SEBI Notification dated 17 May 2024 Amendment in SEBI (LODR) 2015

SEBI on May 17, 2024, amended the SEBI (Listing and Disclosure Requirements) Regulations, 2015 (LODR or LODR Regulations). There were amendments to the SEBI (ICDR) Regulations,2018, SEBI (SAST) Regulations, 2011, SEBI (PIT) Regulations, 2015, and also SEBI (Buy-Back of Securities) Regulations, 2018.

The amendment to SEBI (LODR) Regulations, 2015 came into force from the date of its publication in the Official Gazette, however, the amendments in Regulations 3, 17, 21(5), 25, 30 [omission of the Explanation under sub-regulation (11)], 34, 43A and 44 shall come into force with effect from December 31, 2024.

The amendments to SEBI (LODR) 2015 are briefly detailed below:

1. Market Capitalization: Regulation 3(2):concerning the applicability of the LODR Regulations to a listed entity based on Market Capitalization is substituted as follows:

The applicability shall be determined as follows:

1. 1.  Every recognized stock exchange shall, at the end of the calendar year i.e., 31^stDecember, prepare a list of entities that have listed their specified securities ranking such entities based on their average market capitalization from 1^st July to 31^st December of that calendar year.
      
      
   2. The relevant provisions shall then become applicable to a listed entity that is required to comply with such requirements for the first time (or if applicable, required to comply after any interim period) after 3 months from December 31(i.e. April 1) or from the beginning of the immediate next financial year, whichever is later.
      
      However, the listed entity, which is required to comply with this regulation for the first time or after a period of cessation, shall put in place systems and processes for compliance with Regulation 34(2)(f) (Business Responsibility and Sustainability Report) within 3 months from December 31 (i.e. on or before April 1) or from the beginning of the immediate next financial year, whichever is later.

      
      Such listed entity is further required to disclose the Business Responsibility and Sustainability Report (BRSR) and/or assurance as per the BRSR Core in the Annual Report prepared for the financial year in which systems and processes were required to be put in place.

      Our Comments: This means if, as of 31.12.2024 the Company is listed as per average Market Capitalisation, which will attract various provisions including reporting BRSR and/or assurance as per the BRSR Core. Then such entities are required to put in place the systems and processes from FY 2025-26 and the Annual Report for FY 2025-26 needs disclosure of BRSR.

   3. The listed entity shall continue to comply with relevant provisions that applied to it based on the market capitalization of the previous year and continue(s) to remain applicable based on its rank in the list prepared by recognized stock exchanges as per clause (a) of this sub-regulation.

      
      A new Sub-Regulation 3(2A) with respect to the applicability of the LODR Regulations is inserted which states:

      The provisions of these regulations, which become applicable to a listed entity based on the criteria of market capitalization, shall continue to apply to such an entity unless its ranking changes in the list prepared as per regulation 2(2) and such change results in the listed entity remaining outside the applicable threshold for three (3) consecutive years.
      
      Our comments: The listed entity continues to remain compliant with provisions related to market capitalization unless, for three consecutive years, it is outside the threshold of market capitalization.

      A new Sub-Regulation 3(2B) with respect to the applicability of the LODR Regulations is inserted which states:

      Listed entities that remain outside the applicable threshold for three (3) consecutive years in terms of Regulation 3 (2A), the provisions that apply based on criteria of market capitalization shall cease to apply at the end of the financial year following the 31^st December of the 3^rd consecutive year. 

      However, for listed entities that follow January to December as their financial year, the provisions shall cease to apply at the end of 3 months from 31^st December of the third consecutive year (i.e. on 31^st March).

2. High-value debt-listed (HVDL) entities: Regulation 15:There are few changes in existing Regulation 15(1A) of LODR Regulations concerning High-value debt-listed (HVDL) entities regarding the compliance with Regulations 16 to 27 on comply or explain basis.

The period for compliance with Regulations 16 to 27 by HVDL entities has been further extended from March 31, 2024, to March 31, 2025.

3. Independent Woman Director: Regulation 17:Regulation 17 (1)(a) of LODR Regulations is with respect to the Board of Directors. The amendment read that now the top 1000 listed entities are required to have at least One (1) Independent Woman Director on its Board.

It was initiated earlier for the top 500 listed entities by 01.04.2019 and for the top 100 listed entities by 01.04.2020, which is now deleted, and the Explanation regarding market Capitalisation as at the end of the immediate previous financial year has been deleted.

Board of Directors: Regulation 17 (1)(c) of LODR Regulations concerning the Board of Directors, reads that now the top 2000 listed entities are required to have not less than Six (6) Directors on its Board.

It was initiated earlier for the top 1000 listed entities by 01.04.2019 and for the top 2000 listed entities by 01.04.2020, which is now deleted, and the Explanation regarding market Capitalisation as at the end of the immediate previous financial year has been deleted.

The quorum of the meeting of the Board: In Regulation 17 (2A) of LODR Regulations with respect to the quorum of the meeting of the Board of Directors, now the quorum of the meeting of the Board of Directors of the top 2000 listed entities shall be 1/3^rd of the total strength of Directors or Three (3) Directors, whichever is higher, including at least One (1) Independent Director.  Explanation remains that participation of the directors by video conferencing or by other audio-visual means shall also be counted for such quorum.

It was initiated earlier for the top 1000 listed entities by 01.04.2019 and for the top 2000 listed entities by 01.04.2020, which is now deleted, and Explanation II regarding market Capitalisation as at the end of the immediate previous financial year has been deleted.

4. Gap between two meetings of the Risk Management Committee: Regulation 21: In Regulation 21(3C) of LODR Regulations concerning the Risk Management Committee, now it is amended that the meetings of the Risk Management Committee shall be conducted in such a manner that continuously not more than 210 days (earlier 180 days) shall elapse between any two consecutive meetings.

Applicability to have Risk Management Committee: Regulation 21(5) of LODR Regulations concerning the Risk Management Committee, will apply to the top 1000 listed entities and high-value debt-listed entities. Reference to the top 1000 listed entities determined as per market Capitalisation as at the end of the immediate previous financial year has been deleted.

5. Obligations with respect to independent directors: Regulation 25:In Regulation 25(10) of LODR Regulations concerning the obligations of Independent Directors, now the top 1000 listed entities by market capitalization, shall undertake Directors and Officers Insurance  (‘D and O Insurance’) for all their Independent Directors of such quantum and such risks as may be determined by its Board of Directors.

The line market capitalization as of March 31 of the preceding financial year has been omitted.

6. Vacancies in respect of Certain Key Managerial Personnel: Regulation 26A:In Regulation 26A of LODR Regulations, concerning vacancies of certain Key Managerial Personnel (KMP) like in the office of Chief Executive Officer, Managing Director, Whole Time Director or Manager, a new proviso has been inserted before the existing proviso which is as follows.

Provided that where the listed entity is required to obtain approval of the regulatory, government, or statutory authorities to fill up vacancies of certain KMP, then such vacancies shall be filled up by the listed entity at the earliest and in any case not later than 6 months from the date of the vacancy.

The first proviso as mentioned below is shifted as proviso no.2

Provided further that the listed entity shall not fill such vacancy by appointing a person in interim capacity unless such appointment is made in accordance with the laws applicable in case of a fresh appointment to such office and the obligations under such laws are made applicable to such person.

Our Comments: The vacancy of KMPs is to be filled as soon as possible but not later than 6 months when the listed entity is required to obtain approval from a regulatory, government, or statutory authority for filling up such vacancy.

7. Prior Intimations: Regulation 29:In Regulation 29 of LODR Regulations, with respect to prior intimations, the following amendments have been made:

1. 1. In sub-regulation (1)the amendment reads that the listed entity shall give prior intimation of at least 2 working days in advance, excluding the date of the intimation and date of the meeting to the stock exchange about the meeting of the board of directors in which any of the following proposals is due to be considered
      
      
   2. In sub-regulation (1) Clause (d)concerning fundraising, the following line which is underlined is insertedFundraising by way of issue of securities (excluding security receipts, securitized debt instruments, or money market instruments regulated by the Reserve Bank of India), through 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.
      Following 2^nd proviso is inserted Provided further that intimation for determination of issue price in a qualified institutions placement is not required if such placement is done in accordance with the provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
      
      
   3. In sub-regulation (1)after existing clause (f), new clauses (g) and (h) are inserted which read as follows:
      The listed entity is now required to give prior intimations for:
      • 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;
      • any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or debentures or bonds, shall be payable.
        
        
   4. Sub-regulation (2)along with proviso is substituted with the following clause: The intimation required under sub-regulation (1) shall mention the date of such meeting of the Board of Directors.
      
      

      Our comments: This is to bring uniformity of intimation, for financial results earlier there was a requirement to give prior intimation of at least five days in advance (excluding the date of the intimation and date of the meeting), which is now deleted and brought it in line with all other prior intimation.

   5. Sub-regulation (3) is omitted:with respect to giving intimation of at least eleven working days for any proposal of alteration in the form or nature of any of its securities that are listed on the stock exchange or any alteration in the date of interest on debentures or bonds, or redemption amount of redeemable shares or debentures or bonds.

      These provisions are inserted in sub-regulation (1) after existing clause (f), new clauses (g) and (h)

8. Disclosure of events or information: Regulation 30:In Regulation 30 (11) of LODR Regulations there are certain amendments and now clause 30 (11) reads as follows:

The listed entity may on its initiative also, confirm or deny any reported event or information to stock exchange(s).

 Provided that the top 100 listed entities and thereafter the top 250 listed entities with effect from the date specified by SEBI shall confirm, deny, or clarify upon the material price movement as may be specified by the stock exchanges any reported event or information in the mainstream media which is not general in nature and which indicates that rumor of an impending specific event or information is circulating amongst the investing public, as soon as reasonably possible but in any case not later than 24 hours from the trigger of material price movement.

 Provided further that if the listed entity confirms the reported event or information, it shall also provide the current stage of such event or information.

Further, a new proviso is inserted which reads as follows:

Provided further that when the listed entity confirms within 24 hours from the trigger of material price movement, any reported event or information on which pricing norms provided under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 or SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 or SEBI (Buy-back of Securities) Regulations, 2018 or any other pricing norms specified by SEBI or the stock exchanges are applicable, then the effect on the price of the equity shares of the listed entity due to the material price movement and confirmation of the reported event or information may be excluded for calculation of the price for that transaction as per the framework as may be specified by SEBI.

9. A new sub-regulation 30(11A)with respect to the disclosure of events or information is inserted as follows:

The promoter, director, key managerial personnel, or senior management of a listed entity shall provide adequate, accurate, and timely responses to queries raised or explanations sought by the listed entity to ensure compliance with the requirements under sub-regulation (11) and the listed entity shall disseminate the response received from such individual(s) promptly to the stock exchanges.

10. Annual Report: Regulation 34:In Regulation 34 (2) (f) of LODR with respect to the Business Responsibility and Sustainability Report (BRSR) following explanation is omitted

Explanation-1: For the purpose of this clause:

1. 1. • market capitalization shall be calculated as on the 31st day of March of every financial year;
      • Business Responsibility and Sustainability Report Core shall comprise such key performance indicators as may be specified by the Board from time to time
      • “value chain” for the listed entities shall be specified by the Board from time to time.

Our comments: Since there has been an amendment in the determination of Market Capitalization by stock exchanges and also that the SEBI Circular dated 12 July 2023 clarified KPIs on BRSR Core and specified value chain, this explanation is redundant and hence deleted.

11. Dividend Distribution Policy: Regulation 43A:

The top 1000 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 on the website of the listed entity and a web link shall also be provided in their annual reports.

Our comments: Since there has been an amendment in the determination of Market Capitalization by stock exchanges, this line is deleted.

12. Meetings of shareholders and voting: Regulation 44:

In Regulation 44 (5) and (6) of LODR, there are minor changes with respect to the holding of annual general meetings by the top 100 listed entities by market capitalization and providing a one-way live webcast of the proceedings of the annual general meetings.

Our comments: Since there has been an amendment in the determination of Market Capitalization by stock exchanges, the Explanation to regulation 44 (6) has been deleted.

The link to the aforesaid Notification is as follows:
egazette.gov.in/(S(vekr4v2k1tw4czjeh5z05lep))/ViewPDF.as