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. 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.
C. Disclosure
of Events or Information
Q6. 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.
Q7.
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.
Q8. 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).
Q9. 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
Q10. 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.
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