SEBI Introduces LODR (Second Amendment) Regulations, 2023

SEBI Introduces LODR (Second Amendment) Regulations, 2023

The Securities and Exchange Board of India has introduced the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023.

These amendments are in line with the consultation papers that were previously released by SEBI on time-to-time basis. The amendments are aimed at strengthening corporate governance at listed entities by empowering shareholders, streamlining the disclosure requirements for material events or information and strengthening compliance.

The amendment shall come into force from 14th July, 2023 (i.e., from the 30th day from the date of their publication in the Official Gazette). The major amendment includes, introduction of the concept of non-permanency of the directors on the board, requirement of filling of vacancy of KMPs within 3 months of vacancy, introduction of threshold-based parameters for identifying the materiality of events/information and introduction of certain agreements to be disclosed.

These reforms signify SEBI’s commitment to promoting transparency, accountability, and investor confidence in India’s capital markets. The key changes brought about by the LODR Amendment are as follows:

1. Timelines for disclosure streamlined: Under the new regime, listed entity is required to make the statutory stock exchange intimation not later than:

a. thirty minutes from closure of the board meeting, in which decisions pertaining to the event/information has been taken,

b. twelve hours from the occurrence of the event/information, in case the event/information is emanating from within the listed entity, and

c. twenty-four hours from the occurrence of the event/information, in case the event/information is not emanating from within the listed entity. Additionally, in case an investor meet is being convened, the listed entity is required to publish details of such meet 2 working days prior to meet (excluding the date of the intimation and meet).

2. Quantitative materiality thresholds: Under the new regime, SEBI has prescribed quantitative materiality thresholds for determining materiality, as per which a listed entity is required to make disclosure of event/information if the value or expected value impact exceeds 2% of the turnover or net worth or 5% of the average profit/loss after tax. Further, the listed entities have been prohibited from diluting these thresholds in their materiality policy.

3. Disclosure of agreements binding listed entities: Under the new regime, SEBI has mandated listed entities to disclose certain agreements binding them, irrespective of whether the listed entity is a party to such agreements.

4. ESG disclosures: SEBI has brought in the concept of BRSR Core. Under the new regime, the listed entities are required to provide assurance in respect of certain key performance indicators regarding ESG specified by SEBI from time to time.

5. Changes in existing disclosure requirements: Under the new regime, certain existing disclosure requirements have been amped up or shuffled in terms of status from disclosable based on materiality to mandatorily disclosable.

6. Publication of first financial result post initial public offer: Taking into consideration representations made, SEBI has provided newly listed entities maximum time limit of 21 days from the date of listing to submit its first financial results.

7. Timeline for filling vacancy certain offices: Any vacancy in the office of director, certain KMPs (being chief executive officer, managing director, whole time director, manager, and chief financial officer) and CO to be filled within 3 months from the date of vacancy. However, in case the office of director becomes vacant in such a manner that it makes the listed entity non-compliant with the board composition requirement under LODR, then such vacancy is to be filled on the date of vacancy itself. Further, interim appointments for KMPs/CO to be aligned with Companies Act and LODR.

The recent amendments to SEBI’s Listing Obligations and Disclosure Requirements regulations bring about significant changes in various aspects of corporate governance, disclosure requirements, cybersecurity, director appointments, and shareholder rights. Listed companies need to familiarize themselves with these amendments, ensure compliance, review their policies, and establish appropriate reporting mechanisms to adhere to the revised regulations effectively.