order of a competent
authority restrains it from transferring the securities from the name of the
transferor(s).
(5) The listed entity shall not register the transfer of its
securities in the name of the transferee(s) when the transferor(s) objects to
the transfer:
Provided that the transferor serves on the listed entity,
within sixty working days of raising the objection, a prohibitory order of a
Court of competent jurisdiction.
(6) The listed entity shall not decline to, register or
acknowledge any transfer of shares, on the ground of the transferor(s) being
either alone or jointly with any other person or persons indebted to the listed
entity on any account whatsoever.
(7) The listed entity shall comply with all procedural
requirements as specified in Schedule VII with respect to transfer of
securities.
(8) In case the listed entity has not effected transfer of
securities within fifteen days or where the listed entity has failed to
communicate to the transferee(s) any valid objection to the transfer, within
the stipulated time period of fifteen days, the listed entity shall compensate
the aggrieved party for the opportunity losses caused during the period of the
delay:
Provided that during the intervening period on account of
delay in transfer above, the listed entity shall provide all benefits, which
have accrued, to the holder of securities in terms of provisions of Section 126
of Companies Act, 2013, and Section 27 of the Securities Contracts (Regulation)
Act, 1956:
Provided further that in case of any claim, difference or
dispute under this sub-regulation the same shall be referred to and decided by
arbitration as provided in the bye-laws and/or regulations of the stock
exchange(s).
(9) The listed entity shall ensure that the share transfer
agent and/or the in-house share transfer facility, as the case may be, produces
a certificate from a practicing company secretary within one month of the end
of each half of the financial year, certifying that all certificates have been
issued within thirty days of the date of lodgement for transfer, sub-division,
consolidation, renewal, exchange or endorsement of calls/allotment monies.
(10) The listed entity shall ensure that certificate
mentioned at sub-regulation (9), shall be filed with the stock exchange(s)
simultaneously.
(11) In addition to transfer of securities, the provisions of
this regulation shall also apply to the following:
(a) deletion of name of the deceased holder(s) of securities,
where the securities are held in the name of two or more holders of securities
;
(b) transmission of securities to the legal heir(s), where
deceased holder of securities was the sole holder of securities;
(c) transposition of securities, when there is a change in
the order of names in which physical securities are held jointly in the names
of two or more holders of securities.
Other provisions relating to securities
Regulation
41.
(1)
The listed entity shall not exercise a lien on its fully paid shares and that
in respect of partly paid shares it shall not exercise any lien except in
respect of moneys called or payable at a fixed time in respect of such shares.
(2) The listed entity shall, in case of any amount to be paid
in advance of calls on any shares stipulate that such amount may carry interest
but shall not in respect thereof confer a right to dividend or to participate
in profits.
(3) The listed entity shall not issue shares in any manner
which may confer on any person, superior rights as to voting or dividend
vis-à-vis the rights on equity shares that are already listed.
(4) The listed entity shall, issue or offer in the first
instance all shares (including forfeited shares), securities, rights,
privileges and benefits to subscribe pro rata basis , to the equity
shareholders of the listed entity, unless the shareholders in the general
meeting decide otherwise.
(5) Unless the terms of issue otherwise provide, the listed
entity shall not select any of its listed securities for redemption otherwise
than on pro-rata basis or by lot.
Record Date or Date of closure of transfer books
Regulation
42.
(1)
The listed entity shall intimate the record date to all the stock exchange(s)
where it is listed for the following purposes:
(a) declaration of dividend;
(b) issue of right or bonus shares;
(c) issue of shares for conversion of debentures or any other
convertible security;
(d) shares arising out of rights attached to debentures or
any other convertible security
(e) corporate actions like mergers, de-mergers, splits and
bonus shares, where stock derivatives are available on the stock of listed
entity or where listed entity's stocks form part of an index on which
derivatives are available;
(f) such other purposes as may be specified by the stock
exchange(s).
(2) The listed entity shall give notice in advance of atleast
seven working days (excluding the date of intimation and the record date) to
stock exchange(s) of record date specifying the purpose of the record date.
(3) The listed entity shall recommend or declare all dividend
and/or cash bonuses at least five working days (excluding the date of
intimation and the record date) before the record date fixed for the purpose.
(4) The listed entity shall ensure the time gap of at least
thirty days between two record dates.
(5) For securities held in physical form, the listed entity
may, announce dates of closure of its transfer books in place of record date
for complying with requirements as specified in sub-regulations (1) to (4):
Provided that the listed entity shall ensure that there is a
time gap of atleast thirty days between two dates of closure of its transfer
books.
Dividends
Regulation
43.
(1)
The listed entity shall declare and disclose the dividend on per share basis
only.
(2) The listed entity shall not forfeit unclaimed dividends
before the claim becomes barred by law and such forfeiture, if effected, shall
be annulled in appropriate cases.
Dividend Distribution Policy[iv]
Regulation
43A
(1)
The top five hundred listed entities based on market capitalization (calculated
as on March 31 of every financial year) shall formulate a dividend distribution
policy which shall be disclosed in their annual reports and on their websites.
(2) The dividend distribution policy shall include the
following parameters:
(a) the circumstances under which the shareholders of the
listed entities may or may not expect dividend;
(b) the financial parameters that shall be considered while
declaring dividend;
(c) internal and external factors that shall be considered
for declaration of dividend;
(d) policy as to how the retained earnings shall be utilized;
and
(e) parameters that shall be adopted with regard to various
classes of shares:
Provided that if the listed entity proposes to declare
dividend on the basis of parameters in addition to clauses (a) to (e) or
proposes to change such additional parameters or the dividend distribution
policy contained in any of the parameters, it shall disclose such changes along
with the rationale for the same in its annual report and on its website.
(3) The listed entities other than top five hundred listed
entities based on market capitalization may disclose their dividend
distribution policies on a voluntary basis in their annual reports and on their
websites.]
Voting by shareholders
Regulation
44.
(1)
The listed entity shall provide the facility of remote e-voting facility to its
shareholders, in respect of all shareholders' resolutions.
(2) The e-voting facility to be provided to shareholders in
terms of sub-regulation (1), shall be provided in compliance with the
conditions specified under the Companies (Management and Administration) Rules,
2014, or amendments made thereto.
(3) The listed entity shall submit to the stock exchange,
within forty eight hours of conclusion of its General Meeting, details
regarding the voting results in the format specified by the Board.
(4) The listed entity shall send proxy forms to holders of
securities in all cases mentioning that a holder may vote either for or against
each resolution.
Change in name of the listed entity
Regulation
45.
(1)
The listed entity shall be allowed to change its name subject to compliance
with the following conditions:
(a) a time period of at least one year has elapsed from the
last name change;
(b) at least fifty percent. of the total revenue in the
preceding one year period has been accounted for by the new activity suggested
by the new name; or
(c) the amount invested in the new activity/project is
atleast fifty percent. of the assets of the listed entity:
Provided that if any listed entity has changed its activities
which are not reflected in its name, it shall change its name in line with its
activities within a period of six months from the change of activities in
compliance of provisions as applicable to change of name prescribed under
Companies Act, 2013.
Explanation.- For the purpose of this regulation, -
(i) 'assets' of the listed entity means the sum of fixed
assets, advances, works in Progress / Inventories, investments, trade
receivables, cash & cash equivalents;
(ii) ‘advances’ shall include only those amounts extended to
contractors and suppliers towards execution of project, specific to new
activity as reflected in the new name.
(2) On satisfaction of conditions at sub-regulation (1), the
listed entity shall file an application for name availability with Registrar of
Companies.
(3) On receipt of confirmation regarding name availability
from Registrar of Companies, before filing the request for change of name with
the Registrar of Companies in terms of provisions laid down in Companies Act,
2013 and rules made thereunder, the listed entity shall seek approval from
Stock Exchange by submitting a certificate from chartered accountant stating
compliance with conditions at sub-regulation (1).
Website
Regulation
46.
(1)
The listed entity shall maintain a functional website containing the basic
information about the listed entity.
(2) The listed entity shall disseminate the following information
on its website:
(a) details of its business;
(b) terms and conditions of appointment of independent
directors;
(c) composition of various committees of board of directors;
(d) code of conduct of board of directors and senior
management personnel;
(e) details of establishment of vigil mechanism/ Whistle
Blower policy;
(f) criteria of making payments to non-executive directors ,
if the same has not been disclosed in annual report;
(g) policy on dealing with related party transactions;
(h) policy for determining ‘material’ subsidiaries;
(i) details of familiarization programmes imparted to
independent directors including the following details:-
(i) number of programmes attended by independent directors
(during the year and on a cumulative basis till date),
(ii) number of hours spent by independent directors in such
programmes (during the year and on cumulative basis till date), and
(iii) other relevant details
(j) the email address for grievance redressal and other
relevant details;
(k) contact information of the designated officials of the
listed entity who are responsible for assisting and handling investor
grievances;
(l) financial information including:
(i) notice of meeting of the board of directors where
financial results shall be discussed;
(ii) financial results, on conclusion of the meeting of the
board of directors where the financial results were approved;
(iii) complete copy of the annual report including balance
sheet, profit and loss account, directors report, corporate governance report
etc;
(m) shareholding pattern;
(n) details of agreements entered into with the media
companies and/or their associates, etc;
(o) schedule of analyst or institutional investor meet and
presentations made by the listed entity to analysts or institutional investors
simultaneously with submission to stock exchange;
(p) new name and the old name of the listed entity for a
continuous period of one year, from the date of the last name change;
(q) items in sub-regulation (1) of regulation 47 .
(3) (a) The listed entity shall ensure that the contents of
the website are correct.
(b) The listed entity shall update any change in the content
of its website within two working days from the date of such change in content.
Advertisements in Newspapers
Regulation
47.
(1)
The listed entity shall publish the following information in the newspaper:
(a) notice of meeting of the board of directors where
financial results shall be discussed
(b) financial results, as specified in regulation 33,
along-with the modified opinion(s) or reservation(s), if any, expressed by the
auditor:
Provided that if the listed entity has submitted both
standalone and consolidated financial results, the listed entity shall publish
consolidated financial results along-with (1) Turnover, (2) Profit before tax
and (3) Profit after tax, on a stand-alone basis, as a foot note; and a
reference to the places, such as the website of listed entity and stock
exchange(s), where the standalone results of the listed entity are available.
40
(c) statements of deviation(s) or variation(s) as specified
in sub-regulation (1) of regulation 32 on quarterly basis, after review by
audit committee and its explanation in directors report in annual report;
(d) notices given to shareholders by advertisement.
(2) The listed entity shall give a reference in the newspaper
publication, in sub-regulation (1), to link of the website of listed entity and
stock exchange(s), where further details are available.
(3) The listed entity shall publish the information specified
in sub-regulation (1) in the newspaper simultaneously with the submission of
the same to the stock exchange(s).
Provided that financial results at clause (b) of
sub-regulation (1), shall be published within 48 hours of conclusion of the
meeting of board of directors at which the financial results were approved.
(4) The information at sub-regulation (1) shall be published
in at least one English language national daily newspaper circulating in the
whole or substantially the whole of India and in one daily newspaper published
in the language of the region, where the registered office of the listed entity
is situated:
Provided that the requirements of this regulation shall not
be applicable in case of listed entities which have listed their specified
securities on SME Exchange.
Accounting Standards
Regulation
48.
The
listed entity shall comply with all the applicable and notified Accounting
Standards from time to time.
06. Obligations of Listed Entity Which Has Listed Its Non-Convertible Debt Securities Or Non-Convertible Redeemable Preference Shares Or Both
Applicability
Regulation
49.
(1)
The provisions of this chapter shall apply only to a listed entity which has
listed its ‘Non-convertible Debt Securities’ and/or ‘Non-Convertible Redeemable
Preference Shares’ on a recognised stock exchange in accordance with Securities
and Exchange Board of India (Issue and Listing of Debt Securities) Regulations,
2008 or Securities and Exchange Board of India (Issue and Listing of
Non-Convertible Redeemable Preference Shares) Regulations, 2013 respectively.
(2) The provisions of this chapter shall also be applicable
to “perpetual debt instrument” and "perpetual non-cumulative preference
share” listed by banks.
Explanation (1).- For the purpose of this chapter,
“Bank" means any bank included in the Second Schedule to the Reserve Bank
of India Act, 1934.
Explanation (2).- For the purpose of this chapter, if
the listed entity has listed its non-convertible redeemable preference shares:
(i) The reference to “interest” may also read as dividend;
(ii) The provisions concerning debenture trustees and
security creation (or asset cover or charge on assets) shall not be applicable
for “non-convertible redeemable preference shares”
Intimation to stock exchange(s)
Regulation
50.
(1)
The listed entity shall give prior intimation to the stock exchange(s) at least
eleven working days before the date on and from which the interest on
debentures and bonds, and redemption amount of redeemable shares or of
debentures and bonds shall be payable.
(2) The listed entity shall intimate the stock exchange(s),
its intention to raise funds through new non-convertible debt securities or
non-convertible redeemable preference shares it proposes to list either through
a public issue or on private placement basis, prior to issuance of such
securities:
Provided that the above intimation may be given prior to the
meeting of board of directors wherein the proposal to raise funds through new
non convertible debt securities or non-convertible redeemable preference shares
shall be considered.
(3) The listed entity shall intimate to the stock
exchange(s), at least two working days in advance, excluding the date of the
intimation and date of the meeting, regarding the meeting of its board of
directors, at which the recommendation or declaration of issue of non
convertible debt securities or any other matter affecting the rights or
interests of holders of non convertible debt securities or non convertible
redeemable preference shares is proposed to be considered.
Disclosure of information having bearing on
performance/operation of listed entity and/or price sensitive information.
Regulation
51.
(1)
The listed entity shall promptly inform the stock exchange(s) of all
information having bearing on the performance/operation of the listed entity,
price sensitive information or any action that shall affect payment of interest
or dividend of non-convertible preference shares or redemption of non
convertible debt securities or redeemable preference shares.
Explanation.- The expression ‘promptly inform’, shall imply that the stock
exchange must be informed as soon as practically possible and without any delay
and that the information shall be given first to the stock exchange(s) before
providing the same to any third party.
(2) Without prejudice to the generality of sub-regulation(1),
the listed entity who has issued or is issuing non-convertible debt securities
and/or non-convertible redeemable preference shares shall make disclosures as
specified in Part B of Schedule III.
Financial Results
Regulation
52.
(1)The
listed entity shall prepare and submit un-audited or audited financial results
on a half yearly basis in the format as specified by the Board within forty
five days from the end of the half year to the recognised stock exchange(s).
The listed entity shall comply with following requirements
with respect to preparation, approval, authentication and publication of annual
and half-yearly financial results:
(a) Un-audited financial results shall be accompanied by
limited review report prepared by the statutory auditors of the listed entity
or in case of public sector undertakings, by any practising Chartered
Accountant, in the format as specified by the Board:
Provided that if the listed entity intimates in advance to
the stock exchange(s) that it shall submit to the stock exchange(s) its annual
audited results within sixty days from the end of the financial year,
un-audited financial results for the last half year accompanied by limited
review report by the auditors need not be submitted to stock exchange(s).
(b) Half-yearly results shall be taken on record by the board
of directors and signed by the managing director / executive director.
(c) The audited results for the year shall be submitted to
the recognised stock exchange(s) in the same format as is applicable for
half-yearly financial results.
(d) If the listed entity opts to submit un-audited financial
results for the last half year accompanied by limited review report by the
auditors, it shall also submit audited financial results for the entire
financial year, as soon as they are approved by the board of directors.
(e) Modified opinion(s) in audit reports that have a bearing
on the interest payment/ dividend payment pertaining to non-convertible
redeemable debentures/ redemption or principal repayment capacity of the listed
entity shall be appropriately and adequately addressed by the board of
directors while publishing the accounts for the said period.
(3) (a) The annual audited financial results shall be
submitted along with the annual audit report and [Statement on Impact of Audit
Qualifications (applicable only][v] for audit report with
modified opinion)][vi][;][vii]
[Provided that, in case of audit reports with unmodified
opinion, the listed entity shall furnish a declaration to that effect to the
Stock Exchange(s) while publishing the annual audited financial results.][viii]
(b) The [Statement on Impact of Audit Qualifications (for
audit report with modified opinion][ix] and the accompanying annual
audit report submitted in terms of clause (a) shall be reviewed by the stock
exchange(s) [***][x].
(c) [***][xi]
(d) The applicable [format][xii] of [Statement on Impact of
Audit Qualifications (for audit report with modified opinion)][xiii] shall be [in the manner
as][xiv] specified by the Board
[***][xv].
(4) The listed entity, while submitting half yearly / annual
financial results, shall disclose the following line items along with the
financial results:
(a) credit rating and change in credit rating (if any);
(b) asset cover available, in case of non convertible debt
securities;
(c) debt-equity ratio;
(d) previous due date for the payment of interest/ dividend
for non-convertible redeemable preference shares/ repayment of principal of
non-convertible preference shares /non convertible debt securities and whether
the same has been paid or not; and,
(e) next due date for the payment of interest/ dividend of
non-convertible preference shares /principal along with the amount of interest/
dividend of non-convertible preference shares payable and the redemption
amount;
(f) debt service coverage ratio;
(g) interest service coverage ratio;
(h) outstanding redeemable preference shares (quantity and
value);
(i) capital redemption reserve/debenture redemption reserve;
(j) net worth;
(k) net profit after tax;
(l) earnings per share:
Provided that the requirement of disclosures of debt service
coverage ratio, asset cover and interest service coverage ratio shall not be
applicable for banks or non banking financial companies registered with the
Reserve Bank of India.
Provided further that the requirement of this sub- regulation
shall not be applicable in case of unsecured debt instruments issued by
regulated financial sector entities eligible for meeting capital requirements
as specified by respective regulators.
(5) While submitting the information required under sub-
regulation (4), the listed entity shall submit to stock exchange(s), a
certificate signed by debenture trustee that it has taken note of the contents.
(6) The listed entity which has listed its non convertible
redeemable preference shares shall make the following additional disclosures as
notes to financials:
(a) profit for the half year and cumulative profit for the
year;
(b) free reserve as on the end of half year;
(c) securities premium account balance (if redemption of
redeemable preference share is to be done at a premium, such premium may be
appropriated from securities premium account):
Provided that disclosure on securities premium account
balance may be provided only in the year in which non convertible redeemable
preference shares are due for redemption;
(d) track record of dividend payment on non convertible
redeemable preference shares:
Provided that in case the dividend has been deferred at any
time, then the actual date of payment shall be disclosed;
(e) breach of any covenants under the terms of the non
convertible redeemable preference shares:
Provided that in case a listed entity is planning a fresh
issuance of shares whose end use is servicing of the non convertible redeemable
preference shares (whether dividend or principle redemption), then the same
shall be disclosed whenever the listed entity decided on such issuances.
(7) The listed entity shall submit to the stock exchange on a
half yearly basis along with the half yearly financial results, a statement
indicating material deviations, if any, in the use of proceeds of issue of non-
convertible debt securities and non-convertible redeemable preference shares
from the objects stated in the offer document.
(8) The listed entity shall, within two calendar days of the
conclusion of the meeting of the board of directors, publish the financial
results and statement referred to in sub-regulation (4), in at least one
English national daily newspaper circulating in the whole or substantially the
whole of India.
Annual Report.
Regulation
53.
The
annual report of the listed entity shall contain disclosures as specified in
Companies Act, 2013 along with the following:
(a) audited financial statements i.e. balance sheets, profit
and loss accounts etc [, and Statement on Impact of Audit Qualifications as
stipulated in regulation 52(3)(a), if applicable;][xvi]
(b) cash flow statement presented only under the indirect
method as prescribed in Accounting Standard-3/ Indian Accounting Standard 7,
mandated under Section 133 of the Companies Act, 2013 read with relevant rules
framed thereunder or by the Institute of Chartered Accountants of India,
whichever is applicable;
(c) auditors report;
(d) directors report;
(e) name of the debenture trustees with full contact details
;
(f) related party disclosures as specified in Para A of
Schedule V.
Asset Cover
Regulation54. (1) In respect
of its listed non-convertible debt securities, the listed entity shall maintain
hundred per cent. asset cover sufficient to discharge the principal amount at
all times for the non-convertible debt securities issued.
(2) The listed entity shall disclose to the stock exchange in
quarterly, half-yearly, year-to-date and annual financial statements, as
applicable, the extent and nature of security created and maintained with
respect to its secured listed non-convertible debt securities.
(3) The requirement specified in sub-regulation (1), shall
not be applicable in case of unsecured debt securities issued by regulated
financial sector entities eligible for meeting capital requirements as
specified by respective regulators.
Credit Rating
Regulation
55.
Each
rating obtained by the listed entity with respect to non-convertible debt
securities shall be reviewed at least once a year by a credit rating agency
registered by the Board.
Documents and Intimation to Debenture Trustees
Regulation
56.
(1)
The listed entity shall forward the following to the debenture trustee
promptly:
(a) a copy of the annual report at the same time as it is
issued along with a copy of certificate from the listed entity's auditors in
respect of utilisation of funds during the implementation period of the project
for which the funds have been raised:
Provided that in the case of debentures or preference shares
issued for financing working capital or general corporate purposes or for
capital raising purposes the copy of the auditor's certificate may be submitted
at the end of each financial year till the funds have been fully utilised or
the purpose for which these funds were 46 intended has been achieved.
(b) a copy of all notices, resolutions and circulars relating
to-
(i) new issue of non convertible debt securities at the same
time as they are sent to shareholders/ holders of non convertible debt
securities;
(ii) the meetings of holders of non-convertible debt
securities at the same time as they are sent to the holders of non convertible
debt securities or advertised in the media including those relating to
proceedings of the meetings;
(c) intimations regarding :
(i) any revision in the rating;
(ii) any default in timely payment of interest or redemption
or both in respect of the non convertible debt securities;
(iii) failure to create charge on the assets;
(d) a half-yearly certificate regarding maintenance of
hundred percent. asset cover in respect of listed non convertible debt
securities, by either a practicing company secretary or a practicing chartered
accountant, along with the half yearly financial results:
Provided that submission of such half yearly certificates is
not applicable in cases where a listed entity is a bank or non banking
financial companies registered with Reserve Bank of India or where bonds are
secured by a Government guarantee.
(2) The listed entity shall forward to the debenture trustee
any such information sought and provide access to relevant books of accounts as
required by the debenture trustee.
(3) The listed entity may, subject to the consent of the
debenture trustee, send the information stipulated in sub-regulation (1), in
electronic form/fax.
Other submissions to stock exchange(s)
Regulation
57.
(1)
The listed entity shall submit a certificate to the stock exchange within two
days of the interest or principal or both becoming due that it has made timely
payment of interests or principal obligations or both in respect of the non
convertible debt securities.
(2) The listed entity shall provide an undertaking to the
stock exchange(s) on annual basis stating that all documents and intimations
required to be submitted to Debenture Trustees in terms of Trust Deed and
Securities and Exchange Board of India (Issue and Listing of Debt Securities)
Regulations, 2008 have been complied with.
(3) The listed entity shall forward to the stock exchange any
other information in the manner and format as specified by the Board from time
to time.
Documents and information to holders of non - convertible
debt securities and non-convertible preference shares
Regulation
58.
(1)
The listed entity shall send the following documents:
(a) Soft copies of full annual reports to all the holders of
non convertible preference share who have registered their email address(es)
for the purpose;
(b) Hard copy of statement containing the salient features of
all the documents, as specified in Section 136 of Companies Act, 2013 and rules
made thereunder to those holders of non convertible preference share who have
not so registered;
(c) Hard copies of full annual reports to those holders of
non convertible debt securities and non convertible preference share, who
request for the same.
(d) Half yearly communication as specified in sub-regulation
(4) and (5) of regulation 52, to holders of non convertible debt securities and
non convertible preference shares;
(2) The listed entity shall send the notice of all meetings
of holders of non convertible debt securities and holders of non-convertible
redeemable preference shares specifically stating that the provisions for
appointment of proxy as mentioned in Section 105 of the Companies Act, 2013,
shall be applicable for such meeting.
(3) The listed entity shall send proxy forms to holders of
non convertible debt securities and non-convertible redeemable preference
shares which shall be worded in such a manner that holders of these securities
may vote either for or against each resolution.
Structure of non convertible debt securities and non
convertible redeemable preference shares
Regulation
59.
(1)
The listed entity shall not make material modification without prior approval
of the stock exchange(s) where the non convertible debt securities or
non-convertible redeemable preference shares, as applicable, are listed, to :
(a) the structure of the debenture in terms of coupon,
conversion, redemption, or otherwise.
(b) the structure of the non-convertible redeemable
preference shares in terms of dividend of non-convertible preference shares
payable, conversion, redemption, or otherwise.
(2) The approval of the stock exchange referred to in
sub-regulation (1) shall be made only after:
(a) approval of the board of directors and the debenture
trustee in case of non-convertible debt securities and
(b) after complying with the provisions of Companies Act,
2013 including approval of the consent of requisite majority of holders of that
class of securities.
Record Date
Regulation
60.
(1)
The listed entity shall fix a record date for purposes of payment of interest,
dividend and payment of redemption or repayment amount or for such other
purposes as specified by the stock exchange.
(2) The listed entity shall give notice in advance of at
least seven working days (excluding the date of intimation and the record date)
to the recognised stock exchange(s) of the record date or of as many days as
the stock exchange(s) may agree to or require specifying the purpose of the
record date.
Terms of non convertible debt securities and non convertible
redeemable preference shares
Regulation
61.
(1)
The listed entity shall ensure timely payment of interest or dividend of
non-convertible redeemable preference shares or redemption payment:
Provided that the listed entity shall not declare or
distribute any dividend wherein it has defaulted in payment of interest on debt
securities or redemption thereof or in creation of security as per the terms of
the issue of debt securities:
Provided further that this requirement shall not be
applicable in case of unsecured debt securities issued by regulated financial
sector entities eligible for meeting capital requirements as specified by
respective regulators.
(2) The listed entity shall not forfeit unclaimed
interest/dividend and such unclaimed interest/dividend shall be transferred to
the ‘Investor Education and Protection Fund’ set up as per Section 125 of the
Companies Act, 2013.
(3) Unless the terms of issue provide otherwise, the listed
entity shall not select any of its listed securities for redemption otherwise
than pro rata basis or by lot.
(4) The listed entity shall comply with requirements as
specified in regulation 40 for transfer of securities including procedural
requirements specified in Schedule VII.
Website
Regulation
62.
(1)
The listed entity shall maintain a functional website containing the following
information about the listed entity:-
(a) details of its business;
(b) financial information including complete copy of the
annual report including balance sheet, profit and loss account, directors
report etc;
(c) contact information of the designated officials of the
listed entity who are responsible for assisting and handling investor
grievances;
(d) email address for grievance redressal and other relevant
details;
(e) name of the debenture trustees with full contact details;
(f) the information, report, notices, call letters,
circulars, proceedings, etc concerning non-convertible redeemable preference
shares or non convertible debt securities;
(g) all information and reports including compliance reports
filed by the listed entity;
(h) information with respect to the following events:
(i) default by issuer to pay interest on or redemption
amount;
(ii) failure to create a charge on the assets;
(iii) revision of rating assigned to the non convertible debt
securities:
(2) The listed entity may also issue a press release with
respect to the events specified in sub-regulation (1).
(3) The listed entity shall ensure that the contents of the
website are correct and updated at any given point of time.
07. Obligations of Listed Entity Which Has Listed Its Specified Securities and Either Non-Convertible Debt Securities Or Non-Convertible Redeemable Preference Shares Or Both
Applicability of Chapters IV and V
Regulation63. (1) Entity which
has listed its ‘specified securities’ and ‘non-convertible debt securities’ or
‘non-convertible redeemable preference shares’ or both on any recognised stock
exchange, shall be bound by the provisions in Chapter IV of these regulations.
(2) The listed entity described in sub-regulation (1) shall
additionally comply with the following regulations in Chapter V:
(a) regulation 50(2),(3);
(b) regulation 51;
(c) regulation 52(3), (4), (5) and (6);
(d) regulation 53
(e) regulation 54
(f) regulation 55
(g) regulation 56
(h) regulation 57
(i) regulation 58
(j) regulation 59
(k) regulation 60
(l) regulation 61:
Provided that the listed entity which has submitted any
information to the stock exchange in compliance with the disclosure
requirements under Chapter IV of these regulations, need not re-submit any such
information under the provisions of this regulations without prejudice to any
power conferred on the Board or the stock exchange or any other authority under
any law to seek any such information from the listed entity:
Provided further that the listed entity, which has satisfied
certain obligations in compliance with other chapters, shall not separately
satisfy the same conditions under this chapter.
Delisting
Regulation
64.
(1)
In the event specified securities of the listed entity are delisted from the
stock exchange, the listed entity shall comply with all the provisions in
Chapter V of these regulations.
(2) In the event that non-convertible debt securities and
non-convertible redeemable preference shares’ of the listed entity do not
remain listed on the stock exchange, the listed entity shall comply with all
the provisions in Chapter IV of these regulations.
08. Obligations of Listed Entity Which Has Listed Its Indian Depository Receipts
Applicability
Regulation
65.
The
provisions of this chapter shall apply to listed entity whose securities market
regulators are signatories to the Multilateral Memorandum of Understanding of
International Organization of Securities Commission issuing ‘Indian Depository
Receipts’ as defined under Rule 13 of the Companies (Registration of Foreign
Companies) Rules, 2014.
Definitions
Regulation
66.
For
the purpose of this chapter, unless the context otherwise requires -
(a) “IDR Holder(s)” shall mean holder(s) of Indian Depository
Receipts.
(b) “Depository Agreement” shall mean an agreement between
the listed entity and the domestic depository
(c) “Home Country” or “country of origin” shall mean the
country or parent country where the listed entity is incorporated and listed.
(d) “Security holder” shall mean holder of the security or
equity shares of the listed entity in the home country.
General Obligations of listed entity
67. (1) All correspondences filed with the stock exchange(s) and
those sent to the IDR Holders shall be in English.
(2) The listed entity shall comply, at all times, with the
rules/regulations/laws of the country of origin.
(3) The listed entity shall undertake that the competent
Courts, Tribunals and regulatory authorities in India shall have jurisdiction
in the event of any dispute, either with the stock exchange or any investor,
concerning the India Depository Receipts offered or subscribed or bought in
India.
(4) The listed entity shall forward, on a continuous basis,
any information requested by the stock exchange, in the interest of investors
from time to time.
(5) In case of any claim, difference or dispute under the
provisions of this chapter and other provisions of these regulations applicable
to the listed entity, the same shall be referred to and decided by arbitration
as provided in the bye-laws and regulations of the stock exchange(s).
Disclosure of material events or information
68. (1) The listed entity shall promptly inform to the stock
exchange(s) of all events which are material, all information which is price
sensitive and/or have bearing on performance/operation of the listed entity.
(2) Without prejudice to the generality of sub-regulation
(1), the listed entity shall make the disclosures as specified in Part C of
Schedule III.
Indian Depository Receipt holding pattern & Shareholding
details
Regulation
69.
(1)
The listed entity shall file with the stock exchange the Indian Depository
Receipt holding pattern on a quarterly basis within fifteen days of end of the
quarter in the format specified by the Board.
(2) The listed entity shall file the following details with
the stock exchange as is required to be filed in compliance with the disclosure
requirements of the listing authority or stock exchange in its home country or
any other jurisdiction where the securities of the listed entity are listed:
(a) Shareholding Pattern;
(b) Pre and post arrangement share holding pattern and Capital
Structure in case of any corporate restructuring like mergers / amalgamations
Periodical Financial Results
Regulation
70.
(1)
The listed entity shall file periodical financial results with the stock
exchange in such manner and within such time and to the extent that it is
required to file as per the listing requirements of the home country.
(2) The listed entity shall comply with the requirements with
respect to preparation and disclosures in financial results as specified in
Part B of Schedule IV.
Annual Report
Regulation
71.
(1)
The listed entity shall submit to stock exchange an annual report at the same
time as it is disclosed to the security holder in its home country or in other
jurisdictions where such securities are listed.
(2) The annual report shall contain the following:
(a) Report of board of directors;
(b) Balance Sheet;
(c) Profit and Loss Account;
(d) Auditors Report;
(e) All periodical and special reports( if applicable);
(f) Any such other report which is required to be sent to
security holders annually.
(3) The listed entity shall comply with the requirements with
respect to preparation and disclosures in financial results in annual report as
specified in Part B of Schedule IV.
Corporate Governance
Regulation
72.
(1)
The listed entity shall comply with the corporate governance provisions as
applicable in its home country and other jurisdictions in which its equity
shares are listed.
(2) The listed entity shall submit to stock exchange a
comparative analysis of the corporate governance provisions that are applicable
in its home country and in the other jurisdictions in which its equity shares
are listed along with the compliance of the same vis-à-vis the corporate
governance requirements applicable under regulation 17 to regulation 27, to
other listed entities. Documents and Information to IDR Holder
Regulation
73.
The
listed entity shall disclose/send the following documents to IDR Holders, at
the same time and to the extent that it discloses to security holders in its
home country or in other jurisdictions where its securities are listed:
(a) Soft copies of the annual report to all the IDR holders
who have registered their email address(es) for the purpose
(b) Hard copy of the annual report to those IDR holders who
request for the same either through domestic depository or Compliance Officer
(c) the pre and post arrangement capital structure and share
holding pattern in case of any corporate restructuring like mergers /
amalgamations and other schemes
Equitable Treatment to IDR Holders
Regulation
74.
(1)If
the listed entity's equity shares or other securities representing equity
shares are also listed on the stock exchange(s) in countries other than its
home country, it shall ensure that IDR Holders are treated in a manner
equitable with security holders in home country.
(2) The listed entity shall ensure that for all corporate
actions, except those which are not permitted by Indian laws, it shall treat
IDR holders in a manner equitable with security holders in the home country.
(3) In case of take-over or delisting or buy-back of its
equity shares, the listed entity shall, while following the laws applicable in
its home country, give equitable treatment to IDR holders vis-à-vis security
holder in home country.
(4) The listed entity shall ensure protection of interests of
IDR holders particularly with respect to all corporate benefits permissible
under Indian laws and the laws of its home country and shall address all
investor grievances adequately.
Advertisements in Newspapers
Regulation
75.
(1)The
listed entity shall publish the following information in the newspaper :
(a) periodical financial results required to be disclosed;
(b) Notices given to its IDR Holders by advertisement;
(2) The information specified in sub-regulation (1) shall be
issued in at one English national daily newspaper circulating in the whole or
substantially the whole of India and in one Hindi national daily newspaper in
India.
Terms of Indian Depository Receipts
Regulation
76.
(1)
The listed entity shall pay the dividend as per the timeframe applicable in its
home country or other jurisdictions where its securities are listed, whichever
is earlier, so as to reach the IDR Holders on or before the date fixed for
payment of dividend to holders of its equity share or other securities.
(2) The listed entity shall not forfeit unclaimed dividends
before the claim becomes barred by law in the home country of the listed
entity, as may be applicable, and that such forfeiture, when effected, shall be
annulled in appropriate cases.
(3) The Indian Depository Receipts shall have two-way
fungibility in the manner specified by the Board from time to time.
Structure of Indian Depository Receipts
Regulation
77.
(1)
The listed entity shall ensure that the underlying shares of IDRs shall rank pari-passu
with the existing shares of the same class and the fact of having different
classes of shares based on different criteria, if any, shall be disclosed by
the listed entity in the annual report.
(2) The listed entity shall not exercise a lien on the fully
paid underlying shares, against which the IDRs are issued, and that in respect
of partly paid underlying shares, against which the IDRs are issued and shall
also not exercise any lien except in respect of moneys called or payable at a
fixed time in respect of such underlying shares.
(3) The listed entity, subject to the requirements under the
laws and regulations of its home country, if any amount be paid up in advance
of calls on any underlying shares against which the IDRs are issued, shall
stipulate that such amount may carry interest but shall not in respect thereof
confer a right to dividend or to participate in profits.
Record Date
Regulation
78.
(1)
The listed entity, where it is required so to do in its home country or other
jurisdictions where its securities may be listed, shall fix the record date for
the purpose of payment of dividends or distribution of any other corporate
benefits to IDR Holders.
(2) The listed entity shall give notice in advance of at
least four working days to the recognised stock exchange(s) of record date
specifying the purpose of the record date.
Voting
Regulation
79.
(1)
The listed entity shall, either directly or through an agent, send out proxy
forms to IDR Holders in all cases mentioning that a security holder may vote
either for or against each resolution.
(2) Voting rights of the IDR Holders shall be exercised in
accordance with the depository agreement.
Delisting of Indian Depository Receipt
Regulation
80.
(1)
The listed entity shall, if it decides to delist Indian Depository Receipts,
give fair and reasonable treatment to IDR holders.
(2) The listed entity shall comply with such norms and
conditions for delisting Indian Depository Receipts as specified by the Board
or stock exchange in this regard.
(3) The listed entity shall, in case underlying equity shares
are delisted, shall delist and cancel the Indian Depository Receipts. 54
09. Obligations of Listed Entity Which Has Listed Its Securitised Debt Instruments
Applicability
Regulation
81
(1)
The provisions of this chapter shall apply to Special Purpose Distinct Entity
issuing securitised debt instruments and trustees of Special Purpose Distinct
Entity shall ensure compliance with each of the provisions of these
regulations.
(2) The expressions "asset pool", "clean up
call option", "credit enhancement", "debt or
receivables", "investor", "liquidity provider",
"obligor", "originator", "regulated activity",
"scheme", "securitization", "securitized debt
instrument", "servicer", "special purpose distinct
entity", "sponsor" and "trustee" shall have the same
meaning as assigned to them under Securities and Exchange Board of India
(Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008;
Intimation and filings with stock exchange(s)
Regulation
82.
(1)
The listed entity shall intimate the Stock exchange, of its intention to issue
new securitized debt instruments either through a public issue or on private
placement basis (if it proposes to list such privately placed debt securities
on the Stock exchange) prior to issuing such securities.
(2) The listed entity shall intimate to the stock
exchange(s), at least two working days in advance, excluding the date of the
intimation and date of the meeting, regarding the meeting of its board of
trustees, at which the recommendation or declaration of issue of securitized
debt instruments or any other matter affecting the rights or interests of
holders of securitized debt instruments is proposed to be considered.
(3) The listed entity shall submit such statements, reports
or information including financial information pertaining to Schemes to stock
exchange within seven days from the end of the month/ actual payment date,
either by itself or through the servicer, on a monthly basis in the format as
specified by the Board from time to time:
Provided that where periodicity of the receivables is not
monthly, reporting shall be made for the relevant periods.
(4) The listed entity shall provide the stock exchange,
either by itself or through the servicer, loan level information, without
disclosing particulars of individual borrowers, in manner specified by stock
exchange.
Disclosure of information having bearing on
performance/operation of listed entity and/or price sensitive information
Regulation
83.
(1)
The listed entity shall promptly inform the stock exchange(s) of all
information having bearing on the on performance/operation of the listed entity
and price sensitive information.
(2) Without prejudice to the generality of sub-regulation(1),
the listed entity shall make the disclosures specified in Part D of Schedule
III.
Explanation.- The expression ‘promptly inform’, shall imply that the stock
exchange must be informed must as soon as practically possible and without any
delay and that the information shall be given first to the stock exchange(s)
before providing the same to any third party.
Credit Rating
Regulation
84.
(1)
Every rating obtained by the listed entity with respect to securitised debt
instruments shall be periodically reviewed, preferably once a year, by a credit
rating agency registered by the Board.
(2) Any revision in rating(s) shall be disseminated by the
stock exchange(s).
Information to Investors
Regulation
85.
(1)
The listed entity shall provide either by itself or through the servicer, loan
level information without disclosing particulars of individual borrower to its
investors.
(2) The listed entity shall provide information regarding
revision in rating as a result of credit rating done periodically in terms of
regulation 84 above to its investors.
(3) The information at sub-regulation (1) and (2) may be sent
to investors in electronic form/fax if so consented by the investors.
(4) The listed entity shall display the email address of the
grievance redressal division and other relevant details prominently on its
website and in the various materials / pamphlets/ advertisement campaigns
initiated by it for creating investor awareness.
Terms of Securitized Debt Instruments
Regulation
86.
(1)
The listed entity shall ensure that no material modification shall be made to
the structure of the securitized debt instruments in terms of coupon,
conversion, redemption, or otherwise without prior approval of the recognised
stock exchange(s) where the securitized debt instruments are listed and the
listed entity shall make an application to the recognised stock exchange(s) only
after the approval by Trustees.
(2) The listed entity shall ensure timely interest/
redemption payment.
(3) The listed entity shall ensure that where credit
enhancement has been provided for, it shall make credit enhancement available
for listed securitized debt instruments at all times.
(4) The listed entity shall not forfeit unclaimed interest
and principal and such unclaimed interest and principal shall be, after a
period of seven years, transferred to the Investor Protection and Education
Fund established under the Securities and Exchange Board of India (Investor
Protection and Education Fund) Regulations, 2009.
(5) Unless the terms of issue provide otherwise, the listed
entity shall not select any of its listed securitized debt instruments for redemption
otherwise than on pro rata basis or by lot and shall promptly submit to the
recognised stock exchange(s) the details thereof.
(6) The listed entity shall remain listed till the maturity
or redemption of securitised debt instruments or till the same are delisted as
per the procedure laid down by the Board
Provided that the provisions of this sub-regulation shall not
restrict the right of the recognised stock exchange(s) to delist, suspend or
remove the securities at any time and for any reason which the recognised stock
exchange(s) considers proper in accordance with the applicable legal
provisions.
Record Date
Regulation
87.
(1)
The listed entity shall fix a record date for payment of interest and payment
of redemption or repayment amount or for such other purposes as specified by
the recognised stock exchange(s).
(2) The listed entity shall give notice in advance of atleast
seven working days (excluding the date of intimation and the record date) to
the recognised stock exchange(s) of the record date or of as many days as the
Stock Exchange may agree to or require specifying the purpose of the record
date. 57
10. Obligations of Listed Entity Which Has Listed Its Mutual Fund Units
Applicability
Regulation
88.
(1)The
provisions of this chapter shall apply to the asset management company managing
the mutual fund scheme whose units are listed on the recognised stock
exchange(s).
(2) Notwithstanding anything contained in this chapter, the
provisions of the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 and directions issued thereunder shall apply on the listed
entity and to the schemes whose units are listed on the recognised stock
exchange(s).
Definitions
Regulation
89.
The
expressions "Asset Management Company", "Net Asset Value" ,
"Scheme" , "Unit" and "Unit Holder" shall have
the same meaning as assigned to them under Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996;
Submission of Documents
Regulation
90.
(1)
The listed entity shall intimate to the recognised stock exchange(s) the
information relating to daily Net Asset Value, monthly portfolio, half yearly
portfolio of those schemes whose units are listed on the recognised stock
exchange(s) in the format as specified under Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996 and directions issued there under.
(2) The listed entity shall intimate to the recognised stock
exchange(s) in the manner specified by the recognised stock exchange(s) of:
(a) movement in unit capital of those schemes whose units are
listed on the recognised stock exchange(s);
(b) rating of the scheme whose units are listed on the
recognised stock exchange(s) and any changes in the rating thereof (wherever
applicable);
(c) imposition of penalties and material litigations against
the listed entity and Mutual Fund;
(d) any prohibitory orders restraining the listed entity from
transferring units registered in the name of the unit holders.
Dissemination on the website of stock exchange(s)
91. The listed entity shall submit such information and
documents, which are required to be disseminated on the listed entity’s website
in terms of Securities and Exchange Board of India (Mutual Funds) Regulations,
1996 and directions issued there under, to the recognised stock exchange for
dissemination.
11. Duties and Obligations of the Recognised Stock Exchange(s)
Dissemination
Regulation
92.
(1)
Upon receipt of relevant intimations, information, filings, reports,
statements, documents or any other submissions in terms of these regulations,
from the listed entity the recognised stock exchange(s) shall immediately
disseminate the same on its website.
(2) The disseminations by the recognised stock exchange(s) as
mentioned in sub-regulation (1) shall be made in organised, user friendly and
easily referable manner including by providing hyperlinks for easy
accessibility.
Transferability
Regulation
93.
The
recognised stock exchange(s) shall coordinate with Depositories to ensure
compliance with the applicable laws or directions of the Board or any competent
court with regard to freezing / unfreezing, lock-in/ release of lock-in with
respect to securities issued or managed by the listed entity.
Draft Scheme of Arrangement & Scheme of Arrangement
Regulation
94.
(1)
The designated stock exchange, upon receipt of draft schemes of arrangement and
the documents prescribed by the Board, as per sub-regulation (1) of regulation
37, shall forward the same to the Board, in the manner prescribed by the Board.
(2) The stock exchange(s) shall submit to the Board its
Objection Letter or No-Objection Letter on the draft scheme of arrangement
after inter-alia ascertaining whether the draft scheme of arrangement is in
compliance with securities laws within thirty days of receipt of draft scheme
of arrangement or within seven days of date of receipt of satisfactory reply on
clarifications from the listed entity and/or opinion from independent chartered
accountant, if any, sought by stock exchange(s), as applicable.
(3) The stock exchange(s), shall issue Observation Letter or
No-objection letter to the listed entity within seven days of receipt of
comments from the Board, after suitably incorporating such comments in the
Observation Letter or No-objection letter:
Provided that the validity of the ‘Observation Letter’ or
No-objection letter of stock exchanges shall be six months from the date of
issuance.
(4) The stock exchange(s) shall bring the observations or
objections, as the case may be, to the notice of Court or Tribunal at the time
of approval of the scheme of arrangement.
(5) Upon sanction of the Scheme by the Court or Tribunal, the
designated stock exchange shall forward its recommendations to the Board on the
documents submitted by the listed entity in terms of sub-regulation (5) of
regulation 37.
Statement on Impact of Audit Qualifications accompanying
Annual Audit Report
Regulation
95.
The
recognised stock exchange(s) shall review the Statement on Impact of Audit
Qualifications and the accompanying annual audit report submitted in terms of
clause (d) of sub-regulation (3) of regulation 33 and clause (a) of sub-regulation
(3) of regulation 52.][xvii]
Grievance Redressal
Regulation
96.
The
recognised stock exchange(s) shall redress/facilitate redressal of complaints
of holders of listed securities from time to time.
Monitoring of Compliance/Non Compliance & Adequacy/
Accuracy of the disclosures
Regulation
97.
(1)
The recognised stock exchange(s) shall monitor compliance by the listed entity
with provisions of these regulations.
(2) The recognised stock exchange(s) shall also monitor
adequacy/ accuracy of the disclosures made by listed entity with respect to
provisions of these regulations.
(3) The recognised stock exchange(s) shall submit a report to
the Board, with respect to the obligations specified in sub-regulations (1) and
(2), in the manner specified by the Board.
(4) The recognised stock exchange(s) shall put in place
appropriate framework including adequate manpower and such infrastructure as
may be required to comply with the provisions of this regulation.
12. Procedure for Action in Case of Default
Liability for contravention of the Act, rules or the
regulations
Regulation
98.
(1)
The listed entity or any other person thereof who contravenes any of the
provisions of these regulations, shall, in addition to liability for action in
terms of the securities laws, be liable for the following actions by the
respective stock exchange(s), in the manner specified in circulars or
guidelines issued by the Board:
(a) imposition of fines;
(b) suspension of trading;
(c) freezing of promoter/promoter group holding of designated
securities, as may be applicable, in coordination with depositories.
(d) any other action as may be specified by the Board from
time to time
(2) The manner of revocation of actions specified in clauses
(b) and (c) of sub-regulation (1), shall be as specified in circulars or
guidelines issued by the Board.
Failure to pay fine
Regulation
99.
If
listed entity fails to pay any fine imposed on it within such period as
specified from time to time, by the recognised stock exchange(s), after a
notice in writing has been served on it, the stock exchange may initiate
action.
13. Miscellaneous
Amendments to other regulations
Regulation
100.
The
regulations specified in the Schedule IX to these regulations shall be amended
in the manner and to the extent stated therein.
Power to remove difficulties
Regulation
101.
(1)
In order to remove any difficulties in the application or interpretation of
these regulations, the Board may issue clarifications through guidance notes or
circulars after recording reasons in writing.
(2) In particular, and without prejudice to the generality of
the foregoing power, such guidance notes or circulars may provide for all or
any of the following matters, namely:
(a) procedural aspects including intimation to be given,
documents to be submitted;
(b) disclosure requirements;
(c) listing conditions.
Power to relax strict enforcement of the regulations
Regulation
102.
The
Board may in the interest of investors and securities market and for the
development of the securities market, relax the strict enforcement of any
requirement of these regulations, if the Board is satisfied that:
(a) any provision of Act(s), Rule(s), regulation(s) under
which the listed entity is established or is governed by, is required to be
given precedence to; or
(b) the requirement may cause undue hardship to investors; or
(c) the disclosure requirement is not relevant for a
particular industry or class of listed entities; or
(d) the requirement is technical in nature; or
(e) the non-compliance is caused due to factors affecting a
class of entities but being beyond the control of the entities.
Repeal and Savings
Regulation
103.
(1)
On and from the commencement of these regulations, all circulars stipulating or
modifying the provisions of the listing agreements including those specified in
Schedule X, shall stand rescinded.
(2) Notwithstanding such rescission, anything done or any
action taken or purported to have been done or taken including any enquiry or
investigation commenced or show cause notice issued in respect of the circulars
specified in sub-regulation (1) or the Listing Agreements, entered into between
stock exchange(s) and listed entity, in force prior to the commencement of
these regulations, shall be deemed to have been done or taken under the corresponding
provisions of these regulations.
The regulation contains some Schedules and their Parts which are
not reproduced herein, though their names are given as under
Schedule I – Terms of Securities
Schedule II: Corporate Governance
Part A: Minimum Information to Be Placed Before Board Of
Directors
Part B: Compliance Certificate
Part C: Role of The Audit Committee and Review of Information
By Audit Committee
Part D: Role of Committees (Other Than Audit Committee)
A. Role of Nomination and Remuneration Committee
B. Stakeholders Relationship Committee
Part E: Discretionary Requirements
Schedule III
Part A: Disclosures of Events or Information: Specified
Securities
Part B: Disclosure of Information Having Bearing on
Performance/Operation of Listed Entity and/or Price Sensitive Information:
Non-Convertible Debt Securities & Non-Convertible Redeemable Preference
Shares
Part C: Disclosures of Material Events or Information: Indian
Depository Receipts
Part D: Disclosure of Information Having Bearing on
Performance/ Operation of Listed Entity and/or Price Sensitive Information:
Securitised Debt Instrument
Schedule IV
Part A: Disclosures in Financial Results
Part B: Prepartion and Disclsoures in Financial Results of
Listed Entity Which Has Listed Its Indian Depository Receipts
Schedule V: Annual Report
Schedule VI: Manner of Dealing with Unclaimed Shares
Schedule VII: Transfer of Securities
Schedule Ix- Amendments to Other Regulations
Schedule X- List of SEBI Circulars Which Stand Rescinded
14. Consequence of Violations of SEBI Guidelines
Securities Appellate Tribunal in the matter of Vitro
Commodities Pvt. Ltd. v. SEBI opined that the provisions of Regulations
7(1) of Takeover Regulations, 1997 and Regulation 13(1) of PIT Regulations are
not substantially different, since violation of the first automatically
triggers the violation of second and hence, there is no jurisdiction for
imposition of penalty for second violation when penalty for first violation has
been imposed.
The
special SEBI court held Panther Fincap and Management Services Ltd and its
directors Ketan Parekh and Kartik Parekh guilty of violation of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulation, 1997 while
acquiring shares of Shonkh Technologies International Ltd, sentencing the
Parekhs to three years in jail. The firm and the directors have been asked to
pay a fine of Rs10 lakh.
The
company challenged the order imposing the penalty before the Securities
Appellate Tribunal (SAT). SAT rejected their appeal on January 9, 2007. Thus
SEBI continues to impose fine and sentence and the fine forms a considerable
revenue for the Government.
05. CONCLUSION
Thus the SEBI guidelines play a
major role in the supervision and control of securities and the overall
administration and transparency of Companies and other bodies corporate coming
under it. The legal provisions and the guidelines are comprehensive, but it
does not change with the pace of change in the commercialized corporate reigned
economy of India.
BIBLIOGRAPHY
1. Rakesh
Bhargava, Taxmann’s Company Law Volume 1, Taxmann Publications Pvt. Ltd, New
Delhi, October 2014
2. Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015, Published in
Gazette of India on 02.09.2015
7.
https://en.wikipedia.org/wiki/Main_Page
[i] Substituted
by SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment)
Regulations, 2016, w.e.f. 04.01.2017. Prior to substitution, the title read as
follows- “Obligations with respect to directors and senior management”
[ii]
Inserted by SEBI (Listing
Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2016,
w.e.f. 04.01.2017
[iii]
16 Inserted by the
Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations, 2017, w.e.f. 15.02.2017.
[iv]
17 Inserted by SEBI
(Listing Obligations and Disclosure Requirements) (Second Amendment)
Regulations, 2016, w.e.f. 08.07.2016
[v]
Substituted for ‘either
Form A for audit report with unmodified opinion, or Form B’ by SEBI (Listing
Obligations and Disclosure Requirements) (Amendment) Regulations, 2016, w.e.f.
01.04.2016
[vi]
Inserted by SEBI (Listing
Obligations and Disclosure Requirements) (Amendment) Regulations, 2016, w.e.f.
01.04.2016
[vii]
Substituted for the symbol
‘.’ by SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2016, w.e.f. 01.04.2016
[viii]
Inserted by SEBI (Listing
Obligations and Disclosure Requirements) (Amendment) Regulations, 2016, w.e.f.
01.04.2016
[ix]
Substituted for ‘Form B’ by
SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations,
2016, w.e.f. 01.04.2016
[x]
The words ‘and the
Qualified Audit Report Review Committee in the manner specified in Schedule
VIII’ omitted by SEBI (Listing Obligations and Disclosure Requirements)
(Amendment) Regulations, 2016, w.e.f. 01.04.2016
[xi] Omitted
by SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2016, w.e.f. 01.04.2016. Prior to omission, sub regulation (3)
read as follows:
‘The
listed entity shall on the direction issued by the Board, carry out the
necessary steps, for rectification of modified opinion and/or submission of
revised pro-forma financial results, in the manner specified in Schedule VIII’
[xii]
Substituted for ‘formats’
by SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2016, w.e.f. 01.04.2016
[xiii]
Substituted for ‘Form A and
Form B’ by SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2016, w.e.f. 01.04.2016
[xiv]
Inserted by SEBI (Listing
Obligations and Disclosure Requirements) (Amendment) Regulations, 2016, w.e.f.
01.04.2016.
[xv]
The words ‘from time to
time’ omitted by SEBI (Listing Obligations and Disclosure Requirements)
(Amendment) Regulations, 2016, w.e.f. 01.04.2016
[xvi]
Substituted for the symbol
‘;’ by SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2016, w.e.f. 01.04.2016
[xvii]
Substituted for ‘Form B
accompanying Annual Audit Report 95. The recognised stock exchange(s) shall
review the Form B and the accompanying annual audit report, submitted in terms
of clause (d) of sub-regulation (3) of regulation 33 and clause (a) of
sub-regulation (3) of regulation 52, in the manner specified in Schedule VIII.’
by the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations,
2015, w.e.f. 01-04-2016
[xviii]
Omitted By Sebi (Listing
Obligations And Disclosure Requirements) (Amendment) Regulations, 2016, W.E.F.
01.04.2016
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