Recent SEBI Updates

SEBI revisited the existing norms applicable on various Regulations and floated consultation paper and sought public comments on proposed changes, which was considered and approved in the Board Meeting held on March 25, 2021.

The following points were discussed in the meeting-

1. Review of framework of Innovators Growth platform (IGP) under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018-

In 2015, a new segment named as Institutional Trading Platform (ITP) was introduced by SEBI, with a view to facilitate listing of new age start-ups. However, the ITP framework failed to evince interest.

In 2019, SEBI attempted to revive the platform by introducing certain amendments to the ITP framework and renamed it as the Innovators Growth Platform (IGP).

IGP is aimed at issuers which are intensive in use of technology, information technology, intellectual property, data analytics, bio-technology or nanotechnology. The Board approved the proposals with respect to the framework and decided to introduce many relaxations to the framework of IGP to help start-up and made some amendments to SEBI regulations. The objective is to make the platform more accessible to companies in view of the evolving start-up ecosystem. Following were the proposals approved in Framework of IGP

2. Business Responsibility and Sustainability Reporting by listed entities-

In furtherance to updation and formulation of the National Guidelines On Responsible Business Conduct (NGRBCs), the Ministry of Corporate Affairs had constituted a ‘Committee on Business Responsibility Reporting’ to develop new BRR formats for listed and unlisted companies.

After extensive consultations with various stakeholders including businesses and their associations, professional institutes, academia, civil society organizations, central Ministries and Departments, In its Report, the Committee recommended a new reporting framework called as the ‘Business Responsibility and Sustainability Report (BRSR)’ to better reflect the intent and scope of reporting on non-financial parameters. The Committee recommended two formats for disclosures:  (a) one ‘comprehensive format’ and (b) the second a ‘Lite version’. The Committee further recommended that the implementation of the reporting requirements should be done in a gradual and phased manner.

The Committee also recommended that the BRSR be integrated with the MCA21 portal. As a long-term measure, the Committee envisions that the information captured through BRSR filings be used to develop a Business Responsibility-Sustainability Index for companies.

• The sustainability reporting by listed entities was previously made in Business Responsibility Report (BRR) which is now replaced to a new reporting format named as Business Responsibility and Sustainability Report (BRSR).

• The BRSR shall be applicable to top 1000 listed entities based on the market capitalization for reporting on a voluntary basis for FY2021-22 and will be mandatory from FY 2022-23.

• The main objective of BRSR is to bring in greater transparency on ESG perspective, which is intended to enable businesses to engage more meaningfully with their stakeholders.

• The BRSR allows easy measurement and comparability between companies, sectors and time period.

This way of new reporting provides inter-operability of reporting, where the entities can do the cross-reference of the disclosure made under BRSR with internationally accepted reporting framework (Example- GRI, SASB, TCFD, Integrated Reporting)

3. Amendments to SEBI (Alternative Investment Funds) Regulations, 2012-

The following are the proposals approved to amend SEBI (Alternative Investment Funds) Regulations, 2021-

• provide a definition of ‘startup’ as specified by Government of India for the purpose of investment by Angel Funds;
• remove the list of restricted activities or sectors from the definition of Venture Capital Undertaking to provide flexibility to Venture Capital Funds registered under Category I Alternative Investment Funds (AIFs) in making investments;
• allow AIFs, including Fund of AIFs, to simultaneously invest in units of other AIFs and directly in securities of investee companies subject to certain conditions;
• provide clarity on scope of responsibilities of Managers and members of Investment Committees; and
• Prescribe a Code of Conduct for AIF, Trustee and directors of the Trustee/Designated Partners/directors of the AIF, Manager, members of Investment Committee and key management personnel of AIF and Manager.

4. Review of regulatory framework for reclassification of promoter/promoter group entities-

SEBI has received feedback regarding cases where promoters have desired re-classification but have found it difficult under current regulatory regime. Relaxation from existing requirement on a case to case basis was given by SEBI.

It is therefore desirous that the existing provisions may be revisited to minimize the number of exemptions provided on a case to case basis.

The following proposals were approved to rationalize existing framework and to reclassify promoter group entities which includes exemption from-

• In cases of reclassification pursuant to order/ direction of the Government/ regulator, the re-classification of the promoter is a natural consequence of the order/ direction of the Government / regulator. Hence  the  exemption granted  to  companies  under  IBC  as  stated  in  Regulation  31A(9)  may  be extended  to  companies  undergoing  reclassification  of  their  promoter(s)/ promoter group entities pursuant to government’s/ regulator’s order.

• The requirement of seeking approval of shareholders in cases where the promoter seeking reclassification holds shareholding of less than 1%, subject to the promoter not being in control.

• Few procedural requirements related to reclassification such as obtaining request from promoter, approval from the board and shareholders in case of open offer under SEBI Takeover Regulations and scheme of arrangement.

This exemption from shall be subject to the outgoing promoter’s intent of reclassification being disclosed in the letter of offer or scheme of arrangement along with fulfilling other requirements such as not being in control, not represented on the Board, etc.

The time period between board and shareholders meeting-

An adequate time period needs to be given to the shareholders for considering the request of the promoter(s) seeking re-classification. Therefore it is amended to a minimum of one month and a maximum of three months from the existing requirement of minimum period of three months and maximum six months.

5. Review of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015-

The Board approved several amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). Some of the key amendments are as follows:

• Requirement for formulation of dividend distribution policy by the existing top 500 listed entities has been extended to the top 1000 listed entities on the basis of market capitalization which shall be disclosed in their annual reports and on their websites.

• In case of board meetings held for more than one day, the financial results shall be disclosed by listed entities within 30 minutes of end of the board meeting for the day on which the financial results are considered.

• In the interest of good corporate governance, it is proposed that once corporate governance provisions become applicable to a listed entity, it shall comply with those provisions irrespective of change in paid up capital or net worth unless the paid-up capital or net-worth falls and continues to remain below the threshold for a period of three consecutive financial years. This will ensure that applicability does not get triggered every time the entity crosses the threshold limits or vanishes once it falls below the threshold,

• To provide ease of doing business the requirement to seek stock exchange approval for change of name of a listed entity is dispensed with. As per the conditions under Regulation 45(1) are a pre-requisite for change in name, it is appropriate that the notice seeking approval of the shareholders for the same includes certificate from a practicing chartered accountant or practicing company secretary stating compliance with conditions. As the shareholders approve the change in name, additional approval from the Stock Exchanges would not be required.

• The timelines for submission of periodic reports viz. statement of investor complaints, corporate governance report and shareholding pattern will be harmonized from 15 days to 21 days from the end of each quarter.

• Frequency of submission of compliance certificates relating to share transfer facility and issuance of share certificates within 30 days of lodgement for transfer, sub-division, etc. is revised from half-year to annual.

• The additional requirement to publish newspaper advertisements for the notice to board meetings where financial results are to be discussed and for quarterly statement on deviation or variation in use of funds is additional burden on listed entities therefore it is dispensed with.

6. Applicability, constitution and role of the Risk Management Committee-

The Board considered and approved amendments in relation to applicability, constitution and role of the Risk Management Committee (RMC) of listed entities.

• The requirement to constitute the RMC has been extended to the top 1000 listed entities by market capitalization from the existing top 500 listed entities.

• The RMC shall have minimum three members with majority of them being members of the board of directors, including at least one independent director.

• The quorum for a meeting of the RMC shall be either two members or one third of the members of the committee, whichever is higher, including at least one member of the board of directors in attendance.

• The role of the RMC has been specified and includes formulation of a detailed risk management policy and monitoring its implementation; periodic review of such policy; review of the appointment, removal and terms of remuneration of the Chief Risk Officer (if any), etc.

7. Review of disclosure in respect of analyst/institutional investor meets by listed entity-

A listed entity is required to disclose the schedule of the meetings of Analyst/Institutional investors and presentation made in such meetings to the stock exchanges and on its website.

The further requirements to the above disclosure are-

• Upload the audio/video recordings of such meetings on the website of stock exchanges and of the listed entity, before next trading day or within 24 hours, whichever is earlier.
• Written transcripts of such meetings to be uploaded on the website of stock exchanges and of the listed entity within five working days.

8. Review of SEBI (Delisting of Equity shares) Regulations, 2009-

Several amendments to the SEBI (Delisting of Equity Shares) Regulations, 2009 were approved with an objective to make delisting of process more transparent and efficient. The following are the key amendments-

• Promoter/acquirer will be required to disclose their intention to delist the company by making an initial public announcement (IPA).
• The Committee of Independent Directors will be required to provide their written reasoned recommendations on the proposal for delisting.
• Timelines for completion of various activities forming part of delisting process have been introduced / revised to make the process more efficient and time bound.
• Promoter / acquirer will be permitted to specify an indicative price for delisting which shall not be less than the floor price.
• Promoter will be bound to accept the price discovered through reverse book building if the same is equal to the floor price / indicative price.
• Role of merchant banker involved in the delisting process has been elaborated.

9. Amendments to SEBI (Portfolio Managers) Regulations, 2020-

The amendment was with respect to mandating Portfolio Managers to obtain prior

approval of SEBI for change in control.

10. Online payment of application fee, registration fee, renewal fee and annual fees by intermediaries-

To encourage digital payment the Board approved the proposal to accept the fees from intermediaries through online payment gateway only.

11. Budget Estimates for the Financial Year (FY) 2021-22-

The SEBI budget was considered and approved for the FY 2021-22.