Frequently Asked Questions
SEBI (Listing
Obligations and
Disclosure Requirements)
Regulations, 2015
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. Common Obligations
of Listed Entities
Q3. Regulation 9 requires a
listed entity to frame a policy for preservation
of documents
approved by its board
of directors, classifying them into the documents that can
be preserved permanently or can be
preserved for a period of not less than eight years
after completion of the relevant transactions.
What types of documents are covered under this regulation?
Answer: The
documents
preserved in
terms
of
Regulation
9 includes
documents
required to be preserved by a listed entity in terms of securities laws defined under Regulation 2(1)(zf) and other laws and statutes applicable to such listed entity.
C. Corporate
Governance
Q4. 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.
Q5. 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.
Q6. Regulation 23(8) requires all existing material related party contracts or arrangements entered into
prior to the date of
notification
of these regulations and which may continue beyond such date shall be placed for approval of the
shareholders in the
first
General Meeting subsequent to notification
of these regulations.
Whether the listed entity requires
to take a fresh shareholders approval in case it has already taken an
approval prior to implementation
of these regulations?
Answer: The listed entity need not take fresh approval of shareholders in
case the entity has already fulfilled the requirement of the regulations.
Q7. 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.
Q8. Regulation 24 (4)
requires that the management of the unlisted subsidiary shall
periodically bring
to the notice of the
board of directors of the
listed entity, a statement of all
significant
transactions
and
arrangements
entered
into
by the unlisted subsidiary.
Whether the requirement is applicable only to the material
unlisted subsidiary?
Answer: The
requirement is applicable to all unlisted
subsidiaries.
Q9. 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.
D. Disclosure
of Events or Information
Q10. 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.
Q11.
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.
Q12. 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).
Q13. Schedule III
Part
A,
Para A, item
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.
Q14. Schedule III Para A of Part A, item 4 (d) on deemed material events mentions that a
listed entity shall disclose within
30 minutes of the
closure of the meeting
the decision with respect to fund raising proposed to be
undertaken. What all methods of fund raising are covered under the same?
Answer: The listed entity may be guided by Regulation 29(1) (d) which
stipulates the types of
fund raising an
entity
is required
to
intimate to Stock Exchange.
E. Other Clarifications
Q15. 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.
Q16.
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.
Q17. Regulation 34 (2) (f) requires Annual Report to contain Business Responsibility Report
(BRR). Since when this requirement will be
applicable?
Answer: Presently Regulation 34 requires top hundred listed entities based on market
capitalization(calculated as on March 31 of every financial year) to compulsorily
and other than top hundred listed entities to voluntarily include BRR in their Annual Report. Subsequent
to amendment in SEBI (Listing Obligations and Disclosure
Requirements) Regulation 2015 notified on December 22, 2015, the requirement
of mandatory
reporting of BRR
in Annual Report has been raised from hundred to five
hundred listed entities which will be effective from April 1, 2016 and hence it will
form a part of the Annual Report
for the financial year 2016-17.
Q18. 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.
Q19. 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.
Q20.
Regulation 40 (8) requires the listed entity that
has not effected transfer of securities within fifteen days or where the
listed entity has failed to communicate to
the transferee(s) any valid objection to the transfer, within
the
stipulated
time period of
fifteen days to compensate the aggrieved party for the opportunity losses caused
during the period of the delay. Sub regulation (9) of the aforesaid regulation states
that the
listed entity shall ensure that the share transfer agent and/or the
in-house share transfer
facility, as the case may be, produces a certificate from a practicing company secretary within one month of the end of each half of the financial year, certifying that all certificates have been issued within thirty days of the date of
lodgment for transfer, sub-division, consolidation, renewal, exchange or endorsement
of calls/allotment monies. The
matter needs to
be clarified.
Answer: It is clarified that the listed entity may
seek
such reports from share transfer
agents as they may require, so as to ensure compliance with the time period of 15 days for transfer of
securities as stipulated
in sub-regulation (8).
Q21. 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.
Q22. Regulation 46 (3) requires listed entity to update any change in the content of its
website within two working days from the date of such change in content. Whether
change
in
the content of website means any change on the
website?
Answer: Regulation 46(2) prescribes the list of information to be disseminated by a
listed entity on its website. Regulation 46 (3) refers to the update of any change in the content which is provided as per
the requirements
of Regulation 46
(2).
F.
Miscellaneous
Q23. The regulations do not define 'working days'. Whether the
same can be clarified?
Answer: 'Working days' means working days of the stock
exchange where the securities of the entity are listed.
Company Secretary GAURAV SHARMA+919990694230 Connect on Watts App with Gaurav Email us [email protected] Official Blog Fema India Experts Connect with our Facebook Page:- Click and Like our Page Subscribe our Email updates like other 15,000 Members, Free/Easy/Comfortableway
