SEBI to Facilitate resolution of complaints of Listed Entities against proxy advisors

The Securities and Exchange Board of India (SEBI) has released a Circular dated 4^th August, 2020 facilitating the resolution of grievances of listed entities against SEBI registered proxy advisors. The Circular will be effective from 1^st September, 2020.

Pertinently, under the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), listed entities must protect and enable shareholders to exercise rights, such as:

1. Right to participate  in,  and  to  be  sufficiently  informed  of,  decisions  concerning fundamental corporate changes;
2. opportunity to participate effectively and vote in general shareholder meetings;
3. effective shareholder participation in key corporate governance decisions, such as the nomination and election of members of the board of directors and;
4. exercise of ownership rights by all shareholders, including institutional investors.;

Over the past years, proxy advisors have played crucial roles in enabling shareholders to effectively participate in corporate governance decisions. For instance, proxy advisors render advice to institutional investors or shareholders of listed entities on the exercise of their rights in the company, including recommending votes in agenda items.

SEBI, thus points out that proxy advisors and listed entities may have different views on agenda items of the listed entities and this may give rise to grievances.

Hence to resolve these grievances, SEBI enables listed entities to approach it. SEBI will then examine the matter for non-compliance by the proxy advisors of the Code of Conduct. It will also ensure compliance with the Procedural Guidelines for proxy advisors, issued by a SEBI Circular dated 3^rd August, 2020.