SEBI issues rules for corporate governance on debt listed entities vide SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2021

On September 08, 2021, the Securities and Exchange Board of India (SEBI) has issued the SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2021 to further amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

 

Key Amendments:

  • In Regulation 3, which specifies Applicability of Regulations, sub-regulation (3) has been inserted, namely:

(3) The provisions of these regulations which become applicable to listed entities on the basis of the criterion of the value of outstanding listed debt securities shall continue to apply to such entities even if they fall below such thresholds as mentioned in sub-regulation (1A) of regulation 15.

  • In Regulation 15, which specifies Applicability, sub-regulation 1A has been inserted, namely:

(1A) The provisions of this regulation and regulation 16 to regulation 27 of this chapter shall apply to a listed entity which has listed its non-convertible debt securities and has an outstanding value of listed non-convertible debt securities of Rupees Five Hundred Crore and above:

Provided that in case an entity that has listed its non-convertible debt securities triggers the specified threshold of Rupees Five Hundred Crore during the course of the year, it shall ensure compliance with these provisions within six months from the date of such trigger:

Provided further that these provisions shall be applicable to a ‘high value debt listed entity’ on a ‘comply or explain’ basis until March 31, 2023 and on a mandatory basis thereafter.

Explanation (1)- The entities referred in the first proviso to sub-regulation (1A) of regulation 15 are referred to as ‘high value debt listed entities’ for the purpose of this chapter.

Explanation (2) – The ‘high value debt listed entities’ on the date of notification of this amendment would be determined on basis of value of principal outstanding of listed debt securities as on March 31, 2021.

Explanation (3) – ‘Comply or explain’ for the purpose of the second proviso to sub-regulation (1A) of regulation 15 shall mean that the entity shall 18ecogniz to comply with the provisions and achieve full compliance by March 31, 2023. In case the entity is not able to achieve full compliance with the provisions, till such time, it shall explain the reasons for such noncompliance/ partial compliance and the steps initiated to achieve full compliance in the quarterly compliance report filed under clause (a), sub-regulation (2) of regulation 27 of these regulations.

Explanation (4) –

(a) In case of a ‘high value debt listed entity’ that is a Real Estate Investment Trust (REIT), the Board of the Manager of the Real Estate Investment Trust (REIT), shall comply with regulation 15 to regulation 27 of these regulations related to corporate governance;

(b) In case of a ‘high value debt listed entity’ that is an Infrastructure Investment Trust (InvIT), the Board of the Investment Manager of the Infrastructure Investment Trust (InvIT), shall comply with regulation 15 to regulation 27 of these regulations related to corporate governance.

  • In Regulation 21, which specifies Risk management Company, sub-regulation (5) has been substituted:

(5) The provisions of this regulation shall be applicable to:

 i. the top 1000 listed entities, determined on the basis of market capitalization as at the end of the immediate preceding financial year; and, 

ii. a ‘high value debt listed entity’.

  • In Regulation 23, which specifies related party transactions, in sub-regulation (9) the following proviso has been inserted:

Provided that a ‘high value debt listed entity’ shall submit such disclosures along with its standalone financial results for the half year.

  • In Regulation 25, which specifies obligation with respect to independent directors, sub-regulation 12 has been inserted, namely:

(12) A ‘high value debt listed entity’ shall undertake Directors and Officers insurance (D and O insurance) for all its independent directors for such sum assured and for such risks as may be determined by its board of directors.

  • In Regulation 49, Applicability, sub-regulation (1) has been substituted:

(1) The provisions of this chapter shall apply only to a listed entity which has listed its nonconvertible securities on a recognised stock exchange in accordance with Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

  • In Regulation 49, Applicability, sub-regulation (2) has been omitted.
  • In Regulation 50, which specifies Intimation to stock exchange, sub-regulation (1)&(2) has been substituted, namely:

(1) The listed entity shall give prior intimation to the stock exchange of at least two working days in advance, excluding the date of the intimation and the date of the meeting of the board of directors, about the Board meeting in which any of the following proposals is to be considered:

(a) an alteration in the form or nature of non-convertible securities that are listed on the stock exchange or in the rights or privileges of the holders thereof;

(b) an alteration in the date of the interest/ dividend/ redemption payment of non-convertible securities;

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

(d) fund raising by way of issuance of non-convertible securities; or

(e) any matter affecting the rights or interests of holders of non-convertible securities.

(2) The listed entity shall also intimate the stock exchange not later than the date of commencement of dispatch of notices, in case of:

(a) any annual general meeting or extraordinary general meeting that is proposed to be held for obtaining shareholder approval for the proposals at clauses (c) and (d) under sub-regulation (1) of this regulation;

(b) any meeting of the holders of non-convertible securities in relation to the proposal at clause (e) of sub-regulation (1) of this regulation.

  • In Regulation 50, which specifies Intimation to stock exchange, sub-regulation (3) has been omitted.
  • In Regulation 51, which specifies Disclosure of information having bearing on performance/operation of listed entity and/or price sensitive information, sub-regulation (3) has been inserted, namely:

(3) The listed entity shall disclose on its website, all such events or information which have been disclosed to the 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 Regulation 52, which specifies financial results, Sub-regulation (1) has been substituted, namely:

“(1) The listed entity shall prepare and submit un-audited or audited quarterly and year to date standalone financial results on a quarterly basis in the format as specified by the Board within forty- five days from the end of the quarter, other than last quarter, to the 20ecognized stock exchange(s):

Provided that in case of entities which have listed their debt securities, a copy of the financial results submitted to stock exchanges shall also be provided to Debenture Trustees on the same day the information is submitted to stock exchanges.” 

  • In Regulation 52, which specifies financial results, Sub-regulation (7) has been substituted, namely:

“(7) The listed entity shall within forty-five days from the end of every quarter submit to the stock exchange, a statement indicating the utilization of issue proceeds of non-convertible securities, which shall be continued to be given till such time the issue proceeds have been fully utilised or the purpose for which these proceeds were raised has been achieved.”

  • In Regulation 52, which specifies financial results, Sub-regulation (7A) has been Inserted namely:

“(7A) In case of any material deviation in the use of proceeds as compared to the objects of the issue, the same shall be indicated in the format as specified by the Board.”

  • In Regulation 56, which specifies Documents and Intimation to Debenture Trustees, Sub-section 1A has been inserted, namely:

“(1A) The listed entity shall also disclose to the Debenture Trustee at the same time as it has intimated to the stock exchange, all material events and/or information as disclosed under regulation 51of these regulations in so far as it relates to the interest, principal, issue and terms of non-convertible debt securities, rating, creation of charge on the assets, notices, resolutions and meetings of holders of non-convertible debt securities.”

  • In Regulation 57, which specifies other submissions to stock exchange(s), sub-regulation (1) has been substituted, namely:

“(1) The listed entity shall submit a certificate to the stock exchange within one working day of the interest or dividend or principal becoming due regarding status of payment in case of nonconvertible securities.”

  • In Regulation 57, which specifies other submissions to stock exchange(s), sub-regulation (4)&(5) has been inserted, namely:

(4) The listed entity shall within five working days prior to the beginning of the quarter provide details for all the non-convertible securities for which interest/dividend/principal obligations shall be payable during the quarter.

(5) The listed entity shall within seven working days from the end of the quarter provide:

(a) a certificate confirming the payment of interest/dividend/principal obligations for nonconvertible securities which were due in that quarter; and

(b) the details of all unpaid interest/dividend/principal obligations in relation to nonconvertible securities at the end of the quarter.

  • In Regulation 61, which specifies Terms of non-convertible debt securities and non-convertible redeemable preference shares, sub regulation (2) has been omitted.
  • Regulation 61A, which specifies, “Dealing with unclaimed non-convertible securities and benefits accrued thereon, has been inserted, namely:

(1) The listed entity shall not forfeit unclaimed interest/dividend/redemption amount.

(2) Where the interest/dividend/redemption amount has not been claimed within thirty days from the due date of interest/ dividend / redemption payment, a listed entity shall within seven days from the date of expiry of the said period of thirty days, transfer the amount to an escrow account to be opened by the listed entity in any scheduled bank:

Provided that the interest/ dividend/ redemption amount that is unclaimed and outstanding for a period of less than seven years as on the date of notification of this sub-regulation shall be transferred to the escrow account within thirty days, where it shall remain for the intervening period up to seven years.

(3) Any amount transferred to the escrow account that remains unclaimed for seven years shall be transferred to the ‘Investor Education and Protection Fund’ constituted in terms of section 125 of the Companies Act, 2013.”

  • In Regulation 62, which specifies website, sub regulation 1A has been inserted namely:

(1A) The listed entities to whom regulations 15 to regulation 27 are applicable shall also make the following additional disclosures on their website:

(a) composition of the various committees of the board of directors;

(b) terms and conditions of appointment of independent directors;

(c) code of conduct of the board of directors and senior management personnel;

(d) details of establishment of vigil mechanism/ whistle blower policy;

(e) criteria of making payments to non-executive directors, if the same has not been disclosed in the annual report;

(f) secretarial compliance report as per sub-regulation (2) of regulation 24A of these regulations;

(g) policy on dealing with related party transactions;

(h) policy for determining ‘material’ subsidiaries;

(i) details of familiarization programmes imparted to independent directors including the following details:

(i) number of programmes attended by the independent directors (during the year and on a cumulative basis till date)

(ii) number of hours spent by the independent directors in such programmes (during the year and on cumulative basis till date), and

 (iii) other relevant details.

  • In Regulation 62, which specifies website, sub regulation (4) has been inserted namely:

(4) The listed entity shall update any change in the content of its website within two working days from the date of such change in content.

  • In Schedule III, part B which specifies Disclosure of Information having bearing on performance/operation of listed entity and/or price sensitive operations: Non-convertible debt security & non-convertibles redeemable preference shares, has also been amended.

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