In furtherance of the expert committee report dated June 26, 2024 (a summary of which can be accessed by clicking on this link), the Securities and Exchange Board of India (SEBI) has enacted significant changes to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) through the SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2024 (which can be viewed by clicking on this link) (LODR Amendment Regulations) notified on December 12, 2024.

 

The LODR Amendment Regulations came into effect on December 12, 2024, with certain specific provisions coming into effect on December 31, 2024. The objective of these amendments is to enhance ease of doing business for listed entities.

 

The key amendments introduced vide the LODR Amendment Regulations include the following:

 

1. Expanding the scope of Related Party Transactions

The carve-outs to the definition of ‘related party transactions’ (RPTs) provided under Regulation 2(1)(zc) of LODR Regulations have been broadened to now also include corporate actions by subsidiaries of a listed entity which are uniformly applicable to all shareholders.

Additionally, certain new exclusions have been introduced to the definition of RPTs, such as the acceptance of deposits by banks in compliance with regulatory directions and retail purchases by directors or employees from the listed entity or its subsidiary under uniformly applicable/offered terms and without creating a business relationship. This will simplify compliance and reduce the regulatory burden for banks and listed entities by excluding routine and ordinary course transactions from the RPT regulatory framework.

2. Disclosure Obligation on KMPs/Directors/Promoters/Promoter Group

Currently, Regulation 5 of the LODR Regulations obligates a listed entity to ensure that its Key Managerial Personnel (KMPs), directors, promoters or any other person dealing with the listed entity comply with the LODR Regulations. The amendment has now added a proviso to Regulation 5 that provides an obligation on such KMPs, directors, promoters, and other stakeholders to disclose all information that is relevant and necessary to the listed entity to ensure compliance with applicable laws. This amendment will strengthen accountability and ease compliance for listed entities.

3. Strengthening the Role of Compliance Officers

The role of the Compliance Officer (CO) has been enhanced under Regulation 6 of the LODR Regulations, mandating that the CO must be a whole-time employee of the listed entity, not more than one level below the board of directors. Given the significant roles and responsibilities entrusted upon the CO under the LODR Regulations and other SEBI regulations, and to avoid any conflicts between the powers and responsibilities of such CO, these amendments have been introduced by SEBI.

4. Introduction of Integrated Filings

Regulation 10(1A) of the LODR Regulations has been introduced to enable integrated filing of periodic reports, statements, documents etc. by listed entities. The amendment aims to reduce compliance burdens by unifying multiple period filing requirements into a single system. In this backdrop, the specific periodic filing requirements provided under Regulations 13(3) and 27(2) have been amended and the filing requirement under Regulation 7(3) has been omitted. Further, on December 31, 2024, SEBI has issued a circular laying down the detailed procedure and format of the integrated filings (the circular can be accessed by clicking on this link).

5. Relaxations for Listed Entities coming out of CIRP

Various compliance relaxations have been provided under the LODR Regulations for listed entities coming out of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). Illustratively, such companies are now allowed up to three months to fill vacancies in critical roles, such as CO and senior management positions. Adjusted timelines have also been provided for compliance with board and board committees’ composition and disclosure requirements for quarterly and annual financial results. These changes aim to facilitate smoother transitions for entities resuming regular operations post-insolvency.

6. Redefinition of Senior Management

The definition of ‘senior management’ under Regulation 16(1)(d) of LODR Regulations has been amended to now also include all KMPs within its ambit.

7. Adjustments to Board Composition

To promote robust board governance and remove interpretation ambiguities, Regulation 17 of LODR Regulations has been amended to inter alia mandate that the special resolutions for the appointment or continuation of non-executive directors aged 75 years or older should be obtained prior to the relevant director attaining the age of 75 years. Further, changes have been introduced to omit the time required for obtaining regulatory approvals from the overall timelines prescribed for appointment/re-appointment of directors.

8. Streamlining RPT Approvals

In relation to RPTs, audit committees have been granted broader powers under Regulation 23 of LODR Regulations to grant omnibus approvals for subsidiary-level transactions as well. Additionally, non-material transactions can now be ratified retrospectively by the audit committee within specified limits, promoting practical compliance without compromising transparency.

9. Governance Reforms for Subsidiaries

Regulation 24(6) of LODR Regulations now exempts the requirement of seeking a special resolution for transactions between wholly-owned subsidiaries of a listed entity in respect of asset sales, leases, or disposals exceeding 20% of the assets of the material subsidiary on an aggregate basis during a financial year. This change will ensure operational efficiency and reduce timelines in cases where there is no change in the ultimate ownership of the assets.

10. Strengthened Secretarial Audit Framework

The secretarial audit framework under Regulation 24A of LODR Regulations has been strengthened by mandating that Secretarial Auditors be Peer Reviewed Company Secretaries. Additionally, new rules have been put in place to govern auditor tenure, eligibility, appointment/re-appointment and disqualifications, with a focus on independence and objectivity. As per a new sub-regulation (1A) added, starting April 1, 2025, all Secretarial Compliance Reports must adhere to these updated standards.

11. Revised Event Disclosure Timelines

The timelines for disclosing material events have been updated under Regulation 30(6) of LODR Regulations. Greater flexibility has been provided to listed entities for disclosing outcomes of board meetings which close after normal trading hours of that day but more than three hours before the beginning of the normal trading hours of the next trading day. In such cases, the disclosure regarding the outcome of the board meeting can be made within 3 (three) hours rather than the existing 30 (thirty) minutes timeline.

In addition, several amendments have been introduced to the disclosure events/information provided under Part A of Schedule III of the LODR Regulations. Illustratively, the thresholds for disclosing acquisition of shareholding/control by listed entities have been increased, fraud by senior management is now only required to be disclosed if it relates to the listed entity and monetary thresholds have been introduced for disclosure of fines/penalties by regulatory/enforcement agencies. These amendments will assist in reducing the compliance burden and costs for listed entities.

12. Reclassification of Promoters

The process for reclassification of promoter and promoter group entities as public shareholders has been simplified under Regulation 31A of LODR Regulations. Pursuant to the amendments, the requirement of seeking an approval from the stock exchanges has been replaced with seeking a prior no-objection certificate from the relevant stock exchanges. Further, definite timelines have been introduced for the board and shareholders of the listed entity to vote upon any reclassification request submitted by a promoter or promoter group entity. This should assist in significantly reducing the timelines involved in the processing of any such requests.

13. Digitization of Annual Reports

Regulation 36(1) of LODR Regulations has now been amended to modernize the accessibility of annual reports. Instead of sending hard copies, entities are permitted to merely provide web links to the full report. This would reduce the compliance burden and costs incurred by listed entities in dispatching physical copies of bulky annual reports, and also reduce the environmental impact of printing such annual reports.

14. Simplification of Schemes of Arrangement

To support corporate restructuring, Regulation 37 of LODR Regulations now exempts schemes involving write-offs of accumulated losses applied uniformly across all shareholders from obtaining a prior stock exchange no-objection. However, these schemes must still be filed with the stock exchanges for disclosure purposes to ensure transparency while reducing the timelines.

The aforesaid amendments to LODR Regulations reflect a comprehensive effort to modernize governance standards, streamline compliance, and enhance ease of doing business for listed entities.

Authors & Contributors

Partner(s):

Vaibhav Kakkar

Snigdhaneel Satpathy

Sahil Arora

 

 

Associate(s):

Anuj Garg

Sonia Mangtani

Devansh Sehgal