IBC - CRPS holders even at stage when redemption period has expired, remain shareholders and do not become creditors and do not fulfil definition of financial creditor u/s 5(7): SC (See 'Legal Desk') BSNL Achieves 93% Revenue Run Rate in Q2 (See 'Corp Brief') Chouhan inaugurates National FPO Conclave 2025 in Delhi (See 'Corp Brief') IBC - Moon-shine defense taken to thwart recovery proceedings initiated by Financial Creditor under SARFAESI, can defeat recovery process initiated by Financial Creditor: NCLT (See 'Legal Desk') Indian Coast Guard sets sail on Paperless & technology-driven Future (See 'Corp Brief') CemHack for Green Infra showcases Collaboration between Govt, Industry, and Startups (See 'Corp Brief') NI Act - Statutory demand under Proviso (b) to Sec 138 does not survive if figure claimed is numerically different from dishonoured cheque, even if discrepancy is pleaded to be inadvertent: SC (See 'Legal Desk') India, Nepal strengthen Power Sector Cooperation (See 'Corp Brief') KOYLA SHAKTI to be Digital Backbone of India's Coal Ecosystem: Minister (See 'Corp Brief') A&C - If notice of arbitration was delayed and barred by limitation and arbitration request itself was made two years after initial notice, appointment of arbitrator in partnership dispute can't be done: SC (See 'Legal Desk') Indi and Puliyankudi Limes Make debut in UK Market (See 'Corp Brief') Competition Law - Google abused its dominant position in Online Search Advertising services market in India by imposing unfair and discriminatory terms through its Google Ads Policies in violation of Sec 4 of Competition Act: CCI (See 'Legal Desk') Training Program for EPF Officers on Investment and Risk Management inaugurated (See 'Corp Brief') PMLA - Property in hands of any person in possession of proceeds of crime can be attached even if he is not accused of predicate offence investigated by police/CBI: SAFEMA (See 'Legal Desk') NSIC pays dividend of Rs 44 crore to Government (See 'Corp Brief') Promotion of regional languages is equally vital along with Hindi: MoS (See 'Corp Brief') A&C - Attack on fundamental policy of Indian law allows for reappreciation of arbitral award and thereby, judgment could not be faulted with, on ground of having exceeded its jurisdiction u/s 37: SC (See 'Legal Desk') Raigad Fisheries Cluster emerging as Model for Integrated Value-Chain Development (See 'Corp Brief') A&C - Arbitration agreement remains valid even if appointment mechanism becomes inoperative due to statutory amendments: SC (See 'Legal Desk') SECL releases India Post Special Cover Commemorating Coal India's Golden Jubilee (See 'Corp Brief') Misc - If Court has mandated Defendants to deposit certain sum covering past sales with Registrar General within three months, in interest-bearing account, then failure to do so may trigger sales-ban application by Plaintiffs: HC (See 'Legal Desk') Vaishnaw reviews Railways Preparedness for Cyclone Montha (See 'Corp Brief') SEBI - Information relating to inspection reports/ concluding comments of stock exchanges and other documents concerning MIIs are 'information related to third parties': HC (See 'Legal Desk') National Biodiversity Authority released Rs 55 Lakh to farmers of Red Sanders in TN (See 'Corp Brief') Chouhan directs immediate filling of all vacant posts for better agricultural education (See 'Corp Brief') A&C - Contractual arbitration clauses that permit employee/ex-employee of public body to act as arbitrator must be read alongside neutrality and impartiality requirements and Article 14/19 of Constitution: HC (See 'Legal Desk') Department of Fisheries to impart Tuna Handling and Export Skills (See 'Corp Brief') Capital Market - If exemption granted is limited to requirements of making open offer under Takeover Regulations, it shall not be construed as exemption from disclosure requirements: SEBI (See 'Legal Desk') National Biodiversity Authority releases Rs 18.3 Lakh to Committees in UP and Sikkim (See 'Corp Brief') IBC - Section 16(2) of IBC clearly requires the IRP to be appointed as suggested by Financial Creditor or Corporate Debtor & such provision does not allow any deviation: HC (See 'Legal Desk') Kurian calls for active registration under NFDP (See 'Corp Brief') PMLA - Provisions of PMLA over other statutes related to property encumbrances; attachment of property is tenable where it is acquired through proceeds of crime: SAFEMA TRIBUNAL (See 'Legal Desk') Government intervention and Corporate governance (See CORP EINSICHT)

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Change by Heraclitus and LODR Regulations

Published: Mar 19, 2025

 

By CS Shweta Jain, PCS Partner, Agarwal S. & Associates, New Delhi

Introduction

THE Greek philosopher Heraclitus' notable quote states that change is the only constant in life. Change is also a constant occurrence in the economic and legal systems of every country. Changes are good and are always welcomed when they are properly planned and executed. Today, we will be discussing the recent changes made to the legal framework for listed companies. A listed company means a company which has any of its securities listed on any recognized stock exchange. The listed companies are governed by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR).

In August 2023, an Expert Committee headed by Mr S K Mohanty was formed to review LODR for facilitating ease of doing of business and standardization and integration of various filings under LODR. The major recommendations of the Expert Committee were approved by the SEBI and changes are introduced in LODR in current year 2025. Industry Standards Note (ISN) has also been published to assist listed entities in complying with their obligations in respect of Continuous Disclosure Requirements under LODR.

Industry Standards Note on Regulation 30 of the LODR facilitates uniform approach and assists listed entities in complying with their obligations in respect of disclosures under Regulation 30. Changes are given in detail in ISN issued. This ISN has been prepared in consultation with SEBI and any addition/alteration to this shall be made only in consultation with SEBI. This ISN is available on the websites of BSE Limited, National Stock Exchange of India Limited, Federation of Indian Chambers of Commerce and Industry (FICCI), Confederation of Indian Industry (CII) and Associated Chambers of Commerce & Industry of India (ASSOCHAM).

KEY CHANGES IN REGULATION 30 OF LODR:

DISCLOSURE OF COMMUNICATION FROM REGULATORY, STATUTORY, ENFORCEMENT OR JUDICIAL AUTHORITY UNDER REGULATION 30(13)

The listed entities, while disclosing material information under Regulation 30 with respect to regulatory, statutory, enforcement or judicial authority, shall not be required to disclose confidential and sensitive information, including proprietary information. A summary of key elements of such communication (furnished in the prescribed format as set out in Annexure C of ISN shall constitute sufficient compliance under Regulation 30(13).

DISCLOSURE FOR RESIGNATION OF KEY MANAGERIAL PERSONNEL, SENIOR MANAGEMENT

In cases of key managerial personnel, senior management, compliance officer and non-independent directors of a listed entity, the phrase "resignation comes into effect" shall mean the last date of the person concerned in the listed entity, and the timelines for disclosure shall be calculated accordingly. For instance, if Ms. A is a key managerial personnel in a listed entity, who submits her resignation letter on January 1, 2023, the management of the listed entity accepts the resignation on January 31, 2023 and her last date in the listed entity is February 28, 2023, the listed entity will be required to make the disclosure of her resignation on or prior to March 1st, 2023 (i.e. within 24 hours of such resignation coming into effect). The listed entity would also be required to provide the copy of her resignation letter dated January 1, 2023 on or prior to March 7, 2023 (i.e. within seven days from the date that such resignation comes into effect), along with detailed reasons for the resignation.

When disclosing resignation letter of the key managerial personnel, senior management, compliance officer or director, other than an independent director, to stock exchanges, the listed entity can redact portions from such resignation letter, other than the detailed reasons for resignation.

DISCLOSURE OF ANNOUNCEMENT/COMMUNICATION THROUGH SOCIAL MEDIA INTERMEDIARIES OR MAINSTREAM MEDIA

In case of any premature announcement or communication through social media intermediaries or mainstream media by directors, promoters, key managerial personnel or senior management of a listed entity, while making the requisite disclosure under this provision, the listed entity shall be required to issue necessary clarification in respect to such announcement /communication.

DISCLOSURE OF PROCEEDINGS OF AGMS AND EGMS OF LISTED ENTITY

A listed entity shall disclose voting results of annual and extraordinary general meetings as per the timelines provided in Regulation 44(3) of the LODR Regulations. But certain specific details, like, date of meeting and brief details of items deliberated, would be disclosed within 12 hours as per Regulation 30(6)(ii) of the LODR Regulations.

NOW LET'S ROLL OUR EYES TOWARDS RELATED PARTY TRANSACTIONS (RPT) WHICH ARE GOVERNED BY REGULATION 23 OF LODR

Meaning of material transaction

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].

Provided that a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.

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 {five} percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.

Power to approve RPT

All related party transactions [and subsequent material modifications] shall require prior approval of the audit committee [of the listed entity]

Provided that only those members of the audit committee, who are independent directors, shall approve related party transactions.

Ratify related party transactions

The members of the audit committee, who are independent directors, may ratify related party transactions within three months from the date of the transaction subject to certain conditions.

Omnibus approval for related party transactions

Audit committee may grant omnibus approval for related party transactions proposed to be entered into by the listed entity [or its subsidiary] subject to certain conditions, like -

1. The audit committee shall review, at least on a quarterly basis, the details of related party transactions entered into by the listed entity [or its subsidiary] pursuant to each of the omnibus approvals given.

2. Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year.

When Shareholders' approval required

All material related party transactions and subsequent material modifications as defined by the audit committee under sub-regulation (2)] shall require prior approval of the shareholders through resolution.

Changes in RPT are introduced by SEBI Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/18 dated February 14, 2025. This circular shall come into effect from April 1, 2025, which is given below -

"The listed entity shall provide the audit committee with the information as specified in the Industry Standards on "Minimum information to be provided for review of the audit committee and shareholders for approval of a related party transaction", while placing any proposal for review and approval of an RPT."

"The notice being sent to the shareholders seeking approval for any RPT shall, in addition to the requirements under the Companies Act, 2013, include the information as part of the explanatory statement as specified in the Industry Standards on "Minimum information to be provided for review of the audit committee and shareholders for approval of a related party transaction".

As per Circular, Standards for Minimum Information to be provided to the shareholders for consideration of RPTs is as follows:

(1) The explanatory statement contained in the notice sent to the shareholders for seeking their approval for an RPT shall provide the minimum information so as to enable the shareholders to take a view whether the terms and conditions of the RPT are favorable to the listed entity.

(2) The notice being sent to the shareholders seeking approval for any material RPT shall, in addition to the requirements under the Companies Act, 2013, include the following information as a part of the explanatory statement:

(a) Information as placed before the Audit Committee in the format as specified in Para 4 of these Standards, to the extent applicable.

(b) The Audit Committee can approve redaction of commercial secrets and such other information that would affect competitive position of listed entity from disclosures to shareholders. Further, the Audit Committee shall certify that, in its assessment, the redacted disclosures still provide all the necessary information to the public shareholders for informed decision-making.

(c) Justification as to why the proposed transaction is in the interest of the listed entity.

(d) Statement of assessment by the Audit Committee that relevant disclosures for decision-making were placed before them, and they have determined that the promoter(s) will not benefit from the RPT at the expense of public shareholders.

(e) Disclose the fact that the Audit Committee had reviewed the certificate provided by the CEO or CFO or any other KMP as well as the certificate provided by the promoter directors of the Listed Entity as required under Para 3(2)(b) of these Standards.

(f) Copy of the valuation report or other reports of external party, if any, considered by Audit Committee while approving the RPT.

(g) Comments of the Board/Audit Committee of the listed entity, if any.

(h) Any other information that may be relevant.

Conclusion

Apparently, these LODR changes will bring more transparency and clarity in disclosures of listed companies. They would also promote uniformity in continuous disclosures made by listed companies and enhance corporate governance. LODR changes aim to streamline compliance and align with industry's best practices worldwide. It aims to build investor trust and transparent financial market.

[The views expressed are strictly personal.]

 

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