Company Secretary EMSOP Training Project Report

Project Topic: SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENT)

REGULATIONS, 2015

Submitted by: CHEPURI SAIRAM

Regd. No.: 320045122/12/2012

E-mail ID: chepurisairam@gmail.com

1
SEBI LODR

NO. TOPIC NAME PAGE NO

1 INTRODUCTION 6
2 AMENDMENT REGULATIONS, 2018 7
3 CORPORATE GOVERNANCE 8-9
4 HISTORY OF RECENT AMENDMENTS 10
5 IMPORTANT DEFINITIONS 11
6 SCHEDULES OF SEBI (LODR) REGULATIONS, 2015 12-13
7 COMPOSITION AND ROLE OF THE BOARD OF DIRECTORS 14 – 22
8 ROLE OF DIFFERENT COMMITTEES, ROLE OF 23 – 26
COMPLIANCE OFFICER, VIGIL MECHANISM
9 RELATED PARTY TRANSACTIONS 27-30
10 COMMON OBLIGATIONS OF LISTED ENTITIES, 31 – 33
MATERIAL SUBSIDARY
11 SECRETARIAL AUDIT 34
12 PRIOR INTIMATIONS TO THE STOCK EXCHANGE 35
13 DISCLOSURE OF MATERIAL EVENTS OR INFORMATION 36-37
14 FINAL RESULTS OF LISTED ENTITIES 38
15 ANNUAL REPORT, AGM 39-42
16 DIVIDEND DISTRIBUTION POLICY 43
17 SUMMARISATION OF AMENDMENTS OF LISTING 44-47
REGULATIONS
18 CONCLUSION 48

2
SEBI LODR

CHAPTERS OF SEBI (LODR) REGULATIONS, 2015

NO. CHAPTER NAME REGULATION

1 PRELIMINARY -TITLE, DEFINITIONS AND APPLICABILITY 1- 3
2 PRINCIPLES GOVERNING DISCLOSURE AND 4
OBLIGATIONS OF LISTED ENTITY
3 COMMON OBLIGATIONS OF LISTED ENTITIES 5 - 14
4 OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS 6 – 48
SPECIFIED SECURITIES
5 OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED 49 - 62
ITS NON-CONVERTIBLE DEBT SECURITIES OR NON-
CONVERTIBLE REDEEMABLE PREFERENCE SHARES OR
BOTH
6 OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED 63 – 64
ITS SPECIFIED SECURITIES AND EITHER NON-
CONVERTIBLE DEBT SECURITIES OR NON-
CONVERTBLE REDEEMABLE
PREFERENCE SHARES OR BOTH
7 OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS 65 – 80
INDIAN DEPOSITORY RECEIPTS
8 OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS 81 – 87
SECURITISED DEBT INSTRUMENTS
8A OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS 87A – 87E
SECURITY RECEIPTS
9 OBLIGATIONS OF LISTED ENTITY WHICH HAS LISTED ITS 88 – 91
MUTUAL FUND UNITS
10 DUTIES AND OBLIGATIONS OF THE RECOGNISED STOCK 92 – 97
EXCHANGE(S)
11 PROCEDURE FOR ACTION IN CASE OF DEFAULT 98 - 99
12 MISCELLANEOUS 100 - 103

3
SEBI LODR

SCHEDULES OF SEBI (LODR) REGULATIONS, 2015

No. Schedules
I TERMS OF SECURITIES
II CORPORATE GOVERNANCE (PART A TO E)
III DISCLOSURE OF EVENTS OR INFORMATION (PART A TO E)
IV DISCLOSURE IN FINANCIAL RESULTS (PART A & B)
V ANNUAL REPORT
VI MANNER OF DEALING WITH UNCLAIMED SHARES
VII TRANSFER OF SECURITIES
IX *OMITTED BY SEBI(LODR) (AMENDMENT) REGULATIONS, 2016 W.E.F
01.04.2016 WRT MANNER OF REVIEWING FROM B WITH ANNUAL
AUDITED RESULTS
.X AMENDMENTS TO OTHER REGULATIONS
XI LIST OF SEBI CIRCULAR WHICH STAND RESCINDED
XII FEE IN RESPECT OF DRAFT SCHEME OF ARRANGEMENT

4
SEBI LODR

PROJECT REPORT ACKNOWLEGEMENT

I hereby acknowledge that Project on SCHEDULES OF SEBI (LODR) REGULATIONS, 2015 is

prepared by me (CHEPURI SAIRAM) having registration number 320045122/12/2012 as on
26.12.2019

Place: Guntur
Date: 27.12.2019

CHEPURI SAIRAM

5
SEBI LODR

SEBI (LISTING OBLIGATIONS AND

DISCLOSURE REQUIREMENT)
REGULATIONS, 2015
AN INTRODUCTION
The Security and Exchange Board of India had formulated SEBI (Listing Obligations and Disclosure
Requirement) Regulations, 2015 (“the Listing Regulations or LODR”) to ensure the good corporate
governance among the Listed Entities and to protect the interest of the Stakeholders and to enhance the
shareholder’s value.

SEBI had notified the Listing Regulations on September 02, 2015 mainly with two fold objectives:

Obejective of SEBI (LODR)

2015

To align the provisions Toi consolidate different

of listing requirements listing regulations
with the Companies Act,
2013

6
SEBI LODR

DIVISION OF SEBI (LODR) REGULATIONS, 2015

12 Chapters

103 Regulations

11 Schedules

SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENT) (AMENDMENT)

REGULATIONS, 2018

The Securities and Exchange Board of India (SEBI) released on 9 May 2018, the SEBI (Listing
Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 (SEBI (LODR)
(Amendment) Regulations, 2018 or Corporate Governance Amendments or the Amendments) in order
to adopt and give effect to several recommendations that were proposed in a Report given on 5 October
2017 by the SEBI Committee on Corporate Governance formed on 2 June 2017 under the Chairmanship
of Mr. Uday Kotak (Kotak Committee).

The SEBI also issued a circular on 10 May 2018 for implementation of certain recommendations of the
Kotak Committee. The Kotak Committee made a set of 81 recommendations to the SEBI on the
following issues with an aim to support in improving standards of corporate governance of listed
companies in India:

1. Improving the role, composition and effectiveness of the board and its committees, including
evaluation practices;
2. Ensuring independence in the spirit of Independent Directors and their active participation in the
functioning of the company;
3. Improving safeguards and disclosures pertaining to Related Party Transactions;
4. Improving transparency in accounting and auditing practices by the listed companies;
7
SEBI LODR

5. Addressing issues faced by investors on voting and participation in general meetings;

6. Enhanced monitoring of group entities; and
7. Disclosure and transparency related issues, if any SEBI’s Corporate Governance Amendments
reflects

SEBI’s acceptance of 42 recommendations made by the Kotak Committee, out of which 14

recommendations were accepted with modifications either to scope of its application, or expected
timeline for its implementation. SEBI decided to refer eight recommendations to various agencies (i.e.,
government, professional bodies, other regulators, etc.), considering that the matters involved relate to
them. Remaining 31 recommendations were not accepted.

The current corporate governance practices of the Indian listed corporate entities, where still a sizeable
number of such entities are promoter-led, are on the verge of evolution with these Corporate Governance
Amendments. These amendments pave a way for aligning with some of the best practices followed
globally and bring in a renewed focus on improved corporate governance by way of better structure,
more rigorous checks and balances and greater independence of all key gate-keepers including boards
and auditors.

Though the SEBI aims to put into effect these Corporate Governance Amendments from 1 April 2019, it
has provided a phased timeline from 1 October 2018 to 1 April 2020 for most of the amendments, so
that the companies are able to adjust to new governance requirements as well as overcome any
implementation challenges.

We explore more in this publication about how these Corporate Governance Amendments provide a
mechanism to the listed companies in creating long-term value and at the same time, protect
shareholders’ interest by applying proper care, skills and diligence to business decisions.

8
SEBI LODR

What is expected under good corporate governance?

1. Better Structure;
2. More rigorous check and balances;
3. Great independence of all key gate keepers like Independent Director, Auditors etc.;
4. Board require to scan the road ahead and not less time on rear view mirror; and
5. Time to focus on future prosperity instead of mere compliances.

Committee believed that the well governed entities need to focus on two points:
1. Focus on long term value creation; and
2. Protect the interest of shareholders with proper care, skill and diligence.

Applicability
The latest set of norms provides broad principles for periodic disclosures by listed entities, apart from
incorporating corporate governance principles. These regulations shall apply to the listed entity who has
listed any of the following designated securities on recognized stock exchange(s):

• Specified securities listed on main board or SME Exchange or Institutional trading platform;
• Non-convertible debt securities, non-convertible redeemable preference Shares, perpetual debt
instrument, perpetual non-cumulative preference Shares;
• Indian depository receipts;
• Securitized debt instruments;
• 4security receipts;
• Units issued by mutual funds;
• Any other securities as may be specified by the Board.

9
 SEBI LODR

HISTORY OF RECENT AMENDMENTS

SEBI formed a committee on corporate governance which was led by Mr. Uday Kotak

June 02, 2017

The report of the Committee was placed on the website of SEBI and opened for
public comments
October 05,
2017

After due consideration, SEBI decided to accept certain recommendations with modificatio
March 28,
2018

Amemdements made to the SEBI (LODR) Regulations, 2019, to be implemented vide Notifi
May 09, 2018
and May 10,
2018

1
SEBI LODR

IMPORTANT DEFINITIONS UNDER SEBI (LODR) REGULATIONS, 2015

 Regulation 2(zb): Related Party

Related party means as define under Section 2(76) of the Companies Act, 2013 or under the
applicable Accounting Standard (AS)

Provided that any person of entity belonging to the promoter or promoter group of the listed entity
and holding 20% or more of the shareholding in the listed entity shall deemed to be a related party

Related Party

Defined Under section 2(76) Promoter Promoter group

of the Companies Act, 2013 Defined under Accounting
Standard (holdong 20% 0r (holdong 20% 0r more
more shareholding) shareholding)

 Regulation 16(1) (d): Senior Management

“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.

Senior Management

Company Secretary Chief Financial Officer Officers one level below

Members of the
Management the members of
management

1
SEBI LODR

SCHEDULES OF SEBI (LODR) REGULATIONS, 2015

QUARTERLY COMPLIANCES UNDER SEBI (LODR) 2015

Regulations Particulars Time

Regulation 13(3) Statement of Investor complaints Within 21 days from the end of
each quarter

Regulation 27 Corporate Governance Report Within 15 days from the end of

each quarter

Regulation 31 Shareholding Pattern Within 21 days from the end of

each quarter

Regulation 33 Financial Result Within 45 days of the end of

the quarter and 60 days from
the end of every half year

SEBI – DP Regulation Reconciliation of Share Capital Audit Within 30 days from the end of
55A each quarter

1
SEBI LODR

HALF- YEARLY AND ANNUAL COMPLIANCES UNDER SEBI (LODR) 2015

Regulations Particulars Time

Half yearly

Regulation 7(3) Compliance Certificate certifying Within one month from the end
maintaining physical & electronic of each half year
transfer facility

Regulation 40(9) Certificate from Practicing Company Within one month from the end
Secretary of each half year

Regulation 54(2) Disclose financial result to the stock Within one month from the end
exchange of each half year

Annually

Regulation 33 (3) Financial Result Within 60 days from the end of

every half year

Regulation 34(1) Annual Report

1
SEBI LODR

COMPOSITION AND ROLE OF THE BOARD OF DIRECTORS

The board of directors is responsible to all the stakeholders for meeting the corporate governance
standards since they are responsible for the control and direction of the business decisions.

These Amendments seek to address aspects relating, inter-alia, to the size of the board and its diversity,
disclosure of expertise / skills of the directors, separation of the roles of chairperson and executive
management and the maximum number of directorships.

Regulation 17 of Listing Regulations deals with the Board of Directors and its Composition

Composition of Board of Directors:

 Board shall optimum combination of Executive Director (ED) and Non-Executive director (NED)
with atleast One (1) Woman Director and not less than 50% of the Board shall have NED’s;
[Board of directors of the top 500 listed entities shall have at least one woman independent 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]

1
SEBI LODR

 where the chairperson of the board of directors is a non-executive director, at least one-third of the
board of directors shall comprise of independent directors and where the listed entity does not have a
regular non-executive chairperson, at least half of the board of directors shall comprise of
independent directors;

 where the regular non-executive chairperson is a promoter of the listed entity or is related to any
promoter or person occupying management positions at the level of board of director or at one level
below the board of directors, at least half of the board of directors of the listed entity shall consist of
independent directors.

Composition of
Board of
Directors
With At least
1 Women
Director
Non Executive
Executive-Director
Direct

Not Less than

50% of Board
shall comprise

Amendment: Listed Entities shall have atleast one (1) women independent Director
Top 500 Listed Entities by April 01, 2019
Top 1000 Listed Entities by April 01, 2020
The top 500 and 1000 entities shall be determined on the basis of market capitalization, as at the end of the immediate previous financ

1
SEBI LODR

Chairperson of the Board

of the Director

Regular Non-Executive Non Executive Chairperson is a

Director No regular Non -Executive promoter or related to promoter
Director or at the level of Board or one
level below the Board

1/3rd of the Board shall

comprises of ID's 1/2th of the Board 1/2th of the Board
comprises of ID's comprises of ID's

1
SEBI LODR

Minimum number of directors on the board

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d) (i) (2)]
The Amendments propose to increase the minimum number of directors on the Board to 6 (six) as
against three under the Companies Act. This will be in phased manner where it will come into effect
from 1 April 2019 for top 1,000 listed entities and from 1 April 2020 for top 2,000 listed entities.

Gender diversity on the board – Appointment of Women Independent Director

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d) (i) (1)]

The Amendments require at least one independent woman director on the board of the top 500 listed
entities by 1 April 2019 and for the top 1000 listed entities by 1 April 2020. The Companies Act and
SEBI (LODR) Regulations require at least one woman director to be on the board of listed entities who
may be either an independent or a non-independent director.

Disclosure of expertise / Skills of directors

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x) (c) (i) (2)]

The Companies Act and SEBI (LODR) Regulations require the disclosure of a brief profile of a director
on his/her appointment, including expertise in specific functional areas, without providing any matrix of
skills / expertise / competence of the board on a regular basis. The Amendments now require to disclose
the following, in a phased manner:

• List of core skills / expertise / competencies identified by the board as required in the context of its
business (is) and sector(s) for an efficient functioning. It also requires disclosure of those skills /
expertise
/ competencies that its board members actually possess, without disclosing the names of the directors.
This is to be made effective from the financial year ending 31 March 2019; and

• Skills / expertise / competencies of each and every member of the board along with their names is
required from the financial year ending 31 March 2020.

1
SEBI LODR

Approval for non-executive directors on attaining a certain age

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d) (ii)]

The Amendments introduce a requirement to obtain shareholders’ approval under a special resolution by
a listed entity for the appointment of a person or continuation of any person as a non-executive director
on attaining the age of 75 years for the relevant term.

Explanatory statement annexed to the notice for such motion should indicate the justification for
appointing such a person. While it is recognized that age itself may not be a determinant of efficiency or
capability of a person or the basis for disqualification, a higher level of shareholder endorsement may be
required for directors to continue in their position beyond a certain age.

The Companies Act has a similar requirement only for the managing director, whole-time director, or
managers attaining the age of 70 years.

Meeting of Board of Directors

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

Quorum for board meetings

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d) (IV)]
The Companies Act requires a quorum of one-third of the total strength of the board of directors or two
directors, whichever is higher, for every board meeting. SEBI (LODR) Regulations do not prescribe any
quorum for meetings of the board of directors.

The Amendments require the quorum for every meeting of the board of directors of the listed entity to
be 1/3 of its total strength or three directors, whichever is higher, including at least one independent
director. The participation of the directors by video conferencing or by other audio-visual means shall
also be counted for the purposes of such quorum.

1
SEBI LODR

The above amendment for top 1,000 listed entities shall come into effect from 1 April 2019 and for top
2,000 listed entities shall come into effect from 1 April 2020.

Separation of the roles of non-executive chairperson and managing director / CEO

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(iii) and Para 3(u)(c)]

The Amendments introduce a requirement to have the chairperson of the board as a non-executive
director and not be related to the managing director or the chief executive officer as per Companies Act,
2013. The separation of powers of the chairperson and MD/CEO would enable better and more balanced
governance structure by enabling more effective supervision of the management.

This amendment shall come into effect from 1 April 2020 for top 500 listed entities. However, this
requirement is not applicable to the listed entities, which do not have any identifiable promoters as per
the shareholding pattern filed with stock exchanges.

Maximum number of directorships [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(e)] The
Amendments restrict maximum directorships to eight listed entities and seven listed entities with effect
from 1 April 2019 and 1 April 2020 respectively.

Directorship as independent director is restricted to seven listed entities, except where a 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.

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. References to top 500, top 1,000 and top
2,000 listed entities above shall be determined on the basis of market capitalization, as at the end of an
immediate previous financial year.

1
SEBI LODR

Disclosure of board evaluation

[SEBI Circular: SEBI/HO/CFD/CMD/CIR/P/2018/79, dated May 10, 2018]

The Companies Act and SEBI (LODR) Regulations contain broad provisions on board evaluation, i.e.,
evaluation of the performance of:

(i) The board as a whole,

(ii) Individual directors (including Independent Directors and chairperson) and
(iii) Various committees of the board.

The provisions also specify responsibilities of various persons/committees for the conduct of such
evaluation and the disclosure requirements that are a part of the listed entity’s corporate governance
obligations. In order to strengthen disclosures on board evaluation, SEBI’s circular specifies that every
listed entity may consider the following as a part of its disclosures on board evaluation:

i. Observations of board evaluation carried out for the year

ii. Previous year’s observations and actions taken iii. Proposed actions based on current year
observations

2
SEBI LODR

COMMITTEES OF THE BOARD AND ITS COMPOSITION

Obligations Audit Committee Nomination and Stakeholder Risk

(Regulation 18) remuneration Relationship Management
committee Committee Committee
(Regulation 19) (Regulation 20) (Regulation 21)
(Top 500 Listed
Entities)
Composition • Minimum 3 Director • Minimum 3 At least 3 majority of
• 2/3rd
independent Director (ALL Director, members of Risk
directors NED) including one Management
(listed entity having • 50% Independent Independent Committee shall
outstanding SR equity Directors Director be consist of
shares, audit (listed entity a member of members of the
committee comprises having the Committee board of directors
of only IDs) w.e.f outstanding SR (listed entity (listed entity
29.09.2019 equity shares, having having
• All Members shall be NRC comprises outstanding SR outstanding SR
financially literate and of 2/3rd IDs) equity shares, equity shares,
atleast one member w.e.f 01.04.2019 SRC RMC comprises
shall have accounting comprises of 2/3rd of 2/3rd IDs)
or related financial IDs) w.e.f 29.07.2019
management expertise w.e.f 29.07.2019
Chairman Independent Director • Independent Non-Executive Member of the
Director Director Board of Director
• Chairman of the
Listed entity (ED
or NED) –
Member - yes
Chairperson – No

2
SEBI LODR

Role of Company Secretary to - - -

Company act as a secretary to the
Secretary audit committee
Meetings At least 4 times in a (3A)Shall meet at (3A)Shall meet at Shall meet at
year. least once in a year least once in a least once in a
Gap between 2 year year
consecutive meeting
shall not more than 120
days
Quorum Two Members or 1/3rd (2A) Two - -
of the member Members or 1/3rd of
whichever is greater the Member
(Including Min 2 whichever is
Independent Director) greater + 1
Independent
Director

2
SEBI LODR

AMENDMENTS RELATED TO THE COMMITTEES OF BOARD OF DIRECTOR

[REGULATION 18 – 21]

Role of audit committee

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(u) (a)]

The Amendments widen the role of audit committee by requiring a review of utilization of loans and / or
advances from investment by the holding company in the subsidiary exceeding INR100 crore or 10% of
the asset size of the subsidiary, whichever is lower. This requirement is also applicable to loans /
advances
/ investments existing as on 1 April 2019.

2
SEBI LODR

Role of Nomination and Remuneration Committee (NRC)

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(c) (iii) and Para 3(u) (b) (i)]

Definition of senior management The Amendments modify the definition of “senior management” by
specifying that it comprises all members of the management one level below the chief executive officer /
managing director / whole time director / manager (including chief executive officer / manager, in case
they are a not part of the board) as well as the company secretary and the chief financial officer.

Amendment to the role

The role of the NRC of the board of a listed entity is amended to include recommendations to be made
to the board on all the payments made, in whatsoever form, to the senior management.

Role of Stakeholders Relationship Committee

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(g) and Para 3(u) (b) (ii)]

The Amendments modify and widen the role and responsibilities of SRC to include the following:

1. Resolving the grievances of the security holders of the listed entity including complaints related
to transfer/transmission of shares, non-receipt of annual report, non-receipt of declared
dividends, issue of new/duplicate certificates, general meetings, etc.;
2. Review of measures taken for effective exercise of voting rights by the shareholders;
3. Review of adherence to the service standards adopted by the listed entity in respect of various
services being rendered by the Registrar & Share Transfer Agent; and
4. Review of the various measures and initiatives taken by the listed entity for reducing the
quantum of unclaimed dividends and ensuring timely receipt of dividend warrants / Annual
Reports / statutory notices by the shareholders of the company

Further, the Chairperson of the SRC will now be required to be present at the AGMs to answer
queries of the security holders.

2
SEBI LODR

ROLE OF COMPLIANCE OFFICER

Listed Company shall ensure KMP, Directors, Promoters complies with obligations

• Compliance Officer ensure listed Company confirms with regulatory provisions in letter and spirit

• Co-ordination with – Board and Stock Exchange

• Report to – Board and Stock Exchange. • Ensure – Correct, Authentic, Comprehensive info is filed.
• Monitor email id for grievance redressal.

• Determining materiality of information to be reported to stock exchange.

• Report to Board about compliance.

VIGIL MECHANISM

2
SEBI LODR

Regulation 22 of SEBI (LODR) Regulations, 2015

 (1) The listed entity shall formulate a vigil mechanism for directors and employees to report
genuine concerns.
 (2) The vigil mechanism shall provide for adequate safeguards against victimization of director(s)
or employee(s) or any other person who avail the mechanism and also provide for direct access to
the chairperson of the audit committee in appropriate or exceptional cases.

Every Listed Entity requires to formulate vigil mechanism or Whistle Blower Policy for Directors and Em
Policy
Formulation

Vigil Mechanism ensures the safeguard against the victimization of Directors and
Employees of the Company.
Safeguard

Concerned person has a direct access to the chairman of the Audit Committee to report the Concern
Whom to report
the Concern

2
SEBI LODR

RELATED PARTY TRANSACTION

A majority of Indian listed entities continue to be promoter driven, with significant shareholding held by
promoter/promoter group. Accordingly, checks and balances on interactions and relationships between
listed entities and the promoters/significant shareholders is crucial for good governance.

Regulation 23 of SEBI (LODR) Regulations, 2015 deals with the compliances of the related party
transaction that a company need to keep in mind and ensure its governance.

The definition of “related party” has been modified to include any person or entity belonging to the
promoter or promoter group of the listed entity and holding 20% or more shareholding in the listed
entity.

This follows on from Kotak Committee’s observations that certain promoters / promoter group entities
were not getting categorized as related parties under SEBI (LODR) Regulations, as these did not strictly
fall under the definition of “related parties” under the relevant accounting standards.

Section 2(76) of the Companies Act, 2013 defines who is a related party in relation to the Company

"Related Party", with reference to a company, means—

(i) a director or his relative;

(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager 1[or his relative] is a member or director;
(v) a public company in which a director or manager is a director 2[and holds] along with his relatives,
more than two per cent of its paid-up share capital;
(vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in
accordance with the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions
given in a professional capacity

viii) any body corporate which is—

(A) a holding, subsidiary or an associate company of such company;

(B) a subsidiary of a holding company to which it is also a subsidiary; or
(C) an investing company or the venturer of the company;";

2
SEBI LODR

Materiality policy
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(i)(a)]
Currently, SEBI (LODR) Regulations require listed entities to formulate a policy on materiality of
related party transactions and on dealing with related party transactions. The Amendments intend that
companies also disclose, as a part of their materiality policy, a clear threshold limits duly approved by
the board of directors. Such materiality policy is required to be reviewed and updated by the board of
directors at least once every three years. This amendment shall come into effect from the half-year
ending 31 March 2019.

Transactions ecxeeds 10% of the

entered this year + annual consolidated
Material Transaction
previous turnover of the
transactions during listed entity.
Amendment w.e.f. previsous year
July 01, 2019

A transaction involving payments made to a related party with respect to brand usage or royalty shall be cons

2
SEBI LODR

All Related transactions require the approval of the audit committee

Audit Committee may grant omnibus approval for related party transaction to be entered into by the
listed entity subject to the following condition:

1. Lay down the criterion to grant omnibus approval

2. Committee should satisfy itself regarding the need of the omnibus approval
3. Omnibus approval shall specify:
(i) the name(s) of the related party, nature of transaction, period of transaction,
maximum amount of transactions that shall be entered into,

(ii) the indicative base price / current contracted price and the formula for variation in
the price if any; and

(iii) such other conditions as the audit committee may deem fit

Provided that where the need for related party transaction cannot be foreseen and aforesaid details
are not available, audit committee may grant omnibus approval for such transactions subject to
their value not exceeding rupees one crore per transaction.

4. Committee to review once in a year the details of the related party transactions entered by the
Company

5. Such omnibus approval shall be valid for a maximum period of 1 year.

All material related party transactions shall require approval of the shareholders through
resolution and no related party shall vote to approve such resolutions whether the entity is a
related party to the particular transaction or not

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.

2
SEBI LODR

3
SEBI LODR

COMMON OBLIGATIONS OF LISTED ENTITIES

Regulation 6: Compliance Officer And his Obligations: A listed entity shall appoint a qualified
Company Secretary as the Compliance Officer. The Compliance officer so appointed shall be
responsible for ensuring conformity with regulatory compliance, co-ordination and reporting to the
Board, ensuring that correct procedures have been followed that would result in correctness of
information filed by listed entity under the regulations and monitoring email address of grievance
redressal division.

Regulation 7: Share Transfer Agent: The listed entity shall appoint a share transfer agent or manage
the share transfer facility in house

MATERIAL SUBSIDIARY

Regulation 16(1) (c) of SEBI (LODR) Regulations, 2015 defines material subsidiary and shall mean a
subsidiary, whose income or net worth exceeds 10% percent of the consolidated income or net worth
respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

Explanation: - The listed entity shall formulate a policy for determining ‘material’ subsidiary.

OBJECTIVE OF THE POLICY:

The objective of this Policy is to determine:

i) Meaning of Material Subsidiary;

ii) Restriction on disposal of shares of Material Subsidiary by the Company;
iii) Restriction on transfer of assets of Material Subsidiary; and
iv) Disclosure requirements, under the Listing Regulations and any other laws and regulations as may be
applicable to the Company.

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.

Material subsidiary is considered based on the 20% threshold for the purpose of appointment of an
independent director of a listed entity as a director on the board of an unlisted material subsidiary,
whether incorporated in India or not.

3
SEBI LODR

Further, the Amendments require the board of a listed entity to have under its purview all significant
transactions and arrangements entered into it by all its unlisted subsidiaries (as compared to the
current applicability to only material unlisted subsidiary). This would be brought to the notice of the
board of the listed entity by the management of the unlisted subsidiary on a periodic basis.

SEBI (LODR) Regulations specify that “significant transaction or arrangement” means all individual
transaction or arrangement that exceeds or is likely to exceed 10% of the total revenues or total
expenses or total assets or total liabilities, as the case may be, of the unlisted subsidiary for
immediately preceding accounting year.

Companies with a large number of subsidiaries will need to put in place a strong monitoring mechanism
so that directors of the holding company are aware of all significant transactions on a timely basis. In
addition, companies will also need to have an effective governance program in place even for its
subsidiaries, such that it aligns with the governance program at the listed parent entity’s board, which
results in same values, ethics, controls and processes being reflected across the Group.

Appointing at least one independent director to the board of all unlisted material subsidiary is a step in
this direction to build an effective oversight role. Governance practices for all unlisted subsidiaries,
whether in India or overseas, need to be such that it recognizes the differences in legal environment, tax
regimes and local business cultures.

With an increase in complexity of transactions, increased risks and responsibilities of directors, having
all significant transactions and arrangements of all unlisted subsidiaries under the purview of the listed
parent entity’s board creates a strong group governance framework that can prevent costly financial and
reputational damage.

3
SEBI LODR

3
SEBI LODR

SECRETARIAL AUDIT

Regulation 24A of SEBI (LODR) Regulations, 2015 covers the provision related to the conduct of
Secretarial Audit and it says that 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.

Objectives of Secretarial Audit

The objectives of Secretarial Audit are mentioned below as follows:-
1. To verify & report on compliances of applicable laws and Secretarial Standards;
2. To point out non-compliances and inadequate compliances;
3. To protect the interest of various stakeholders i.e. the customers, employees, society etc;
4. To avoid any unwarranted legal actions/penalties by law enforcing agencies and other persons
as well.

Benefits of Secretarial Audit

Broadly, the need for Secretarial Audit is:
1. An effective mechanism to make sure of the compliance with the legal and procedural
requirements
2. Provides a level of confidence to the directors & Key Managerial Personnel etc.
3. Secretarial Audit ensures legal and procedural requirements so directors can concentrate
on important business matters.
4. Strengthen the goodwill of a company for their regulators and stakeholders.
5. Secretarial Audit is an effective governance and compliance risk management tool.
6. It helps the investor in analyzing the compliance level of companies, thereby increases
the reputation

Secretarial Audit is an independent, objective assurance intended to add value and improve an
organization’s operations. It helps to accomplish the organization’s objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk management, control, and
governance processes.

3
SEBI LODR

REGULATION 29: PRIOR INTIMATIONS TO THE STOCK EXCHANGE

(1) The listed entity shall give prior intimation to stock exchange about the meeting of the board of
directors in which any of the following proposals is due to be considered:

(a) financial results viz. quarterly, half yearly, or annual, as the case may be;

(b) proposal for buyback of securities;

(c) proposal for voluntary delisting by the listed entity from the stock exchange(s);

(d) fund raising by way of 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:

(e) declaration/ recommendation of dividend, issue of convertible securities including convertible

debentures or of debentures carrying a right to subscribe to equity shares or the passing over of
dividend.

(f) the proposal for declaration of bonus securities where such proposal is communicated to the
board of directors of the listed entity as part of the agenda papers

(2) The intimation required under sub-regulation (1), shall be given at least two working days in
advance, excluding the date of the intimation and date of the meeting:

Provided that intimation regarding item specified in clause (a) of sub-regulation (1), to be discussed at
the meeting of board of directors shall be given at least five days in advance (excluding the date of the
intimation and date of the meeting), and such intimation shall include the date of such meeting of board
of directors.

(3) The listed entity shall give intimation to the stock exchange(s) at least eleven working days before
any of the following proposal is placed before the board of directors –

(a) 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.

(b) any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of
redeemable shares or of debentures or bonds, shall be payable.

3
SEBI LODR

REGULATION 30: DISCLOSURE OF MATERIAL EVENTS OR INFORMATION

Every listed entity shall make disclosures of any events or information which, in the opinion of the
board of directors of the listed company, is material.

Disclosure of Material Event

(Regulation 30)

Event specified in Para A of Part Event specifies in Para B of Part

A A of Schedule III
of Schedule III (Material based on the Materiality
(Deemed Material) policy of the Company)

The Listed entity shall formulate a policy on determination of materiality which shall be disclosed on
the website of the Company

Criterion of materiality

Omission of event likely Omission of event likelt to Event or Information is

to discountinuity or result in significant material in the eys of
alteration of event market reaction the Board

3
SEBI LODR

The board of directors of the listed entity shall authorize one or more Key Managerial Personnel for
the purpose of determining materiality of an event or information and for the purpose of making
disclosures to stock exchange(s) under this regulation and the contact details of such personnel shall
be also disclosed to the stock exchange(s) and as well as on the listed entity's website.

The listed entity shall disclose on its website all such events or information which has been disclosed
to stock exchange(s) under this regulation, and such disclosures shall be hosted on the website of the
listed entity for a minimum period of five years and thereafter as per the archival policy of the listed
entity, as disclosed on its website.

In case where an event occurs or an information is available with the listed entity, which has not
been indicated in Para A or B of Part A of Schedule III, but which may have material effect on it, the
listed entity is required to make adequate disclosures in regard thereof.

The listed entity shall provide specific and adequate reply to all queries raised by stock exchange(s)
with respect to any events or information:
Provided that the stock exchange(s) shall disseminate information and clarification as soon as
reasonably practicable.

FINANCIAL RESULT

3
SEBI LODR

Regulation 33 of SEBI (LODR) Regulations, 2015 deals with the provision of preparing and filling of
the financial results of the listed entities to the concerned stock exchanges where the securities of the
Company is listed.

While preparing the financial result listed entities should keep in mind the following points:

1. The financial results shall be prepared on the basis of accrual accounting policy and shall be in
accordance with uniform accounting practices adopted for all the periods.

2. The quarterly and year to date results shall be prepared in accordance with the recognition and
measurement principles laid down in Accounting Standard 25 or Indian Accounting Standard 31’

3. The standalone financial results and consolidated financial results shall be prepared as per
Generally Accepted Accounting Principles in India:

Provided that in addition to the above, the listed entity may also submit the financial results, as
per the International Financial Reporting Standards notified by the International Accounting
Standards Board.

4. The listed entity shall ensure that the limited review or audit reports submitted to the stock
exchange(s) on a quarterly or annual basis are to be given only by an auditor who has subjected
himself to the peer review process of Institute of Chartered Accountants of India and holds a
valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of
India.

3
SEBI LODR

ANNUAL REPORT
It is understood that increased and better participation by constituents enhances good governance.
Accordingly, easing investor participation, including through the use of technology, is imperative and
responding to questions from the shareholders promotes accountability of boards and management. The
Amendments seek to facilitate and ease participation by removing the boundaries of physical meetings
and adopting the use of technology.

Regulation 34 of SEBI (LODR) Regulations, 2015 covers the provision related to the Annual Report
of the Company.

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.

3
SEBI LODR

The annual report shall contain the following:

(a) audited financial statements i.e. balance sheets, profit and loss accounts etc [,and Statement on
Impact of Audit Qualifications as stipulated in regulation 33(3)(d), if applicable;]83

(b) consolidated financial statements audited by its statutory auditors;

(c) cash flow statement presented only under the indirect method as prescribed in Accounting
Standard-3 or Indian Accounting Standard 7, as applicable, specified in Section 133 of the
Companies Act, 2013 read with relevant rules framed thereunder or as specified by the Institute
of Chartered Accountants of India, whichever is applicable;

(d) Directors report;

(e) Management discussion and analysis report - either as a part of directors report or addition thereto;

(f) For the top 500 listed entities based on market capitalization (calculated as on March 31 of every
financial year), business responsibility report describing the initiatives taken by them from an
environmental, social and governance perspective, in the format as specified by the Board from time
to time:

Provided that listed entities other than top 500 listed companies based on market capitalization and
listed entities which have listed their specified securities on SME Exchange, may include these
business responsibility reports on a voluntary basis in the format as specified.

4
SEBI LODR

Timeline for annual general meetings of listed entities

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(s)(ii)]

The Amendments introduce a requirement that reduces the timeline for holding AGM within a period of
five months from the date of closing of the financial year. This requirement is applicable to top 100
listed entities by market capitalization, determined as on 31 March of every financial year.

The Amendments seek to align the timeline for holding AGM with the global practices and to avoid
bunching of AGMs (especially in August/ September), which results in lower shareholder participation.
Currently, the Companies Act requires listed entities in India to hold AGM within six months from the
end of the financial year. There is no specific provision in SEBI (LODR) Regulations on this.

4
SEBI LODR

Webcast of proceedings of the meeting

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(s)(ii)]

The Amendments introduce a requirement that the top 100 listed entities shall provide one-way live
webcast of the proceedings of the AGM. The top 100 listed entities shall be determined on the basis of
market capitalization, as at the end of the immediate previous financial year. Currently, the Companies
Act and SEBI (LODR) Regulations do not mandate webcast of the meeting proceedings.

Reducing the timelines of the AGM in line with global practices will reduce the clash in AGM’s for
different companies and result in maximum participation by the shareholders. By making a meeting
accessible via a webcast will substantially increase its exposure and reach. The internet platform
overcomes constraints of physical presence and webcast allows large number of shareholders to
remotely participate at the same time. This results in efficient decision making for approval of audited
accounts, election of directors, appointment of auditors and various other initiatives, thereby facilitating
accomplishment of business goals and strategic objectives.

DIVIDEND DISTRIBUTION POLICY

4
SEBI LODR

Regulation 43A of SEBI (LODR) Regulations, 2015 talks about the formulation of dividend
distribution policy by the top five hundred 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
in their annual reports and on their websites.

Parameters of Dividend Distribution Policy of the Company should be:

(a) the circumstances under which the shareholders of the listed entities may or may not expect dividend;

(b) the financial parameters that shall be considered while declaring dividend;

(c) internal and external factors that shall be considered for declaration of dividend;

(d) policy as to how the retained earnings shall be utilized; and

(e) parameters that shall be adopted with regard to various classes of shares

The listed entities other than top five hundred listed entities based on market capitalization may disclose
their dividend distribution policies on a voluntary basis in their annual reports and on their websites

4
SEBI LODR

SUMMARISATION OF AMENDMENTS OF LISTING REGULATIONS

The table below summarizes the amendments which are effective for year ending March 31, 2019. This
implies that listed entities will need to start making decisions immediately in order to ensure compliance
for the FY 2018-19:

CHAPTER AREA KOTAK COMMITTEE

RECOMMENDATION
Composition and Role of the Disclosure of Expertise / Skills of The amendments require
Board of Directors Directors [SEBI (LODR) disclosure of a list of core skills/
[The Kotak Committee (Amendment) Regulations, 2018, expertise/competencies
report, chapter I] Para 3(x) (c)(i)(2)] identified by the board as
required in the context of its
business(es) and sector(s) for an
efficient functioning. It also
requires disclosure of
those skills/expertise/
competencies that its
board members actually
possess, without disclosing the
names of the directors.
Enhanced Monitoring of Secretarial Audit [SEBI (LODR) The amendments extend the
Group Entities [The Kotak (Amendment) Regulations, 2018, requirement of Secretarial Audit
Committee report, chapter Para 3(k)] to every listed entity and its
IV] material unlisted Indian
subsidiaries along with the
requirement to annex with its
annual report, a secretarial audit
report given by a practicing
company secretary.
Disclosures and Submission of Annual Reports The amendments require the
Transparency [The Kotak [SEBI (LODR) (Amendment) listed entity to submit to the
stock exchange and publish on

4
SEBI LODR

Committee report, chapter Regulations, 2018, Para 3(q) and the website: • A copy of the
VI] Para 3(r)(i)] annual report shall be sent to the
shareholders along with the
notice of the AGM to be
disclosed not later than the day
as dispatched to the
shareholders. • In the event of
any changes to the annual
report, the revised copy along
with details of, and explanation
for the changes are required to
be sent in not later than 48 hours
after the AGM. The
amendments now also clarify
that the listed entity to send soft
copies of the full annual report
to all those shareholders who
have registered their email
address(es), either with the
listed
entity or with any depository.
Disclosures and Disclosures of Key Changes in The Amendments introduce a
Transparency [The Kotak Financial Indicators [SEBI (LODR) requirement for all the listed
Committee report, chapter (Amendment) Regulations, 2018, entities to disclose in the
VI] Para 3(x) (b)] MD&A section of the annual
report: • details of significant
changes (i.e. change of 25% or
more as compared to the
immediately previous financial
year) in the key financial ratios,
along with detailed
explanations thereof;

4
SEBI LODR
and • details of any change in

4
SEBI LODR

Return on Net Worth as

compared to the immediately
previous financial year along
with a detailed explanation
thereof.
Disclosures and Utilization of Proceeds of The amendments introduce a
Transparency [The Kotk Preferential Issue and Qualified requirement to disclose details
Committee report, chapter Institutional Placement (QIP) [SEBI of utilization of funds raised
VI] (LODR) (Amendment) Regulations, through preferential allotment or
2018, Para 3(n) and Para 3(x)(c)(iii)] QIP as specified under
Regulation 32(7A) as a part of
the Corporate Governance
Report.
Disclosures and Disclosure Pertaining to Directors The amendments introduce an
Transparency [The Kotak [SEBI (LODR) (Amendment) additional requirement to
Committee report, chapter Regulations, 2018, Para 3(x) (c)(i)] disclose separately the names of
VI] the listed entities where the
person is a director and the
category is of directorship.
Disclosures and Disclosures Pertaining to The amendments introduce a
Transparency [The Kotak Disqualification of Directors [SEBI requirement to disclose a
Committee report, chapter (LODR) (Amendment) Regulations, certificate from a company
VI] 2018, Para 3(x) (c)(iii)] secretary in practice stating that
none of the directors on the
board of the company have been
debarred or disqualified from
being appointed or continuing
as the directors of companies by
the Board / MCA or any such
statutory authority. Currently,
there is no specific provision in

4
SEBI LODR

the Companies Act and SEBI

(LODR) Regulations for the
same.
Disclosures and Views of Committees Not Accepted The amendments extend the
Transparency [The Kotak by the Board of Directors [SEBI requirement to disclose, along
Committee report, chapter (LODR) (Amendment) Regulations, with the reasons thereof, where
VI] 2018, Para 3(x) (c)(iii)] the Board had not accepted any
recommendation of any
committee of the board which is
mandatorily required, in the
relevant financial year.
However, such disclosure
requirement shall only apply
where the recommendation of /
submission by the committee is
required for the approval of the
board and shall not apply where
prior approval of the relevant
committee is required for
undertaking any transaction
under SEBI (LODR)
Regulations.
Accounting and Audit Disclosures on Audit and Nonaudit The amendments introduce a
related issues [The Kotak Services Rendered by the Auditor new requirement to disclose
Committee report, chapter [SEBI (LODR) (Amendment) total fees for all services paid by
VII] Regulations, 2018, Para 3(x) (c)(iii)] the listed entity and its
subsidiaries, on a consolidated
basis, to the statutory auditor
and all entities in the network
firm/network entity of which
the statutory
auditor is a part.

4
SEBI LODR

Conclusion

The prime objective of the SEBI Act, 1992 are: 1. Protecting the interests of the investors in securities;
2. Promoting the development of, and; 3. Regulating, the securities market and for matters connected
therewith or incidental thereto. SEBI as the watchdog of the industry has an important and crucial role in
the market participants and crucial role in the market participants perform three duties in accordance
with the regulatory norms. The preamble of the SEBI describes the basic functions of the SEBI as‘…to
protect the interest of investors in the securities and to promote the development of, and to regulate the
securities market and for matters connected therewith’.