Introduction
The Securities and Exchange Board of India (‘SEBI’) introduced significant amendments to the SEBI (Listing Obligations and Disclosure Requirements) (LODR) Regulations, 2015 (‘LODR Regulations’)[i]. The recent amendments will be known as SEBI (Listing Obligations And Disclosure Requirements) (Third Amendment) Regulations, 2024 (‘Amendment Regulations’). These Amendment Regulations will take effect on 31.12.2024, while certain provisions, such as those concerning secretarial audit, will come into force starting 01.04.2025. These changes are set to affect listed companies and aim to enhance corporate governance, increase transparency and ensure timely reporting of material events. Some changes come with stringent timelines, while others mandate adopting new compliance measures.
The LODR Regulations were introduced in 2015 to govern the obligations and disclosure requirements of listed companies in India. These Regulations prescribe detailed compliance requirements for listed companies, including disclosure of financial results, material events, corporate governance norms, and the responsibilities of the board of directors (‘BoD’) and management. They are periodically amended to align with evolving corporate governance standards and investor needs.
Here’s what the companies need to know:
1. Reg. 6 - Compliance Officer
The compliance officer shall be an officer who is in whole-time employment of the listed entity, not more than one level below the BoD and shall be designated as key managerial personnel (‘KMP’).
The new provision also mandates that listed entities undergoing the corporate insolvency resolution process (‘CIRP’) must appoint KMP within 3 months of the approval of the resolution plan. During the interim period, at least one full-time KMP must be responsible for managing day-to-day operations.
This change ensures operational continuity and stronger management oversight, especially in companies undergoing insolvency proceedings.
2. Reg. 13 - Investor Grievance Redressal
This amendment introduces the requirement for listed entities to submit a detailed statement on a quarterly basis that outlines how investor grievances have been addressed in the format and timeline as may be prescribed by the BoD.
This will standardize how grievances are tracked and reported, making comparing and analysing grievance handling across companies easier.
3. Reg. 17 - BoD
Non-executive directors (NEDs) aged over 75 years require shareholder approval for appointment or continuation in office.
Any vacancy in the committees of the BoD must be filled within 3 months or by the date of the vacancy’s occurrence, whichever is earlier.
These changes aim to strengthen governance structures and address gaps in leadership.
4. Reg. 23 - Related Party Transactions (‘RPTs’)
Corporate actions such as dividends, stock splits, and rights issues that are uniformly applicable to all shareholders are excluded from the definition of RPTs.
Omnibus approvals can now be granted for recurring RPTs involving subsidiaries. Ratification provisions have also been introduced, allowing RPTs to be ratified by the Audit Committee within 3 months.
These changes streamline compliance processes while retaining checks for material RPTs.
5. Reg. 24A - Secretarial Audit
Secretarial audits must now be conducted by peer-reviewed company secretaries starting 01.04.2025.
Restrictions have been placed on secretarial auditors from rendering services that may impair independence.
This aligns secretarial audits with statutory audit practices, thereby enhancing audit quality and independence.
6. Reg. 30 - Disclosure of Material Events
Disclosure timelines for material events, including litigation disclosures, have been relaxed. For example, entities now have 72 hours instead of 24 to disclose non-tax litigation claims.
Enhanced thresholds for disclosing acquisitions and penalties imposed by sectoral regulators have been introduced.
These amendments balance the need for prompt disclosures with practical compliance timelines.
7. Reg. 31A - Promoter Reclassification
Stricter timelines for promoter reclassification have been introduced:
a. The BoD must analyse requests within two months.
b. Shareholder approvals must be obtained within 60 days of the stock exchange’s no-objection certificate (NOC).
Exemptions have been provided for companies under insolvency or undergoing schemes of arrangement.
8. Reg. 46 - Website Disclosures
Mandatory disclosures include Articles of Association (AoA), employee benefit scheme documents, and detailed profiles of BoD.
Companies may provide QR codes and web links in newspaper advertisements for better investor access.
This improves transparency and simplifies information dissemination.
Conclusion
The Amendment Regulations significantly overhaul corporate governance and disclosure requirements for listed entities. While fostering enhanced transparency and accountability, they also introduce stricter compliance obligations. By addressing gaps in existing provisions, SEBI has taken a definitive step toward strengthening India’s securities market. The success of these amendments depends on the readiness and timely implementation by listed entities.
End Note
[i] Notification No. SEBI/LAD-NRO/GN/2024/218 dated 12.12.2024.
Authored by Muskaan Jain, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.