Disclaimer: Based on queries/ comments received
from market participants, these FAQs have
been prepared to provide guidance on the provisions of SEBI (Listing Obligations and
Disclosure
Requirements) Regulations, 2015 ("the Regulations", "Listing Regulations", "LR")
and circulars
issued there under.
For full particulars
of
laws governing continuous disclosure requirements,
please refer to
the Acts/Regulations/Guidelines/Circulars etc. appearing under the Legal
Framework Section of SEBI website i.e., www.sebi.gov.in and the websites of respective
recognized stock
exchanges.
A. Definitions
Q1. Regulation 2(1)(b) of LR defines an ‘associate company’ to mean any entity which is an associate under
the Companies Act, 2013
or under
the applicable accounting
standards. Whether both conditions have to
be
met or either of
the two?
Answer: The definition of associate company should be viewed under the Companies Act, 2013 as well as Accounting Standards. If the condition is met under either of the
two, then such entity should be classified as an associate company.
Q2. Regulation 2(1)(zb) of LR defines the term ‘Related party’ to mean related party under the Companies Act, 2013 or under the applicable Accounting Standards. Whether both
conditions have to be met or either of
the
two?
Answer: The definition of related party should be viewed under the Companies Act,
2013 as well as Accounting Standards. If the condition is met under either of the
two, then such party should be classified as a related party.
B. Corporate Governance
Q3. Regulation 17(8) of LR requires a compliance certificate to the Board of directors by
Chief Executive
Officer (CEO) and Chief Financial
Officer (CFO). Whether the Managing Director or Whole Time Director may certify the compliance certificate, when the company has not designated a
CEO?
Answer: Such certificates may be signed by the officials who hold powers, duties and responsibilities of a CEO/
CFO irrespective of their designations.
Q4. Regulation 23 (4) provides that all material related party transactions shall require approval of the shareholders through resolution and the related parties shall abstain
from
voting on such resolutions
whether the entity is
a related party to the particular
transaction or not. In this regard, whether only those related parties who are related
to the
concerned transaction/ contract should abstain from voting
or whether related
parties should altogether abstain from voting?
Answer: The requirement under Regulation 23(4),
is applicable for listed entities subject to the provisions of Regulation 15. Hence, for applicable entities, the regulations clearly provide that all material related party
transactions shall require approval of the
shareholders through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party for the particular
transaction or not.
Q5. Regulation 24(1) prescribes having at least one independent director of the listed
entity as a director on the board of directors of 'unlisted material subsidiary, incorporated in India'. Sub-regulations (2), (3) and (4) to the same regulation refer to
'unlisted subsidiary'.
Whether such sub-regulations (2), (3) and (4) are applicable
to
all unlisted subsidiaries or only material unlisted subsidiaries incorporated in India?
Answer: Listed entities may be guided by the provisions of Regulation 24. Wherever
'unlisted material subsidiary' and 'unlisted subsidiary' have been distinctly mentioned in a particular sub-regulation, such sub-regulation
shall be applicable to material unlisted subsidiaries or all unlisted subsidiaries as the case may be.
Q6. Regulation 26(1) stipulates that a director shall not be a member in more than ten
committees or act as chairperson of more than five
committees across all listed entities.
Clause (a) to the aforesaid sub-regulation requires membership on committees that a director serves in all public limited companies, whether listed or
not, to be included for determining the count
of committee membership/
chairmanship for sub-regulation (1) and excludes membership on
committees of private limited
companies, foreign companies and companies under Section 8
of the
Companies Act, 2013. Whether a director can
be committee member for ten listed entities only
or the same includes unlisted public companies as well?
Answer: A director of a listed entity can be member in maximum ten committees and
chairperson of more than five committees of listed entities and unlisted
public limited
companies put together.
C. Disclosure
of Events or Information
Q7. Regulation 30(8) of LR requires posting of disclosures on the listed entity’s website for a minimum period of five
years. Whether the said provision is prospective from
December 1, 2015 and pertains to disclosures relating
to events happening
thereafter?
Answer: The
disclosures made under Regulation 30(8) shall be made w.e.f. December
01, 2015, i.e., the listed entity shall disclose on its website all
such events or
information which has been disclosed to
stock exchange(s)
under this regulation on or after
the
said date, and such disclosures shall be hosted on the website of the listed entity for a minimum period of
five
years from the date of disclosure to the stock exchange.
Q8. Regulation 30(9) of LR
requires disclosure of all events and information with respect to
subsidiaries which are
material. If both parent and subsidiary are listed entities, would
it be sufficient compliance if the
listed subsidiary has made a disclosure or whether same
disclosure
be made
by the
parent listed entity also?
Answer: Both the parent and material subsidiary in their own right as Listed Entities
have
to make disclosure separately
as applicable under Listing Regulations.
Q9. Regulation 16 (1)(c) defines material subsidiary as - “material subsidiary” shall mean a
subsidiary, whose
income
or net worth exceeds twenty percent of the consolidated
income or net worth respectively, of the
listed entity
and its subsidiaries in the immediately
preceding accounting year.” The Explanation
to Regulation 16 (1)(c) states that
the listed entity
shall formulate a policy
for determining
material subsidiary. Can the listed entity adopt a different criteria for determining material
subsidiary for the purpose of Regulation 30 (9)?
Answer: The definition of 'material
subsidiary' under regulation 16(1)(c) defines a subsidiary that is material to
the listed entity. Further, the explanation to
the aforesaid provision allows the listed entity to formulate a policy for the same, i.e., a listed entity
can
develop criteria that is stricter than what has been provided in the Regulations.
Regulation 30(9) requires the listed entity to
disclose all events or information with
respect to subsidiaries which are material for the listed entity. The said sub-regulation
places stress on materiality of the events or information.
Therefore, disclosure would be
required in cases
where the event or
information originating from a
subsidiary is material to the listed entity, irrespective
of whether such a
subsidiary is
material
or not as per
the definition provided
at regulation 16(1)(c).
Q10. Schedule III Part A, Para
A,
Clause 1(ii)(a) requires disclosures on acquisition or
agreements to acquire
shares or voting
rights in a
company, whether directly
or indirectly, such that the
listed entity holds shares or voting rights aggregating to five
per cent or more of the shares or voting
rights in the said company. Whether the disclosure is
with respect to acquisition of shares or voting rights when the target
company is a listed entity
only
or whether it is applicable
to
unlisted entities also?
Answer: The Schedule refers
to
the listed
entity’s acquisition of shares
or voting
rights in
the company. Such target company
can be listed or unlisted.
D. Other Clarifications
Q11. Under Regulation 33(3), for
submission of financial
results for the last
quarter,
whether
Unaudited Results can be submitted to the
Exchanges?
Answer: Regulation
(33)(3)(d) clearly states that
the
listed
entity shall
file audited annual results in 60 days from the end of the last quarter. Therefore, the financial statements
for
the last quarter shall necessarily be audited. The said provision was also there in
the erstwhile Listing Agreement.
Q12. Regulation 33 (3)(d)
requires a
company to submit audited standalone financial results for the
financial year, within sixty
days from the
end of the financial year along
with the audit report and either Form A (for audit report with unmodified opinion)
or Form B (for audit report with modified opinion).
However for listed entities having
subsidiaries whether two sets of Form
A or
Form B have to be
prepared for standalone and consolidated results?
Answer: A company having subsidiaries will prepare two sets of Form A and/or Form B, one for standalone results and another
for
consolidated results based on
the
respective audit report.
Q13. Regulation 35 requires the listed entity to submit to the stock exchange(s) an Annual
Information Memorandum in the manner specified by the Board from
time to time.
Since the Regulations
do
not currently specify the applicable date and the manner, is
the said provision currently applicable?
Answer: As mentioned, in the regulation, the said requirement will become applicable
as and when
Annual Information Memorandum is specified
by SEBI.
Q14. Regulation 40(3) requires that the listed entity shall register transfers of its securities in the name of the transferee(s) and issue certificates or receipts or advices, as applicable, of transfers; or issue any valid objection or intimation to the transferee or transferor, as the
case may be, within a
period
of fifteen days from the date of such receipt of request for transfer. It provides that the
listed entity shall ensure
that transmission requests are
processed for securities held in dematerialized mode and physical mode within seven days and twenty one days respectively, after receipt of
the
specified documents and that proper verifiable dated records of all correspondence with the investor shall be maintained by the listed entity. In this regard, how would a company ensure compliance in an era where companies have no
role
to
play in processing
of transmission of securities held in dematerialized mode?
Answer: The provision in Regulation 40(3) may be read in context with Regulation 7(1)
which states that the listed entity shall appoint a share transfer agent or manage the
share transfer facility in-house. In cases where the listed entity is managing the share
transfer in-house, such compliance may be ensured. In this
regard, the
share transfer
agent
is an agent of the listed entity and it is
imperative that the listed entity as a principal shall supervise the activities of its agent. Further, Regulation 8 provides that the listed entity, wherever applicable, shall co-operate with and submit correct and
adequate information
to
the intermediaries registered with the Board including registrar to an issue and share
transfer agents.
Q15. As per Regulation 46(2)(n), the
listed entity
is
required to disseminate on its website details of agreements entered into with the
media
companies and/or their associates,
etc. In this regard, should the
listed entity disclose
all agreements entered into with
media companies/
their associates including ordinary agreements or
disclose only
such
agreements that are not in the normal course of business as required under item
5 of paragraph A of part A of Schedule III of LR?
Answer: It is clarified that only such agreements that are
not
in the normal course of business shall be disclosed. Listed entities may refer to
SEBI Press Release No. 200/2010 dated August 27, 2010 and Press Council of India Press Release No. PR/3/10-11-PCI dated
August 02, 2010 wherein concerns related
to
'private treaties'
and their disclosures have been discussed in
detail.
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