LODR Amendment - Dec 2024
Ramachandran V
SEBI has notified amendments to Listing Obligations and Disclosure Requirements (Regulations) 2015 (LODR) vide gazette notification dated 12th December, 2024
Salient features of the amendment are as follows:
1) In Regulation 5 a proviso has been added as follows:
“Provided that the key managerial personnel, directors, promoter, promoter group or any other person dealing with the listed entity shall disclose to the listed entity all information that is relevant and necessary for the listed entity to ensure compliance with the applicable laws.”
Regulation 5 is general obligations of compliance. Now the obligation has been put on the KMP, directors etc. to ensure compliance with all the laws applicable to a company.
2) in Regulation 6, a new proviso has been added below the requirement for a listed company to appoint a qualified company secretary as compliance officer.
“Provided that the Compliance Officer shall be an officer, who is in whole time employment of the listed entity, not more than one level below the board of directors and shall be designated as a Key Managerial Personnel.”
The level of a CS has been maintained as not more than one level below the Board of Directors of the company. This is a significant upgradation for the profession of the Company Secretary.
3) A new sub regulation has been added in respect of those companies undergoing the resolution plan under the IBC.
“(1B) Any vacancy in the office of the Compliance
Officer of such listed entity in respect of which a resolution plan under
section 31 of the Insolvency Code has been approved, shall be filled within
a period of three months of such approval:
Provided that, in the interim, such listed entity shall have not less than one
full-time key managerial personnel managing its day-to-day affairs.”
4) Annual return under regulation 7(2) has been deleted by omission of regulation 7(3). One less compliance for the listed entity.
5) A new sub regulation has been added in regulation 10 which ensures that SEBI will provide an integrated system for companies to file their returns, forms, statements, documents etc. within the timelines and in the format specified.
6) The statement of investor grievances in regulation 13(3) is likely to be amended to provide for more details than is currently stipulated.
7) In Regulation 15, which provides for exemption to small listed companies, clause 26A has been added to the list of clauses that need not be complied by such small companies.
8) In case of companies under resolution plan under IBC they have to comply with Reg 17 within 3 months of the approval of the resolution plan under IBC. Similar provisions for reg 18 to 21 of LODR.
9) Regulation 16 - definition of "material subsidiary" - income has been replaced with turnover.
"material subsidiary shall mean a subsidiary, whose turnover or net worth exceeds 83[ten] percent of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year."
10) Definition of "senior management" in Reg 16(1) has been amended to include “persons identified and designated as key managerial personnel, other than the board of directors, by the listed entity" The words Company Secretary and Chief Financial Officer has been deleted. This expands the scope of KMP to whatever has been decided by the BOD.
11) Regulation 17 in case of NEDs attaining the age of 75 years, now the special resolution for appointment/ re-appointment of NEDs has to be done before he attains the age of 75 years.
12) Regulation 17(1C) has been amended to provide that where appointment or re-appointment is subject to regulatory approvals then the time taken for regulatory approvals will not be considered for the purpose of three months or next general meeting after appointment.
This is basically to give relief to public sector companies which face delays in securing approvals of the ministries to the appointment of directors on their Board.
13) Regulation 17(1E) has been amended to provide that where vacancy in the office of not only director but also the committees, then such vacancy shall be filled in within 3 months from the date of such vacancy. Earlier the committees were not included in its ambit, hence the change.
14) Regulation 17(2) has been amended to provide that Board of Directors shall meet at least four times each financial year (earlier it was year, not financial year) and the gap between two consecutive meetings shall not exceed 120 days.
15) Regulation 17(6) has been amended as follows:
17(6)(ca) The approval of shareholders by special resolution shall be obtained every financial year, in which the annual remuneration payable to a single non-executive director exceeds fifty per cent of the total annual remuneration payable to all non-executive directors, giving details of the remuneration thereof.]
The word financial has been added.
16) Regulation 17(11) has been amended to provide that Board shall give rationale for each of the items of special business in the explanatory statement u/s 102 of the Companies Act, 2013
17) Regulation 18, 19, 20 & 21 for meetings of the committees, the word “financial” has been inserted before the word “year”.
18) New clause added in Regulation 23 pertaining to related party transactions:
“(e) remuneration and sitting fees paid by the listed entity or its subsidiary to its director, key managerial personnel or senior management, except who is part of promoter or promoter group, shall not require approval of the audit committee provided that the same is not material in terms of the provisions of sub-regulation (1) of this regulation.
(f) The members of the audit committee, who are independent directors, may ratify related party transactions within three months from the date of the transaction or in the immediate next meeting of the audit committee, whichever is earlier, subject to the following conditions:
(i) the value of the ratified transaction(s) with a related party, whether entered into individually or taken together, during a financial year shall not exceed rupees one crore;
(ii) the transaction is not material in terms of the provisions of sub-regulation (1) of this regulation;
(iii) rationale for inability to seek prior approval for the transaction shall be placed before the audit committee at the time of seeking ratification;
(iv) the details of ratification shall be disclosed along with the disclosures of related party transactions in terms of the provisions of sub-regulation (9) of this regulation;
(v) any other condition as specified by the audit committee:
Provided that failure to seek ratification of the audit committee shall render the transaction voidable at the option of the audit committee and if the transaction is with a related party to any director, or is authorised by any other director, the director(s) concerned shall indemnify the listed entity against any loss incurred by it.”
Sub regulation 9 is pertaining to disclosure to stock exchanges.
19) Regulation 23(3) provides that omnibus approval of RPT may be given by Audit Committee not only for the listed entity, but for its subsidiary also. The audit committee shall review on a quarterly basis the RPTs not only of the listed entity but also its subsidiary.
20) Regulation 23(5) has two clauses added to it, expanding the scope of transactions which does not come under the purview of related party transactions, they are
“(d) transactions which are in the nature of payment of statutory dues, statutory fees or statutory charges entered into between an entity on one hand and the Central Government or any State Government or any combination thereof on the other hand.
(e) transactions entered into between a public sector company on one hand and the Central Government or any State Government or any combination thereof on the other hand.”
21) A new proviso has been added in Reg 23(9) which requires disclosure of remuneration paid to directors, KMP, senior management if the said remuneration is material in terms of Reg 23(1). Remuneration of directors belonging to the promoter/ promoter group has to be disclosed nevertheless. The proviso reads as under:
“Provided further that the remuneration and sitting fees paid by the listed entity or its
subsidiary to its director, key managerial personnel or senior management, except who is part of promoter or promoter group, shall not require disclosure under this sub-regulation provided that the same is not material in terms of the provisions of sub-regulation (1) of this regulation.”
22) The definition of material subsidiary in Reg 24 is on the basis of turnover and not income.
23) Reg 24 – Selling/ disposing/ leasing of assets between two wholly owned subsidiaries of a listed entity does not require the prior approval of the shareholders.
24) Reg 24A – (a) Secretarial Auditor is defined as someone who Is Peer Reviewed Company Secretary
(b) Individual as Secretarial Auditor cannot be appointed for more than one term of 5 years;
(c ) Secretarial Audit firm for not more than two consecutive term of 5 years;
(d) Secretarial auditor has to be appointed through approval by the shareholders in the annual general meeting;(similar to statutory auditors)
(e ) Re-appointment of an individual Company Secretary or a Company Secretary firm after his term of 5 years can be done only after a gap of 5 years from the completion of such term.
(f) Secretarial Auditor firm which is being appointed should not have any common partner in the firm of Company Secretaries that has just completed its term. They cannot be appointed for another 5 years;
(g) Casual vacancy arising out of death, resignation or removal of a Secretarial Auditor shall be filled in by the Board of Directors within 3 months thereof and they shall hold office until the conclusion of the annual general meeting;
(h) Secretarial Auditor should not render any such other services which are not approved by the Board of Directors and should render only such other services that are approved by the BOD;
(I) This provision comes into effect from 1st April, 2025 and any association of a company Secretary with a listed company shall not be counted for the purpose of tenure as per the above provisions;
25) Regulation 25(6) pertaining to appointment of independent director in the casual vacancy caused due to resignation or removal of independent director within 3 months thereof has been omitted.
26) Regulation 26(6) provides that any employee including KMP, directors, or promoter shall enter into any agreement for himself with any shareholder or third party with regard to compensation or profit sharing in connection with dealings in securities of such company unless prior approval by way of ordinary resolution is taken in the general meeting.
A proviso has been added that such persons shall abstain from voting on the resolution in the general meeting.
27) Further the 3rd proviso in regulation 26(6) has been amended to provide for obtaining approval of shareholders in the first general meeting after listing of the securities.
28) Regulation 27 – Report of corporate governance, the time limit of 21 days from the end of the quarter has been omitted, a new time line will be notified by SEBI in this regard.
29) New provisos have been added in Reg 30 as follows
“Provided that in case the meeting of the board of directors closes after normal trading hours of that day but more than three hours before the beginning of the normal trading hours of the next trading day, the listed entity shall disclose the decision pertaining to the event or information, within three hours from the closure of the board meeting:
Provided further that in case the meeting of the board of directors is being held for more than one day, the financial results shall be disclosed within thirty minutes or three hours, as applicable, from closure of such meeting for the day on which it has been considered.”
30) New proviso has been added in Reg 30(6) with respect to timelines within which the disclosures should be made:
“Provided that if all the relevant information, in respect of claims which are made against the listed entity under any litigation or dispute, other than tax litigation or dispute, in terms of sub-paragraph 8 of paragraph B of Part A of Schedule III, is maintained in the structured digital database of the listed entity in terms of provisions of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the disclosure with respect to such claims shall be made to the stock exchange(s) within seventy-two hours of receipt of the notice by the listed entity:”
31) Reg 30A – “complete” details of agreements are not required to be posted on the webpage of the entity.
31) Reg 31A(2) has been omitted – it provided for reclassification of status of a person as a promoter or a public and that it shall be approved by the stock exchanges.
32) Conditions for reclassification of promoters/ promoter group is as follows
(a) Fulfilment of the following requirements:
(i) the promoter(s) seeking reclassification shall make a request for reclassification
to the listed entity along with a rationale for the request and a description as to
how the conditions specified in clause (b) of this sub-regulation (3) are satisfied;
(ii) the board of directors of the listed entity shall analyze such request which is
compliant with the conditions specified in clause (b) of sub-regulation (3) and
provide their views in the immediate next board meeting or within two months
from the date of receipt of the request from its promoter(s), whichever is earlier;
(iii) the listed entity shall submit an application seeking no-objection of the
recognized stock exchange for such reclassification request along with the views
of the board of directors within five days of consideration of the request by the
board of directors;
(iv) the recognized stock exchange shall decide on such application(s) within a
period of thirty days, excluding the time taken, if any, by the listed entity to
respond to queries of stock exchanges, from the date of receipt of the application:
Provided further that in case of entities that are listed on more than one recognized
stock exchange, the concerned stock exchanges shall jointly decide on the
application.
(v) the listed entity shall place the reclassification request before the shareholders
in a general meeting for approval, within sixty days of receipt of no-objection
letter from the recognized stock exchange, along with the views of the board of
directors on the request and the no-objection letter received from the recognized
stock exchanges;
vi) the request of the promoter(s) seeking reclassification shall be approved in the
general meeting by an ordinary resolution in which the promoter(s) seeking
reclassification and the persons related to him/her/it shall not vote to approve such
reclassification request:
Provided further that the provisions of this sub-clause shall not apply in
cases:
(a) where the promoter(s) seeking reclassification and persons related to
the promoter(s) seeking reclassification, together, do not hold more than
one percent of the total voting rights in the listed entity;
(b) where reclassification is pursuant to a divorce.
vii) the listed entity shall notify the stock exchanges within five days of obtaining
shareholder approval and effect the reclassification:
Provided that the listed entity shall seek approval of the recognized stock
exchange for effecting reclassification if there are changes in the facts and
circumstances of the case after receipt of no-objection from the recognized stock
exchanges.”
33) Approval of the shareholders on the request of promoters for reclassification as public shall be considered as a key event requiring disclosure within 24 hours.
34) Reg 34 – the listed company shall submit to the stock exchanges and publish on its website, a copy of annual report on or before the commencement of dispatch to the shareholders.
35) Reg 36 – Hard copy of the annual report need not be sent to the shareholders who have not registered for obtaining soft copy. “A letter providing the web-link, including the exact path, where complete details of the Annual Report is available” is enough to be sent to them.
36) Reg 36(2) which provides that the listed entity shall send the annual report to the shareholders not less than 21 days before the annual general meeting – has been omitted.
37) Amendment to Reg 36(5) – notice to include details of fees payable to not only statutory auditors, but secretarial auditors also.
38) Regulation 37 which pertains to scheme of arrangement exempts the following
a) solely provide for merger of a wholly owned subsidiary with its holding company; or
b) solely provide for writing off the accumulated losses against the share capital of the listed entity applied uniformly across all shareholders on a pro rata basis or against the reserves of the listed entity:
Provided that such draft schemes shall be filed with recognized stock exchanges for the purpose of disclosures.”
39) Amendment in Reg 39 to provide for issue of Letter of Confirmation as against share certificates in the case of duplicate/ sub division/ consolidation/ name change, etc.
This practice is already been carried on by the RTAs.
40) Reg 39(3) which provided that listed entity shall submit information regarding loss of share certificates and issue of duplicate share certificates to the stock exchanges has been omitted. Therefore company need not make this disclosure to the stock exchanges.
41) Reg 40 (2), (3), (6), (8), (9) & (10) has been omitted, which means that the annual 40(9) certification is not required any more.
42) Reg 42 pertaining to record date – companies now have to give notice in advance of at least 3 (as against 7) working days of record date, specifying purpose of record date. However in case of corporate action through schemes of arrangement as per Reg 37, seven (as against 3) days advance notice is required to be given.
43) Reg 42(3) which pertained to recommendation or declaration of dividend at least 5 working days before the record date – has ben deleted.
44) Reg 42(4) which provided for a time gap of at least 30 days between two record dates has been reduced to 5 working days.
45) Reg 42(5) which pertained to securities held in physical form has been omitted.
46) A proviso has been added in Reg 44 to provide that requirement to send proxy forms shall not be applicable to general meetings held through electronic mode only.
47) In Reg 46 regarding website, the companies have to additionally post MOA/ AOA and brief profile of board of directors including directorship and full time position held in body corporates.
Presentations prepared for analysts or institutional investors meet post earnings or quarterly calls, should be posted on the website, before the beginning of such events.
Video recordings of post earnings or quarterly calls should be made available on the website within 48 hours of the event.
New addition to the web site.
“(za) Employee Benefit Scheme Documents, excluding commercial secrets and such other information that would affect competitive position of the listed entity, framed in terms of the provisions of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations,
Provided that redaction of information under clause (za) above from the Employee Benefit Scheme document shall be approved by the board of directors of the listed entity and shall be in compliance with guidelines as may be specified by the Board:”
48) Reg 47 pertaining to advertisement of financial results in newspapers has been amended as follows:
“(1) The listed entity shall publish an advertisement in the newspaper, within forty eight hours of conclusion of the meeting of board of directors at which the financial results were approved, containing a Quick Response code and the details of the webpage where complete financial results of the listed entity, as specified in regulation 33, along-with the modified opinion(s) or reservation(s), if any, expressed by the auditor, is accessible to the investors:
Nothing provided under this regulation shall preclude a listed entity from publishing, if it so chooses, the financial results in terms of regulation 33 along-with the modified opinion(s) or reservation(s), if any, expressed by the auditor in the newspaper as per the format specified within 48 hours of conclusion of the meeting of the board of directors at which the financial results were approved.”
This will result in tremendous cost savings for companies.
49) Reg 50 provides that disclosures to stock exchanges shall be made in XBRL format in accordance with the guidelines issued by the stock exchanges from time to time.
50) Reg 52(2) has been amended to provide that the financial results are approved by the Board of Directors. Hitherto, it stated that the quarterly results shall be taken on record by the BOD and signed by the MD/ED.
The signing of the financial results shall be signed by the chairperson or managing director, or a whole time director or in the absence of all of them, it shall be signed by any other director of the listed entity who is duly authorized by the board of directors to sign the financial results.
A new sub regulation (2a) has been added in reg 52(2).
51) Reg 60 record date for payment of dividend, interest, redemption – notice of 3 (as against 7) working days.
52) Schedule II, Part E – listed entities ranked from 1001 to 2000 shall endeavour to have at least one woman independent director on its Board of Directors.
Two more clauses added in Part E
“F. Independent Directors
The independent directors of top 2000 listed entities as per market capitalization shall endeavour to hold at least two meetings in a financial year, without the presence of non-independent directors and members of the management and all the independent directors shall endeavour to be present at such meetings.
G. Risk Management
Listed entities ranked from 1001 to 2000 in the list prepared by recognized stock exchanges in terms of sub-regulation (2) of regulation 3 may constitute a risk management committee with the composition, roles and responsibilities specified in regulation 21.”
53) Schedule III – Part A – disclosure of acquiring control over including amalgamation, merger, demerger or restructuring if the control exceeds 20% (5% at present) over the said company.
Change in holding of 5% (presently 2%)
New proviso added:
“Provided that acquisition of shares or voting rights aggregating to five percent or more of the shares or voting rights in an unlisted company and any change in holding from the last disclosure made under this proviso exceeding two per cent of the total shareholding or voting rights in the said unlisted company shall be disclosed on a quarterly basis in the format as may be specified.
54) Disclosure within 30 minutes from closure of meeting has been replaced with 30 minutes from outcome of the meetings.
55) Regarding disclosure on frauds new clause added
Explanation 3 – Fraud by senior management, other than who is promoter, director or key managerial personnel, shall be required to be disclosed only if it is in relation
to the listed entity.”
56) Regarding analysts and institutional investors, disclosure of names in the schedule of analysts and institutional investors shall be optional at the behest of the listed company.
57) Regarding forensic audits disclosure, definition of forensic audit given
Explanation – For the purpose of this sub-paragraph, forensic audit refers to the audits, by whatever name called, which are initiated with the objective of detecting any mis-statement in financial statements, mis-appropriation, siphoning or diversion of funds and does not include audit of matters such as product quality control practices, manufacturing practices, recruitment practices, supply chain process including procurement or other similar matters that would not require any revision to the financial statements disclosed by the listed entity.”
58) Disclosure of fine or penalty – following clause added
“Explanation – Imposition of fine or penalty shall be disclosed in the following manner along with the details pertaining to the action(s) taken or orders passed as mentioned in the sub-paragraph:
(i) disclosure of fine or penalty of rupees one lakh or more imposed by sectoral regulator or enforcement agency and fine or penalty of rupees ten lakhs or more imposed by other authority or judicial body shall be disclosed within twenty four hours.
(ii) disclosure of fine or penalty imposed which are lower than the monetary thresholds specified in the clause (i) above on a quarterly basis in the format as may be specified.”