Tag Archives: LODR

related party transactions

SEBI has in its board meeting held on 28th September, 2021 review the provisions relating to related party transactions (RPT) and made the following changes in the Listing Obligations and Disclosure Requirements Regulations. The amendment in the LODR will of course come later in due course of time.

It seeks enhanced disclosure and approval process for RPTs. The gist of the changes are given below.

The Board considered and approved the amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in relation to regulatory provisions on related party transactions (RPTs). Key amendments are as follows:
I. The definition of related party shall include:
a. all persons or entities forming part of promoter or promoter group irrespective of their shareholding;
b. any person/entity holding equity shares in the listed entity, as below, either directly or on a beneficial interest basis at any time during the immediately preceding financial year:
i. to the extent of 20 % or more
ii. to the extent of 10% or more w.e.f. April 1, 2023.
II. The definition of RPT shall include transactions between:
a. the listed entity or any of its subsidiaries on one hand and a related party of the listed entity or any of its subsidiaries on the other hand;
b. the listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of
its subsidiaries w.e.f. April 1, 2023.
III.Prior approval of the shareholders of the listed entity shall be required for material RPTs having a threshold of lower of Rs. 1000 crore or 10% of the consolidated annual turnover of the listed entity.
IV. Approval of the Audit committee shall be required for
a. All RPTs and subsequent material modifications as defined by the Audit committee;
b. RPTs where subsidiary is a party but listed entity is not a party subject to threshold of
i. 10% of the consolidated turnover of the listed entity,
ii. 10% of the standalone turnover of the subsidiary w.e.f. April 1, 2023.
V. Enhanced disclosure of information related to RPTs to be:
a. placed before the audit committee,
b. provided in the notice to shareholders for material RPTs, and
c. provided to the stock exchanges every six months in the format specified by the Board with the following timelines:
i. within 15 days from the date of publication of financials;
ii. simultaneously with the financials w.e.f. April 1, 2023.
The amendments shall come into force with effect from April 1, 2022 unless otherwise specified above.

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LODR compliances – corp gov.

SEBI has mandated an additional set of compliances for listed entities – under regulation 27 of the Listing Obligations and Disclosure Requirements Regulations 2015. Now disclosures around loans/ guarantees/ letters of comfort/ securities provided by listed entities to their promoter or promoter group entities or any other entity controlled by them, either directly or indirectly has to be made on a half yearly basis from the financial year 2021-22.

The format of the report is given in this circular

https://www.sebi.gov.in/legal/circulars/may-2021/format-of-compliance-report-on-corporate-governance-by-listed-entities_50338.html

Apart from this, there are three other corporate governance reporting to be done in various periods as enumerated under:

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securities compliances – relaxations

SEBI has relaxed some compliance deadlines in view the ongoing covid 2.0 pandemic. Details are given below:

Listed entities have been allowed to use their digital signatures for all filings upto 31st December, 2021.

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LODR – amendments

SEBI has vide its notification dated 8th October, 2020 amended the Listing Obligations and Disclosure Requirements Regulations 2015 as follows:

In Chapter V pertaining to obligations of a listed entity which has listed its non convertible debt securities or non convertible redeemable preference shares or both.

Regulation 54(1) pertaining to asset cover has been amended as follows:

  1. [(1) In respect of its listed non-convertible debt securities, the listed entity shall maintain hundred per cent. asset cover or asset cover as per the terms of offer document/Information Memorandum and/or Debenture Trust Deed, sufficient to discharge the principal amount at all times for the non-convertible debt securities issued.]

In earlier version, the wordings highlighted above were not there. It has been added vide this amendment.

Regulation 54(3) has been omitted. Prior to its omission, reg 54(3) read as follows:

“(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.”

So now even unsecured debt securities will be required to keep asset cover as per reg 54(1) ibid.

Regulation 56 pertaining to documentation and intimation to debenture trustees. New clause has been inserted in reg 56(1)(c) as follows, after existing sub-clause (iii).

1[(iv) all covenants of the issue (including side letters, accelerated payment clause, etc.)]

Reg 56(1)(c) pertains to intimations to be made to the debenture trustee by the issuer – intimations regarding revisions in rating, default in timely payment of interest or redemption or both in case of non-convertible securities or failure to create charge on the assets. Now one more clause has been added as above for making intimation to the debenture trustees.

Reg 56(1)(d) has been replaced as follows:

“(d) a half-yearly certificate regarding maintenance of hundred
percent asset cover or asset cover as per the terms of offer document/
Information Memorandum and/or Debenture Trust Deed, including
compliance with all the covenants, in respect of listed non-convertible
debt securities, by the statutory auditor, along with the half-yearly
financial results:
Provided that the submission of half yearly certificate is not
applicable where bonds are secured by a Government guarantee.”

Earlier this certificate could have been issued by a practising CA or CS. Now that is one opportunity lost for us.

In Schedule III, in part A, a new clause has been added. Schedule III pertains to disclosure of events or information in respect of specified securities under regulation 30.

17. Initiation of Forensic audit: In case of initiation of forensic audit,
(by whatever name called), the following disclosures shall be made
to the stock exchanges by listed entities:
a) The fact of initiation of forensic audit along-with name of
entity initiating the audit and reasons for the same, if available;
b) Final forensic audit report (other than for forensic audit
initiated by regulatory / enforcement agencies) on receipt by the
listed entity along with comments of the management, if any.

https://www.sebi.gov.in/legal/regulations/oct-2020/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-third-amendment-regulations-2020_47821.html

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LODR

SEBI has amended the regulation 42 of the Listing Obligations and Disclosure Requirements Regulations (LODR) vide its notification dated 5th August, 2020. Basically the amendment is a technical one. Regulation 42 pertains to listed entities intimating to the stock exchanges record date for closure of transfer books for various purposes like dividends, bonus shares etc. The intimation is to be given to those stock exchanges in which the listed entity’s securities are listed.

Now it has amended regulation 42 saying that intimation to be given to the stock exchanges where the listed entity’s securities are listed or where stock derivatives are available on the stock of the listed entity or where listed entity’s stock forms part of an index in which derivatives are available.

This condition was in reg 42(1)(e) where intimation is to be given in case of corporate action like mergers, de-mergers, splits and bonus shares. Now it has been carried to the header before the purposes are spelt out.

SEBI circular can be found here

https://www.sebi.gov.in/legal/regulations/aug-2020/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-second-amendment-regulations-2020_47274.html

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Secretarial compliance report

SEBI has extended by one month the timeline to file the secretarial compliance report by listed entities under regulation 24-A of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015. This is in view of the covid pandemic.

SEBI circular can be found here.

https://www.sebi.gov.in/legal/circulars/jun-2020/further-extension-of-time-for-submission-of-annual-secretarial-compliance-report-by-listed-entities-due-to-the-continuing-impact-of-the-covid-19-pandemic_46933.html

While SEBI & MCA & CBITC have been quite pro-active in extending compliance deadlines due to covid pandemic, the same kind of interest is not shown by RBI, India’s oldest regulator. Till today, they have not extended the timeline for filing the annual FLA return which is supposed to be filed every year and the last date for the same is 15th July, 2020. Even earlier they had not extended the time line for filing the form FC-GPR online which is supposed to be filed within one month of the date of allotment of securities. Why this lethargy from RBI is not clear.

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SEBI relaxation – mar 20 a/cs

SEBI has vide their circular dated 24/6/20 further relaxed the timeline for submission of financial results by listed entities for their march 20 quarterly as well as final audited results by one more month upto 31st July, 2020. Earlier it was relaxed upto 30th June, 2020

Under Regulation 33 and 52 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) listed companies have to submit their quarterly and annual financial results within 45 days from the end of the quarter/ financial year. This year due to Covid, relaxations were given to the companies in view of the office lockdown situation.

SEBI circular can be found here

https://www.sebi.gov.in/legal/circulars/jun-2020/further-extension-of-time-for-submission-of-financial-results-for-the-quarter-half-year-financial-year-ending-31st-march-2020-due-to-the-continuing-impact-of-the-covid-19-pandemic_46924.html

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SEBI – relaxations

https://www.sebi.gov.in/legal/circulars/mar-2020/-further-relaxations-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-lodr-and-the-sebi-circular-dated-january-22-2020-relatin-_46436.html

Further relaxations made by SEBI in compliance matters because of the Covid crisis.

Reg 40(9) certification has been relaxed by one month.

reg 44(5) – holding of AGM by top 100 market listed entities – should have been done within 5 months from the closure – now one month extra has been given

conduct of various committee meetings in a financial year – nomination cum remuneration committee, stakeholders committee, risk management committee, – they are supposed to hold at least one meeting during the financial year. If they have not met, then they can meet upto june 2020.

Standard Operating Procedure i/r of fines and other enforcement actions for non compliances – action will be deferred and will be applicable only for compliances for the period ending 30th june, 2020.

reg 47 – publication of advertisement in newspapers in respect of board meetings and other matters is being exempted since many newspapers are not bringing out their print version of the newspapers.

Still the regulation 76 of the SEBI (Depositories) Act regarding reconcilation of share capital audit is not covered in these circulars.

 

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SEBI relaxations – covid

SEBI has on 23rd March, 2020 announced a second set of relaxations for compliances due to the covid crisis.

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-and-certain-sebi-circulars-due-to-the-covid-19-virus-pandemic-cont-_46395.html

These relaxations cover primary issues in debt market/ commercial papers, some LODR compliances, some NCD compliances/ commercial papers etc. and some municipal debt compliances.

Earlier some relaxations were made on 19th March, 2020 regarding compliances under LODR

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-due-to-the-covid-19-virus-pandemic_46360.html

Still SEBI in both of these circulars not mentioned about the reconciliation of share capital under the SEBI (Depositories) Regulations and certificate u/r 40(9) of the LODR both of which go in April 2020 in respect of the March 2020 period. Half baked and incomplete circulars being issued by SEBI in this regard.

Meanwhile there is no news from MCA regarding extension in their deadlines – payment of challan dates, due dates for various forms which come into force for the March 2020 period, extension of the resubmission due dates, Spice+ dates etc.

Government departments seems to be working in utter disaster

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