BACKGROUND AND INTRODUCTION
Securities and Exchange Board of India (SEBI) on September 2, 2015 issued the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) with the aim to consolidate and streamline the provisions of existing listing agreements for different segments of capital markets such as equity shares (including convertibles), non convertible debt securities, etc. and disclosure norms in relation thereto, thereby ensuring better enforceability.
The Regulations shall be effective from 90 days from the date of notification of these regulations i.e. December 01, 2015. But Regulations relating to (i) passing of ordinary resolution instead of special resolution in case of all material related party transactions subject to related parties abstaining from voting on such resolutions, in line with the provisions of the companies Act, 2013, and (ii) re-classification of promoters as public shareholders under various circumstances, shall be effective from September 02, 2015 itself.
With the LODR Regulations, the current listing agreement is substituted by simple and short Listing Agreement. The new Regulations have greater statutory force and non-compliance would lead to violation of Securities Laws and consequential penal provisions would be applicable. Violation of Listing Agreement is covered under section 23E of SCRA with penalty upto Rs 25 Crores.
As per Section 2 (52) of the Companies Act, 2013, listed company means a company which has any of its securities listed on any recognized stock exchange. This means that if a private limited company has its debt securities listed on any recognized stock exchange, then such company is under the ambit of listed company category for complying with the Companies Act, 2013 and the rules and regulations made thereunder. In Listing Regulations 2015, the term 'listed entity' is used instead of 'listed company' to cover even the entities which are "body corporate" (governed by relevant statutes).
KEY DEFINITIONS
“designated securities” means specified securities, non - convertible debt securities, non-convertible redeemable preference shares,perpetual debt instrument, perpetual non-cumulative preference shares, Indian depository receipts, securitised debt instruments, [security receipts,] units issued by mutual funds and any other securities as may be specified by the Board.
“half yearly results” means the financial results prepared in accordance with these regulations in respect of a half year;
"listed entity" means an entity which has listed, on a recognised stock exchange(s), the designated securities issued by it or designated securities issued under schemes managed by it, in accordance with the listing agreement entered into between the entity and the recognised stock exchange(s).
“listing agreement” shall mean an agreement that is entered into between a recognised stock exchange and an entity, on the application of that entity to the recognised stock exchange, undertaking to comply with conditions for listing of designated securities;
“main board" means main board as defined in clause (a) of sub-regulation (1) of regulation 106N of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
“related party” means a related party as defined under sub-section (76) of section 2 of the Companies Act, 2013 or under the applicable accounting standards:
[Provided that any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party.]
Provided [further] that this definition shall not be applicable for the units issued by mutual funds which are listed on a recognised stock exchange(s);
"specified securities" means ‘equity shares’ and ‘convertible securities’ as defined under clause (zj) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
APPLICABILITY OF SEBI (LODR) REGULATIONS
Unless otherwise provided, 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 Exchangeor 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;10[(da) security receipts;]
(e)units issued by mutual funds;
(f)any other securities as may be specified by the Board.
PRINCIPLES GOVERNING DISCLOSURES AND OBLIGATIONS OF LISTED ENTITY
(This is applicable to all listed entities irrespective of type of security listed)
The listed entity which has listed securities shall make disclosures and abide by its obligations under these regulations,in accordance with the following important principles:
Financial disclosures shall be prepared and disclosed in accordance with the applicable accounting standards.
In the preparation of financial statements the accounting standards shall be implemented in letter and spirit, in the interest of all stakeholders.
Annual audit is to be conducted by an independent, competent and qualified auditor Refrain from making misrepresentations or furnishing misleading information.
Provide adequate and timely information to the exchanges and investors.
Disseminations under Regulations and Circulars shall be - adequate, accurate, explicit, timely and presented in a simple language.
Event based or periodical filings, reports, statements, documents and information shall contain relevant information. Such filings shall enable investors to track performance over specified time and also assess the current status of the listed entity.
Listed entities shall comply with the corporate governance provisions as specified in Chapter IV, to achieve the objectives of the principles as under:
Protect and facilitate the exercise of various rights of shareholders.
Timely and accurate disclosures on all material information, including the financial situation, performance, ownership and governance of the listed entity.
Board of Directors to discharge various responsibilities on disclosure of information, key functions, Provide adequate and timely information to shareholders.
Equitable treatment of all shareholders, including minority and foreign shareholders.
Recognise the rights of the stakeholders and encourage co-operation between the listed entity and the stakeholders. Devise an effective whistle blower mechanism for stakeholders and have a redressal mechanism for violation of their rights.
In case of any ambiguity or incongruity between the principles and the relevant regulations the principles shall prevail.
COMMON OBLIGATIONS OF LISTED ENTITIES
These obligations are common to all listed entities irrespective of the type of security listed, the listed entities have to comply with these obligations.
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.
Regulation 6: Compliance Officer and his Obligations.
A listed entity shall appoint a qualified company secretary as the compliance officer.
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.
Regulation 7: Share Transfer Agent.
(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[***]11 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).
Regulation 8: Co-operation with intermediaries registered with the Board.
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.
Regulation 9: Preservation of documents.
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.
Regulation 10: Filing of information.
(1) The listed entity shall file the reports, statements, documents, filings and any other information with the recognised stock exchange(s) on the electronic platformas 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).
Regulation 11: Scheme of Arrangement.
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 anyway 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).
Regulation 12: Payment of dividend or interest or redemption or repayment.
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.
Regulations 13: Grievance Redressal Mechanism
(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.
Regulation 14: Fees and other charges to be paid to the recognized stock exchange(s).
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).
In the next article we will discuss the obligations of listed companies which has listed its specified securities.
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