SEBI consultation paper to gather public and stakeholder input on the recommendations made by an Expert Committee

The Securities and Exchange Board of India (SEBI) has released a consultation paper to gather public and stakeholder input on the recommendations made by an Expert Committee. These recommendations aim to facilitate ease of doing business and harmonize the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations). This initiative aligns with the Union Budget FY 2023-24’s announcement to simplify and reduce the cost of compliance for financial sector regulations.

Recommendations for Filings and Disclosures:

1. Implementing a single filing system via API-based integration between stock exchanges. Integrating periodic filings by listed entities.
2. Enabling system-driven disclosure of certain filings like shareholding patterns and credit rating revisions.
3. Allowing disclosure of information on a listed entity’s website through curated links to stock exchanges.
4. Streamlining newspaper advertisement requirements.

Board of Directors and Committees:

1. Providing a three-month timeline to fill vacancies in board committees.
2. Excluding time taken for regulatory, statutory, or government approvals from timelines for shareholder approval for director appointments.

Promoters and Controlling Shareholders:

1. Streamlining the process of reclassifying promoter or promoter group entities.
2. Mandating promoters, directors, and key managerial personnel to disclose relevant information for compliance.

Related Party Transactions (RPTs):

1. Exempting transactions uniformly applicable to all shareholders from RPT definitions.
2. Exempting remuneration and sitting fees for directors, key managerial personnel, and senior management from audit committee approval, except for promoters.
3. Allowing ratification of RPTs by audit committees under certain conditions.
4. Applying omnibus approval provisions to RPTs of subsidiaries.
5. Exempting transactions like payment of statutory dues to the government from approval requirements.

Disclosure of Material Events:

1. Providing additional time for disclosure of board meeting outcomes concluded after trading hours.
2. Streamlining disclosure requirements for acquisitions.
3. Clarifying disclosures related to tax litigations, penalties, and material events.

Other Compliance Requirements:

1. Relaxing compliance for companies emerging from the Insolvency and Bankruptcy Code (IBC) framework.
2. Reducing mandatory gaps between record dates and eliminating the need for no-objection letters for capital reduction schemes under certain conditions.
3. Streamlining requirements for analyst or institutional investor meets, annual reports, and postal ballots.

Facilitating Shareholder Participation:

1. Allowing listed entities to conduct virtual or hybrid shareholder meetings permanently.

Strengthening Corporate Governance:

1. Enhancing diversity among independent directors.
2. Mandating compliance officers to be key managerial personnel and whole-time employees.
3. Introducing provisions for secretarial auditors’ appointment and disqualification.
4. Requiring disclosure of additional information like the Memorandum and Articles of Association.

Recommendations under ICDR Regulations

Price Band Advertisement and Other Issue Related Advertisements:

1. Combining pre-issue and price band advertisements.
2. Using QR codes for disclosing certain information.
3. Disclosing pre-issue and post-issue shareholding for promoters and top 10 shareholders.

Voluntary Disclosure of Proforma Financials:

1. Allowing issuers to disclose proforma financials for recent acquisitions or divestments.
2. Permitting disclosure of financial statements of acquired or divested subsidiaries.
3. Allowing issuers to disclose consolidated proforma financials to show the impact of acquisitions funded by the issue proceeds.

Public Announcement Requirements:

1. Replacing the requirement to advertise the filing of a draft offer document within two days with “two working days.”

Certification for Loan Repayment:

1. Allowing issuers to obtain loan utilization certificates from peer-reviewed chartered accountants.

Eligibility Conditions for IPOs:

1. Allowing issuers with outstanding stock appreciation rights to file draft offer documents.

Regulation 8A of ICDR:

1. Clarifying additional conditions for an Offer for Sale (OFS) under Regulation 8A.

Reservation for Employees in Rights Issues:

1. Deleting provisions related to employee reservation in rights issues.
2. Disclosure of Weighted Averages of Certain Ratios:
3. Adding disclaimers for illustrations on weighted average disclosures.

Pre-IPO Transactions:

1. Mandating disclosure of pre-IPO transactions post filing of the draft offer document.

Promoter Lock-in:

1. Clarifying the lock-in period for promoters when issue proceeds are used for loan repayment utilized for capital expenditure.

Standalone Basis Information:

1. Requiring standalone basis disclosure when issue proceeds are used for working capital.