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Dear Readers,
‘SEBI has come up with Securities and Exchange Board of
India
(Listing Obligations
and Disclosure Requirements) (Amendment) Regulations, 2018 which
shall be applicable from 1st April, 2019. Some
Regulations or Sub regulations are Applicable from 1st October, 2018
Please click on below link to download the Amendment Notification.
RELATES TO
|
PRIOR TO THE
AMENDMENT
|
AFTER AMENDMENT
|
Definition of
Related party
|
As per Regulation 2(1) of the SEBI
listing regulations related party was defined as:
“(zb)―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 this definition shall not be
applicable for the units issued by mutual funds which are listed on a
recognised stock exchange(s);”
|
SEBI (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations, 2018
“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”
|
Definition of
Independent
Director
|
In the definition of
independent
director as per Regulation
16(1)(b)(ii):
“who is or
was not a promoter of
the listed entity or its holding,
subsidiary or
associate company”
|
The definition of independent director
as per Regulation 16(1)(b)(ii) has been substituted to
include:
“who is or
was not a promoter of the listed entity or its holding,
subsidiary or
associate company or member
of the promoter group of the
listed entity”
Effective from 1st October, 2018
|
Definition of
Independent Director
|
No corresponding clause
|
Qualification of ID shall include
(viii) who is not a
non-independent
director of
another company on the board of which any non-independent
director of the listed entity is
an independent director:”
Effective from 1st October, 2018
|
Definition of
material
|
Regulation 16(c) provides that:
|
The same has been substituted with:
|
subsidiary
|
“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.
|
“material subsidiary” shall mean
a
Subsidiary, whose income or net worth
exceeds ten percent of
the consolidated income or net worth respectively, of the listed entity and
its subsidiaries in
the
immediately preceding accounting year.
|
Definition of
senior management
|
Regulation 16(d) provides that:
“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”
|
The definition of senior management
has been substituted to include:
“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 chief executive officer/managing director/whole time
director/manager (including chief
executive officer/manager, in case
they are not part of the
board) and
shall specifically include company
secretary and chief financial officer”
|
Composition
of Board
|
Regulation 17 (1)(a)
of
SEBI
listing regulation provided
that
the Board should have an
optimum combination
of executive and non-executive directors with one women
director and 50% of Board should
comprise of non-executive directors
|
A proviso to
such clause has been
inserted which reads as:
“Provided that the
Board of directors of the top 500 listed entities shall have at
least one independent woman director
by April 1,
2019 and
the Board of
directors of the top 1000 listed entities shall have at least one independent
woman director by April 1, 2020; “
Further, top 500 and 1000 entities shall be determined on
the basis of market capitalisation, as at the end of the immediate previous financial year
|
Minimum
directors in listed entities
|
No corresponding clause
|
The amendment regulations has
inserted a new
sub-clause to regulation
17(1) as appended below:
|
“(c) The board of directors
of the top
1000 listed entities (with effect from April 1, 2019) and the top 2000 listed
entities (with effect from April 1,
2020) shall comprise
of not less
than six
directors.
|
||
Chairman of
Board
|
No corresponding regulation
|
New sub-regulation to
Regulation 17 has
been inserted:
(1A) No listed entity shall appoint a
person or continue the directorship of
any person as a non-executive director
who has attained the age of
seventy five years unless a special resolution is passed to that effect, in
which case
the explanatory statement annexed to
the notice for such motion shall indicate the justification for appointing such
a person.”
(1B). With
effect from April 1, 2020, the
top 500 listed entities shall ensure that
the Chairperson of the board
of such listed entity shall -
(a) be a non-executive director;
(b) not be related to the Managing Director or the Chief Executive Officer as
per the
definition
of the term “relative” defined
under the Companies Act, 2013
Provided that this sub-regulation shall not
be
applicable to
the listed entities
which do not have any identifiable
promoters as per the shareholding
pattern filed with stock exchanges
|
Quorum of
BM
|
Regulation 17(2)
provides :
(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
|
A new sub-regulation has been inserted
in Regulation 17
“(2A) The quorum for every meeting of
the board of directors of
the top 1000 listed entities with effect
from April
1,
2019 and of
the top 2000 listed entities
with effect from April 1, 2020 shall be one-third of its total strength or three
directors, whichever is higher, including
at least one independent director.
|
Fees of Non - Executive Director(s)
|
As per Regulation 17(6) BOD shall
recommend fees and compensation to
be paid to non- executive directors and the shareholders approval shall limit
the maximum number of
stock options that may
be granted to Non
- Executive Director(s) in a FY.
|
A new sub-clause shall
be inserted for
sub-regulation (6) which provides:
(ca) The approval
of shareholders by
special resolution shall be
obtained every year,
in which the annual
remuneration payable to a
single non-
executive director exceeds fifty per cent of the total annual
remuneration payable to
all non -
executive directors, giving details of
the remuneration
thereof.”
|
No corresponding sub-clause
|
A new sub-clause have been
inserted
imposing limits on
the remuneration of directors which
shall require approval
of shareholders:
“(e) The fees or compensation payable
to
executive directors who
are promoters or
members of the
promoter group, shall be
subject to the approval of the shareholders
by special resolution in general meeting,
if-
(i) the
annual remuneration payable
to such executive director
exceeds rupees 5 crore
or 2.5 per cent of
the net profits of the listed entity,
whichever is higher;
or
(ii) where there
is more than one such director, the aggregate annual
|
remuneration to such
directors exceeds
5 per cent of
the net profits of the listed
entity:
Provided that the
approval of the shareholders
under this provision shall
be valid
only till the expiry of
the term
of
such director.
Explanation: For the purposes of
this clause, net profits shall
be calculated as
per section 198 of the Companies
Act,
2013.”
|
||
In regulation 17(10)
there was a
provision for evaluation of performance of
board:
“(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”
|
The regulation for performance
evaluation of directors shall be
substituted with following
clause:
“(10)
The evaluation of independent
directors shall be done
by
the entire board
of directors which
shall include
(a) performance of the directors;
and (b) fulfillment of
the independence criteria as specified in
these regulations
and their independence from the
management:
Provided that in
the above
evaluation, the
directors who are subject to evaluation shall not participate.”
|
|
Notice of
GM
|
No corresponding sub-regulation
|
A new sub-regulation has been inserted
in Regulation 17 w.r.t notice of general meeting as appended below:
“11. The statement to be annexed to the
notice as referred to in sub -section (1)
of section 102 of the Companies Act,
2013 for each item of
special business to be
transacted at a general meeting
shall also
set forth clearly the recommendation of the
board to the shareholders
on each of the specific items.”
|
Number of
directorship
|
No corresponding regulation
|
New Regulation 17A has been inserted
to provide that
now the maximum
number of directorships which
can be held by a director including alternate directorships shall be subject to:
“(1) A person shall not be a director in
more than eight listed entities
with effect
from April 1, 2019 and
in not more than seven listed entities
with effect
from April 1,
2020:
Provided that a person shall not serve as an
independent director in
more than seven listed entities.”
(2) Notwithstanding the
above, any person who is serving as a whole
time director / managing
director in
any listed entity shall serve as an
independent director in
not more than
three listed
entities”
For the purpose of this sub-regulation, the count for the number of
listed entities on which a person is a director / independent director shall
be only those whose equity shares are listed on a stock exchange.”
|
Quorum of
NRC committee
and meetings
of NRC committee
|
No corresponding regulation
|
A new sub-regulations 2A and 3A has
been inserted regulation 19 w.r.t. quorum for NRC committee which shall
be :
“(2A) The quorum for a meeting of the nomination and
remuneration
committee shall be either two
members or one third of the
members of the committee,
whichever is greater, including
at least one independent
director in
attendance.”
“(3A) The nomination and remuneration committee shall meet at least
once in a year.”
|
Role of SRC
committee
|
Regulation 20 of listing
regulations provides for constitution of
SRC committee and its ToR as follows:
“(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”
|
However this has been
substituted
specifically
w.r.t role of SRC as
appended below:
“(1) The listed entity shall constitute a
Stakeholders Relationship Committee to specifically look into the
various aspects of
interest of shareholders, debenture holders and
other security holders”
|
Composition
of SRC
committee
|
No corresponding sub-regulation
|
New sub-regulation has been inserted:
(2A) At least three directors, with at
least one being an independent director, shall
be members of the Committee.”
|
Meeting of
SRC
committee
|
(3) The board of
directors shall
decide other members of this committee.
|
The following has been substituted with:
“(3) The Chairperson of the Stakeholders
Relationship Committee shall be present
at the annual
general meetings to answer queries
of the security holders.”
(3A)The stakeholders relationship committee shall meet at least
once in a year”
|
Meeting of
Risk Management
Committee
|
No corresponding sub-regulation
|
New sub-regulation has been insertred
in regulation 21 :
“(3A) The risk
management committee
shall meet at least
once in
a year.”
Further, the role of risk management
committee has been extended to
include specifically cover cyber
security
|
Applicability
of risk
|
Regulation 21(5)
provides:
|
The said sub-regulation has been
substituted as:
|
management
committee
|
“(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.”
|
“(5) The provisions of this regulation shall be
applicable to top 500 listed
entities, determined on the
basis of market capitalisation, as at the end
of the immediate previous financial year.”
|
RPT policy
|
Regulation 23(1)
provides:
(1)The listed entity shall
formulate a
policy on materiality of related party transactions and
on dealing with related party transactions:
|
The said sub-regulation has been
substituted to widen the RPT
policy:
“(1)The listed entity shall
formulate a
policy on materiality of related party
transactions and on
dealing with related party transactions,
including
clear threshold
limits duly approved by the
board of directors and such
policy shall be
reviewed by the board of directors
at least once
every three years and
updated accordingly
Further a new sub-regulation 1A shall be
inserted:
(1A) Notwithstanding the
above, a transaction involving payments made to
a related party with respect to brand
usage or royalty shall be considered material if the transaction(s)
to be entered
into individually or taken together with previous transactions during
a financial year, exceed two
percent of
the annual consolidated turnover of the
listed entity as per the last audited
financial statements of
the listed entity.”
|
Material
Related Party
Transactions
|
Regulation 23(4)
provides
(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
|
The said regulation shall be
substituted
with the following:
“(4) All material related party
transactions shall require approval of
the shareholders through resolution and
the related parties shall
not vote to
approve the relevant transaction on such resolutions whether the entity is a
|
party to the
particular
transaction or
not.
|
related party to the particular
transaction or
not.”
|
|
Standalone
and consolidated financial
results
|
No corresponding sub-regulation
|
New sub-regulation shall be inserted in regulation 23 :
“(9) The listed entity shall submit
within
30 days from the
date of publication of
its standalone and consolidated financial
results for the half year, disclosures of
related
party transactions on a consolidated
basis, in the format specified in the relevant accounting standards
for
annual results to the stock exchanges
and publish the same on
its website.”
Effective from half year ending March
31, 2019
|
ID on
material foreign subsidiary
|
Regulation 24(1)
provides:
(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.
|
The said regulation has been substituted
to include material foreign subsidiary as provided below:
“(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, whether incorporated in
India or not
For this
material subsidiary shall mean
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.
in the Explanation to sub-regulation (4), the word “material”
appearing after the word “unlisted” shall be omitted
|
Secretarial
Audit
|
No corresponding regulation
|
New regulation 24A has been introduced w.r.t secretarial audit:
Every listed entity and its
material unlisted subsidiaries incorporated in India shall undertake secretarial audit
and shall annex with its
annual report, a
secretarial audit
report, given by a company secretary in practice, in
such form as may
be specified
with effect from the year ended March
31, 2019”
.
|
Alternate
directorship
o ID
|
Regulation 25 of
the listing
regulations provides :
(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
|
The following sub-regulation has been
subtituted
“(1) No person
shall be appointed
or continue as an
alternate director for an
independent director of a
listed entity with effect from
October 1,
2018”
|
Declaration
by IDs
and
introduction
of Directors and Officers
Insurance
|
No corresponding regulation
|
A new sub-regulation has been
introduced in Regulation 25 as provided below:
“(8) Every independent
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 circumstances which
may
affect his status as an
independent
director, submit a declaration that he meets the
criteria of independence as
provided in
clause (b)
of sub- regulation (1) of 12 regulation 16 and
that
he is not aware of any circumstance
or situation, which exist or
may be reasonably anticipated, that could impair
or impact his ability to
discharge his duties with
an objective independent judgment
and without any external influence.
(9) The board
of directors of
the listed
entity shall
take on record the declaration and
confirmation
|
submitted by the independent director
under sub-regulation (8)
after
undertaking due
assessment of the veracity of the same.
(10) With effect from October 1,
2018, the top 500 listed entities by market capitalization calculated as on
March 31 of the preceding financial
year, shall undertake Directors and
Officers insurance
(‘D and O insurance’)
for all
their
independent directors of such quantum
and for such risks as may be determined
by its board of directors.”
|
||
Intimation to
stock exchange for declaration
of bonus in
BM
|
Proviso to
sub-regulation (f)
of
Regulation 29 provides:
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).
|
This shall be omitted from 1st October,
2018
|
Disclosure of
funds raised
from QIP and
preferential
allotment in Annual
Report
|
No corresponding sub-regulation
|
New sub-regulation 7A has been
inserted in Regulation 32 to provide :
“(7A) Where an
entity has raised
funds
through preferential allotment
or qualified institutions placement,
the
listed entity shall
disclose
every year, the utilization of such funds during that year in its Annual
Report until such funds
are fully utilized.”
|
Submission
of standalone and consolidated
financial results half -
|
No corresponding sub-
regulations
|
New clauses shall be
inserted in
Regulation 33 of listing regulations:
(g) The listed entity shall
also submit as
part of its standalone and consolidated
financial results for the half year, by way
|
yearly
|
of a note, statement of cash
flows for
the half-year.
(h) The listed entity shall
ensure that, for the purposes of
quarterly consolidated financial results, at least
eighty percent of each
of the consolidated revenue, assets
and profits,
respectively, shall have
been subject to audit or in case of
unaudited results, subjected to limited review.
(i) The listed entity shall
disclose, in
the results for the last
quarter in the financial year, by
way of a note, the
aggregate effect of material adjustments made in the results of that quarter which pertain to
earlier periods.”
|
|
Limited
review of consolidated
accounts
|
No corresponding sub-regulation
|
In regulation 33 following sub-regulation
shall be
inserted:
“(8) The statutory auditor of a listed
entity shall undertake a
limited review of the
audit of all the entities/ companies
whose accounts are to be consolidated with the listed entity as
per AS 21
in accordance with guidelines
issued by the Board on this matter.”
|
Submission
to stock
exchange
|
Regulation 34 provides:
(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.
|
The same has been substituted on
the
lines:
“(1) The listed entity shall submit
to the stock exchange and publish
on its website-
(a) a copy
of the annual report
sent to the
shareholders along with the notice
of the
annual general
meeting not later than the day of
commencement of
dispatch to its shareholders;
(b)in the event of any changes to the
|
annual report, the revised copy along
with the details
of and explanation for the changes shall be
sent not later than
48 hours after the annual general
meeting.”
|
||
Intimation to
stock exchange
|
No corresponding sub-regulation
|
The followings clauses shall be inserted
in Regulation 36 :
“(4) The disclosures made
by the listed
entity with immediate effect from
date of notification of these amendments
(a) to the stock exchanges shall be in XBRL format in accordance with the guidelines specified by the
stock
exchanges from time to time;
and
(b) to the stock exchanges and on
its website, shall be
in a format that allows users to find
relevant information
easily through a
searching tool
Provided that the requirement to make
disclosures in
searchable
formats
shall not apply
in case there is
a statutory requirement to
make such disclosures
in formats which may
not be searchable, such as
copies
of scanned documents.
(5) The notice being sent to shareholders for
an annual general meeting, where
the statutory auditor(s) is/are proposed to be
appointed/re-appointed shall include
the
following disclosures as a
part of the
explanatory statement to the notice: (a)Proposed fees payable
to the
statutory
auditor(s) along
with terms of
appointment and in case of a new auditor, any
material change
in the fee payable to such auditor from that paid
to
the outgoing auditor along
with the rationale
for such change;
|
(b)Basis of
recommendation for
appointment including the details in relation to
and credentials of the
statutory auditor(s) proposed to
be appointed.”
|
||
Heading of
regulation 44
|
Regulation 44 provides Voting by
shareholder
|
HEADING CHANGED
Regulation 44 has been
amended as “
Meetings
of Shareholders
and Voting”
|
Holding of
Annual General Meeting
|
No corresponding sub-regulation
|
Following clauses shall be inserted in
Regulation 44 of
the listing
regulations:
“(5) The top 100 listed entities by market
capitalization,
determined as on
March
31st of every financial year, shall hold
their annual general meetings within a
period of five
months from the date of closing
of the
financial year
.
(6) The top 100 listed entities
shall provide one-way live
webcast of the
proceedings of the annual general
meetings”
|
Website
Disclosure
|
No corresponding sub-regulation
|
As per regulation 46
, these also have to
be disclosed on the website of the
Company:
“(r) With effect
from
October 1,
2018,
all credit ratings obtained by the
entity for all its outstanding instruments, updated immediately as and when there
is any revision
in any of the ratings.
(s) separate audited financial
statements of
each subsidiary of the listed entity in respect of
a relevant financial year, uploaded at least
21 days prior to the
date of the annual general meeting which has been called
to
inter alia consider
accounts of that
financial
year.”
|
Click here to download the Article
Author
Company Secretary
Vikram Grover
csvikram.grover@gmail.com
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