SEBI in its Board meeting (SEBI PR No. 130/2014 dated 19 November 2014) had discussed the conversion of existing listing agreements into a single comprehensive regulation for various types of listed securities. Finally, the SEBI notified the SEBI Listing Regulations aiming to consolidate and streamline the existing listing agreements for different segments of the capital market into one single document across various types of securities listed on the recognized stock exchanges.
Listed firms will face monetary penalties and suspension of trading for non-compliance with the SEBI's new listing regulations, including for timely and proper disclosure of 'price sensitive' developments. In a circular, SEBI said stock exchanges will impose fines for non-compliance with listing regulations and invoke suspension of trading in case of subsequent and consecutive defaults.
In order to maintain consistency and uniformity of approach, exchanges will follow uniform fine structure for non-compliance with Listing Regulations with regard to non-submission of certain periodic reports as well as Standard Operating Procedure for suspension and revocation of trading suspension. To ensure effective enforcement of the Listing Regulations, the depositories, on receipt of intimation from concerned exchange, will have to freeze or unfreeze, as the case may be, the entire shareholding of the promoter and promoter group in such entity.
Under the mechanism, the initial penal action would be a minimum fine of Rs. 1,000 to Rs. 5,000 per day depending on the violation, while repeated offences would lead to actions like transfer to restricted-trade category, freezing of promoter shares and overall suspension on trading in company shares. The exchange will have to give a 21days (prior to the proposed date of suspension) public notice on its website proposing suspension of trading in the shares of non-compliant listed entity.
Further SEBI's provisions for listed entities have been aligned with those of the Companies Act, 2013. In the Regulations, while many of the existing provisions of the Listing Agreements have been retained, but at the same time, many new obligations have also been cast on the Listed Companies and their Boards/ KMPs.
A gist of some important provisions of listing regulations vis-à-vis erstwhile Equity Listing Agreement, in respect of Specified Securities are outline as follows:
Regulation |
Particulars |
Remarks |
Regulation 7: Share Transfer Agent |
Listed entities are required to submit a Compliance Certificate duly certified by both the Compliance Officer and the Authorized Representative of Share Transfer Agent to the Recognised Stock Exchanges where their specified securities are listed within 1 month of end of each half of the financial year. |
This Regulation is a substitution of Clause 47 (c) of the erstwhile Listing Agreement. Earlier, this Certificate was required to be obtained from a PCS but as per listing regulations, the same is required to be certified by the Compliance Officer of the Listed Entity and Authorized Representative of the Share Transfer Agent. |
Regulation 9: Preservation of Documents |
The listed Company is required to formulate a Policy for Preservation of Documents duly approved by the Board of Directors, classifying them in at least two categories as follows- Documents whose preservation shall be permanent in nature; Documents with preservation period of not less than 8 years after completion of the relevant transactions. |
This Regulation is, to some extent, in line with the provisions of Companies Act, 2013 and would ensure better governance in the operations of the Company. The policy for Preservation of Documents is required to be uploaded on the functional website of the Company. |
Regulation 12: Payment of Dividend, Interest, Redemption or Repayment |
Every listed entity is required to make use of E-payment facility as approved by RBI for the purpose of making payment of Dividends, Interest, Redemption or Repayment Amounts. Where it is not possible to use e-payment facility then ‘payable-at-par warrants’ or Cheques can be issued. If the amount of Dividend is Rs. 1,500/- or more, the ‘payable-at-par warrants’ or Cheques shall be sent by speed post |
To ensure transparency on one hand and on the other, in the interest of shareholders at large, this Regulation facilitates e-payment of Dividends, Interest, Redemption or Repayment Amounts. |
Regulation 13: Grievance Redressal Mechanism |
Every listed Company is required to comply with the following: To get itself registered on the SCORES platform or any other similar platform to electronically handle the investor complaints as specified by the Board. To file a Statement within 21 days from the end of the relevant quarter to the Recognised Stock Exchanges pertaining to the status of investors complaints detailing the following information: -No. of Complaints Pending -pending at the beginning - Received and disposed of during the quarter -Unresolved at the end of the quarter The said statement is also required to be placed before the Board of Directors on a quarterly basis. |
To ensure timely redressal of investors’ complaints and accountability to the stakeholders at large, a new provision pertaining to submission of Pending Investor Complaints Report to the Recognised Stock Exchanges has been inserted. In the erstwhile Listing Agreement, the information pertaining to pending investors complaints were being submitted on a quarterly basis only along with the Financial Results required to be filed with the stock exchange for the relevant quarter. |
Regulation 16 to 27: Corporate Governance |
The main highlights of the Corporate Governance are outlined as follows: Provisions of Corporate Governance are not applicable on: the listed entity having paid up equity share capital not exceeding Rs. 10 Crore and Networth not exceeding Rs 25 Crore, as on the last day of the previous financial year; the listed entity which has listed its specified securities on the SME Exchange. The Listed entities other than above, are required to: Formulate a Policy on material related party transactions and dealing with related parties. Seek approval from shareholders in General Meeting by passing an ordinary resolution for approving material related party transactions subject to the stipulation that such related parties shall be abstained from voting on such resolution. |
With the intent to harmonize the provisions with the Companies Act, 2013, the requirement of shareholder approval for material related party transaction has been relaxed from Special Resolution to Ordinary Resolution. The provisions of Clause 49 of erstwhile Listing Agreement are by and large replicated in the listing regulations. |
Regulation 28: In Principle approval |
The Listed company, prior to issuance of securities is needed to obtain an In Principle approval |
This provision is in line with Clause 24(a) of erstwhile Listing Agreement. |
Regulation 29: Prior Intimations |
The listed company is required to give prior intimation to the Recognised Stock Exchanges about the Board Meeting held, from time to time, in the following manner:
-the interest is required to be paid on debentures or bonds -the redemption amount is required to be paid on redeemable shares or debentures or bonds. |
The listing regulations, have introduced some additional business pertaining to which prior intimation of Board Meeting is required to be forwarded to the Recognised Stock Exchanges and have also prescribed the computation of requisite timeframe for sending the prior intimation. |
Regulation 30: Disclosure of Events or Information. |
The main provisions of the Regulation pertaining to disclosure are as follows:
|
The provisions of this Regulation have removed all the ambiguities of Clause 36 of the erstwhile Listing Agreement and addition of provisions related to explanation for delay in disclosure would surely bring more transparency in the business affairs of the Company. Further, SEBI vide its Circular dated September 09, 2015 clearly prescribed the information needed to be disclosed pertaining to material transactions as prescribed in Regulation 30 of listing regulations. This circular brings in more clarity of what to disclose and will ensure uniformity in disclosures made by listed entities. |
Regulation 31: Holding of Specified Securities and Shareholding Pattern |
|
Regulation 31 has duly replaced Clause 35 of the erstwhile Listing Agreement. |
Regulation 31(A): Disclosures of Class of Shareholders and Conditions For Reclassification |
The Stock Exchange may allow for reclassification upon receipt of a request from the listed company or the concerned shareholder, along with requisite evidence. The reclassification will be allowed subject to compliance of specified conditions.
Shareholders need to specifically approve whether the outgoing promoter can hold any KMP position in the company. In any case, the outgoing promoter cannot act as KMP for a period of more than 3 years from the date of shareholders’ approval. The outgoing promoter along with the promoter group and persons acting in concert cannot hold more than 10% of the paid-up equity share capital of the company and shall not have any special rights through any formal or informal arrangements.
SEBI may relax any condition for reclassification in specific cases, if it is satisfied about non-exercise of control by the outgoing promoter or its person acting in concert.
Then Public shareholder is required to make an open offer in accordance with the provisions of SEBI (SAST) Regulations, 2011. |
To resolve the ambiguities as to re-classification, SEBI has inserted this regulation to place a regulatory framework for re-classification of promoters in listed companies as public shareholders under various circumstances. |
Regulation 32: Statement of Deviation(s) or Variation(s) |
In case of SME listed entities, the said Deviations statement is required to be furnished on semi-annual basis. |
This Regulation has duly replaced the provisions of Clause 43A and Clause 49(VII)(I) of the erstwhile Listing Agreement. |
Regulation 33: Financial Results |
The listed company shall submit to the stock exchange the following:
In respect of companies listed on SME Exchange, the quarterly results needed to be submitted on a half yearly basis and ‘year-to-date’ financial results are not required to be filed to the stock exchanges. |
Regulation 33 has duly replaced Clause 41 of the erstwhile Listing Agreement. |
Regulation 34: Annual Report |
|
While the erstwhile Listing Agreement cast the obligation for submission of Annual reports to the Stock Exchanges, as soon as they were issued. However, this Regulation mandates for filing of Annual Reports within 21 working days of the AGM. |
Regulation 35: Annual Information Memorandum |
The annual Information Memorandum is needed to be submitted by the listed entities to the stock exchange, in the manner as may be specified by SEBI from time to time. |
The Regulations ensure disclosure of updated information to the stakeholders at large on a regular basis to facilitate them to take well informed decision pertaining to making investment in the Company or not. |
Regulation 36: Documents & Information to Shareholders |
The listed company is required to submit its Annual Report to the shareholders in the following manner:
|
The Annual Reports are needed to be send to the shareholders at least 21 days before the AGM. |
Regulation 37: Draft Scheme of Arrangement |
|
The Regulation prescribes provisions in line with the Circulars issued by SEBI on February 4, 2013 and May 21, 2013 pertaining to No-Objection for the draft scheme of arrangement. |
Regulation 38: Minimum Public Shareholding |
All listed companies have to comply with Minimum Public Shareholding norms, as laid down in Rule 19(2) and 19A of SCRR, in the manner specified by SEBI from time to time. |
While the erstwhile Clause 40A of Listing Agreement even mandated for the modes of complying with MPS norms, this Regulation, presently is silent on the same. |
Regulation 39: Issuance of Certificates or Receipts/ Letters/Advices for securities and dealing with unclaimed securities |
|
The time period of 15 days for issuance of certificates or receipts on prescribed events has been extended to 30 days. |
Regulation 40: Transfer or transmission or transposition of securities. |
The main highlights are outlined as follows:
|
The Clause 12(c) of the erstwhile listing agreement doesn’t specify the time limit for serving the prohibitory order of the court which is being clearly specified in this regulation. |
Regulation 42: Record Date or Date of Closure of Transfer Books |
There must be gap of minimum 30 days between two record dates or two transfer book closure dates. |
In the Regulations, it is clarified that the requirement of maintaining of time gap of 30 days is between 2 Record Dates or between 2 Book Closures. |
Regulation 45: Change in name of the listed entity |
The listed company desirous to change its name is required to file an application for change in name with ROC subject to the compliance with the following conditions:
The line of business undertaken by the company must be in line with its name. However, if there is any deviation between the same, then the company is required to comply with the relevant provisions of the Companies Act, 2013 for change in name, within 6 months from the date of change in line of business. The listed company shall file an application for name availability with ROCs upon satisfying the conditions laid down above Para. After receipt of confirmation regarding name availability from the ROC, the listed company is also required to obtain the approval from the concerned stock exchange for the change in name prior to filing the request for change of name to ROC. |
Under the erstwhile Clause 32 of the Listing Agreement, this condition of not even being able to make an application to ROC was not there. |
Regulation 46: Website |
The listed company is required to update any change in the content of its website within 2 working days from the date of such change in the content. |
This regulation provides clarity as the erstwhile listing agreement was silent regarding updation of contents on the website of the company. |
Regulation 47: Advertisements in Newspapers |
The listed entity shall publish the following information in at least 1 English newspaper, circulating in whole or substantially whole of India and in 1 daily newspaper in the vernacular language, where the registered office of the company is situated:
The above provisions are not applicable on the entities listed on SME Exchange. |
This Regulation has provided an ease of reference by summarizing the provisions of Newspaper publications which in erstwhile Listing Agreement was mentioned in separate clauses |
Earlier a private agreement between Stock Exchange and listed company govern all listing obligation and disclosure requirement. Listing agreement like any other agreement among parties creates civil obligation in case of any violation of the agreement. Now, market regulator took direct regulatory role over the listed entities in India.
Notification of SEBI Listing Regulations can be seen as a welcome move by SEBI streamlining and consolidating the post listing requirements under the Listing Agreement and various SEBI circulars. This would aid in simplifying doing business in India through a listed company and also increase transparency which in turn would boast investor confidence for investing in Indian listed companies.