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Frequently Asked Questions
January 08, 2016
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.
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.
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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
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.
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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.