SEBI has notified SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’). A time period of 90 days has been allowed to companies to implement these regulations. However, two provisions of the regulations shall be applicable with immediate effect namely,
i. Rules governing passing of ordinary resolution instead of special resolution in case of all material related party transactions and
ii. Rules on re-classification of promoters as public shareholders under various circumstances.
With a view to provide ease of reference, regulations have been structured by consolidating into one single document across various types of securities listed on the Stock exchanges.
The regulations provides for– Guiding Principles under (Chapter II); Common obligations applicable to all listed entities under (Chapter III); Obligations which are applicable to specific types of securities under (Chapter III to IX); Obligations of stock exchanges and provisions in case of default under (Chapter X & XI); Ease of Reference; and ensures streamlining and segregation of initial issuance/listing obligations;
Further, wherever necessary, the provisions in Listing Regulations have been aligned with those of the Companies Act, 2013. The regulations prescribe a short version of the Listing Agreement of approximately (2 pages) which would be made available very soon. The short version of Listing Agreement is required to be signed by a company getting its securities listed on Stock Exchanges
It is to be noted that the Listing regulations consolidates and streamlines the provisions of existing listing agreements for different segments of the capital market viz., i) Equity (including convertibles) issued by entities listed on the Main Board of the Stock Exchanges, Small and Medium Enterprises listed on SME Exchange and Institutional Trading Platform, ii) Non-Convertible Debt Securities, iii) Non Convertible Redeemable Preference Shares, iv) Indian Depository Receipts, v) Securitized Debt Instruments and Units issued by Mutual funds schemes.
Key highlights of the regulations are outlined as under:
1. Applicability: The regulations shall apply to the listed entity who has listed any of the designated securities on recognised stock exchange(s)
2. Common Obligations Of Listed Entities: The listed entity shall have to 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
3. Related party transactions: The regulation allows companies to approve any material related party transactions by passing an ordinary resolution instead of special resolution however, it should be noted that the related parties shall have to abstain from voting on such resolutions.
So far, SEBI norms required a vote by two-thirds of majority shareholders for a special resolution before a related-party transaction could be passed. This has now been reduced to 50%, on the lines of the Companies Act. The move would make it easier for listed companies to clear such deals.
4. Appointment of Company Secretary as Compliance Officer: A listed entity shall appoint a qualified company secretary as the compliance officer who shall be responsible for ensuring conformity with the regulatory provisions applicable to the listed entity in letter and spirit; co-ordination with and reporting to the Board, recognised stock exchange(s) and depositories with respect to compliance with rules, regulations and other directives; Monitoring of grievance redressal division. This move would open a world of opportunities for Company Secretaries profession.
5. Principles governing disclosures and obligations: The listed entity shall make disclosures and abide by its obligations under the regulations in accordance with the principles such as:
i) preparation and disclosure of information in accordance with applicable AS and financial disclosure
ii) Conduct of audit by an independent, competent and qualified auditor.
iii) Refraining from providing misrepresentation to recognised stock exchange(s) and not misleading the investors.
iv) Providing adequate and timely information to recognised stock exchange(s) and investors
v) Filings, reports, statements, documents and information which are event based or are filed periodically shall contain relevant information etc.