SEBI (LODR) �[SECOND AMENDMENT] REGULATIONS, 2023

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CS Naveen Chandra

Disclaimer

• This presentation and the contents hereof have no nexus with my employer, Kennametal India Limited or any of its affiliates in any manner.
• All representations and opinion being made are in my personal capacity.
• This presentation is only for academic purposes; this is not intended to be a professional advice or opinion. Anyone relying on this does so at one’s own discretion. Please do consult your professional consultant for any matter covered by this presentation.
• The contents of the presentation are intended solely for the presentation at the ICSI, Bengaluru Chapter on July 8, 2023.
• No circulation, publication, or unauthorised use of the presentation in any form is allowed, except with the prior written permission of the author.
• No part of this presentation is intended to be solicitation of professional assignment.

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Outline

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• Background & objectives
• Applicability schedule
• Disclosure of material events and information
• Overview of amendments under Reg 30
• Interplay with PIT Regulations
• Determination of “materiality” for disclosure of

information or events

• Tests for determination of materiality of information or events
• Testing of materiality in case of continuing

events

• Implementation challenges
• Policy review in line with amendments
• Mandatory verification of market rumours
• Broadening disclosures under Schedule III
• Expanded list of items
• Revised timelines for disclosure of information

• Sale, lease or disposal of undertaking, other than

through schemes of arrangements

• Identification of undertaking
• Approval requirements
• Disclosure requirements
• Timelines for filling up vacancies in key positions
• Periodic shareholders’ approval
• for continuation of permanent directors
• for agreements with special rights
• Reporting on BRSR Core and assurance

requirements

• Reporting in Annual Report
• HVDLEs

Background and objectives of the amendments

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Broad objectives of present amendments

• Removing ambiguity on timelines of disclosure
• Enhanced disclosures and transparency
• Protection of minority shareholders
• Relaxations to HVDLEs through extending timelines for mandatory compliance with corporate governance provisions
• Empowering minority shareholders
• Enhanced corporate governance

Series of Consultation Papers

(Nov,22-Feb,23)

SEBI approved amendments in board meeting – 29^th March, 2023

Amendments to Listing Regulations

14^th June, 2023

Effective dates at a glance

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Disclosure of material events – a bird view

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Note - For HVDLEs, regulations pertaining to

debt-listed companies attract

Equity listed

companies

Reg 30 of LODR

Part A of Schedule III

SEBI Circular dated Sep,2015

Annexure II – Point of disclosure

Reg 51 of LODR

Debt listed

companies

Para A – Deemed material events

Para B – Events to be tested for materiality

Para C – Residual

Annexure I – Details to be disclosed

Part B of Schedule III

Background to the amendments to disclosure

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• Timely and seamless flow of information is a critical

aspect of stakeholder governance

• Various domestic and international principles also enunciate the same
• OECD Principles of Corporate Governance -
• The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company
• Corporate Governance Principles and

Recommendations , Australia -

• A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities

❏ Reg 4 of SEBI LODR Regs

❏ The listed entity shall provide adequate and timely information to recognised stock exchange(s) and investors.

❏ The listed entity shall refrain from misrepresentation and ensure that the information provided to recognised stock exchange(s) and investors is not misleading.

❏ The listed entity shall ensure that disseminations made under provisions of these regulations and circulars made thereunder, are adequate, accurate, explicit, timely and presented in a simple language.

Why amendments to Reg. 30?

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• Non-disclosure of objection of lender to buyback
• when no-objection was a precondition
• voting through postal ballot ongoing at that

time

• subsequently withdrawal of buyback
• objection was considered material to be

disclosed during ongoing voting

• Settlement order passed at Rs. 19.12 lacs
• Non-disclosure of significant regulatory actions

already appearing in media

• Failure to address queries of stock exchanges
• Delay in disclosure of deemed material events
• Penalty of Rs. 10 lacs imposed

• Non-disclosure of final assessment order imposing tax demand having material effect on financials
• relying on opinion on professional, and
• pending appeal on tax demand order
• considered to be non-compliance with Clause 36 of Listing Agreement (presently Reg 30) read with PIT Regs
• Penalty of Rs. 10 lac on company
• Rs. 3 lac on each non-ID
• Order upheld by SAT on appeal
• Failure to disclose change in management (SAST Regs) as

material event under Clause 36 of Listing Agreement

• necessary public announcement made
• Penalty of Rs. 2 lacs imposed

Overview of Reg. 30 amendments

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• Disclosure of material events or information - Reg 30 (1)
• Deemed material event - Sched III.A.A
• Tested for materiality - Sched III.A.B
• Other events which may be material - 30 (12),

Sched III.A.C

• Criteria for materiality: significant impact on price

discovery. Reg 30 (4)

• Now complemented with numerical standards
• Information to SE first, and ASAP
• Timelines reduced to 12 hours for info emanating

within the listed entity

• Existing timeline of 24 hours continue for those

originating outside the listed entity

• specific timelines for events listed in Sched III.A.A (4)
• Material information about subsidiaries also to be

disclosed - 30 (9)

• responses to rumours - earlier, the LE has the option to

confirm or deny any reports - Reg 30 (11)

• Now, mandatory for top 250 LEs in a phased manner

• Sched III.A.A – “deemed” material events
• events to be disclosed without testing for

materiality

• 21 events are currently listed post amendment
• as the intent is informational, entities should do a

liberal reading of the entries, and go by intent

• Sched III.A.B – “tested” material events
• 13 listed events, to be tested for materiality, based

on materiality policy and Reg 30(4)

• Penalties for non-disclosure or delayed disclosure
• to be adjudicated by SEBI
• Penalty u/ s 23A of SCRA
• Minimum Rs. 1 lac
• Continuing Rs. 1 lac per day
• Maximum Rs. 1 crore

Inter-play PIT and LODR

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Linking UPSI with Reg. 30?

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• SEBI vide its Consultation paper dated 18^th May, 2023 has proposed to include “material event in accordance with Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015” in the definition of UPSI.
• Potential consequences:
• Even events which are though material but not in the nature of UPSI will also come into the purview of same
• Given the proposed changes under Regulation 30 read

with Schedule III (approved by SEBI in its meeting dated 29th March, 2023), several new items will be included under the list, thereby adding to the frequency and probability of intimations

• Leading to the formalities like entry in SDD, closure of trading window etc. even for those events which are not in the nature of UPSI

• What could be the way out?
• Including only the following under the defn of UPSI
• Matters included in Part A : Para A and Para B
• Which have been tested for materiality using the

given thresholds

• From the point of germination and identification
• Till the same is made publicly available

Determining materiality of information or events

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• Reg 30(4) specifies guidelines for determination of material events and information
• The extant guidelines are subjective
• (a)the omission of an event or information, which is likely to result in discontinuity or alteration of event or information already available publicly; or
• (b)the omission of an event or information is likely to result in significant market reaction if the said omission came to light at a later date;
• (c)In case where the criteria specified in sub- clauses (a) and (b) are not applicable, an event/information may be treated as being material if in the opinion of the board of directors of listed entity, the event / information is considered material.

• Amended regulations specify “quantitative” thresholds for determining “materiality”
• the same is in addition to and not in substitution

of subjective thresholds

• the omission of an event or information, whose value or the expected impact in terms of value, exceeds the lower of the following:
• two percent of turnover, as per the last audited consolidated financial statements of the listed entity;
• two percent of net worth, as per the last audited consolidated financial statements of the listed entity, except in case the arithmetic value of the net worth is negative;
• five percent of the average of absolute value of profit or loss after tax, as per the last three audited consolidated financial statements of the listed entity.

Quick look at the international legislations (US)

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• Determination of “materiality” is important before disclosure
• to ensure information is “relevant” and not

“redundant”

• Materiality is understood as a filtering mechanism
• Re. TSC Industries, Inc. v. Northway, Inc

“Some information is of such dubious significance that insistence on its disclosure may accomplish more harm than good.”

• “Material” is defined under Rule 405 to the Securities Act
• The term material, when used to qualify a

requirement for the furnishing of information as to

any subject,

• limits the information required to those matters
• to which there is a substantial likelihood
• that a reasonable investor would attach importance in determining whether to purchase the security registered.

• Re. Mills v. Electric Auto-Lite Co., the US SC stated that
• “here the misstatement or omission in a proxy statement has been shown to be ‘material,’ as it was to be here, that determination itself indubitably embodies a conclusion that the defect was of such a character that it might have been considered important by a reasonable shareholder who was in the process of deciding how to vote”
• Re-affirmed in Halliburton Co. v. Erica P. John Fund, Inc.
• Doctrine of “buried facts”
• Re. Werner v. Werner, 267 F.3d 288, 297 (3d Cir. 2001)
• when the fact in question is hidden in a voluminous document or is disclosed in a piecemeal fashion which prevents a reasonable shareholder from realizing the ‘correlation and overall import of the various facts interspersed throughout’ the document.

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• Section 202.05 of NYSE Manual
• release quickly to the public any news or information which might reasonably be expected to materially affect the market for its securities

Quick look at the international legislations (UK)

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• UK Listing Rules
• Rule 9.6 requires disclosure of material information to RIS
• Ch 10 deals with premium listing companies
• requires additionally disclosure of Class 1 and Class 2 transactions
• Class 2 transaction: a transaction where any percentage ratio is 5% or more but each is less than 25%;
• Class 1 transaction: a transaction where any percentage ratio is 25% or more.
• to be determined as per class test

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• Class test include the following -
• the gross assets test;
• the profits test;
• the consideration test; and
• the gross capital test

Quick look at the international legislations (SG)

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• Rule 703 of SGX Rules
• mandates disclosure concerning the issuer/ its subsidiaries/ associates which -
1. is necessary to avoid the establishment of a

false market in the issuer's securities; or

• would be likely to materially affect the

price or value of its securities.

• as per the Corporate Disclosure Policy

(Appendix 7.1)

• provides subjective conditions
• no definitive tests for materiality

Are these thresholds micro managing?

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• Apart from the ‘deemed material events’ listed in Para A Part A of Schedule III, determination of materiality of other events depends on materiality policy of the listed entity
• Unreasonable discretion applied by listed entities, in determining materiality of an event
• Amendments seek to make the provision more objective and less discretionary
• Quantitative thresholds in addition to abstract

tests of materiality

• Extracts from Consultation Paper:
• “…make the provision of regulation 30(4) of LODR Regulations more objective and non- discretionary”
• “…uniformity in the guidance to the listed entities is required for determining materiality of events or information”
• “…importance of ensuring timely disclosure of

material events by all listed entities at all times.”

• “…timely dissemination of information would help

in reducing information asymmetry.”

• “…aim to keep pace with the changing

market dynamics.”

• “…it is expected that the listed entities adopt technology based solutions for ease of compliance”

Understanding the thresholds!

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• “Enterprise” based and not “entity” based
• consolidated financial statements to be considered
• The least of the 3 values; all based on audited financial statements
• “Value” v/s “expected impact in terms of value”
• Value would generally be certain,
• Expected impact does not necessarily mean immediate impact; it may be spread over a period of time, on reaching the full effect of the corporate action.
• Whether impact needs to be positive or negative or both need to be considered?
• “Negative” Net Worth
• to be ignored completely while considering materiality
• “Absolute” value of average profit/ loss after tax
• Absolute values of profit/ loss to be taken for last 3 FYs
• Averaging does not mean netting off
• For example, suppose a listed company reported a profit of Rs. 5 crores in FY 20-21, profit of Rs. 3 crores in FY 21-22 and loss of Rs. 1 crore in FY 22-23. The limit of materiality in the instant case will be derived as [5% of {(5+3+1)/3}], i.e., Rs. 15 lacs.

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Prospective or retrospective?

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• Amendments are prospective in nature

• effective from 14^th July, 2023
• however, events occurring prior to the amendments having

continuing impact post amendments

• to be tested on the basis of revised materiality tests
• if not already available in public domain
• to be disclosed to stock exchanges as material event in terms of

Regulation 30

• within 30 days of effective date, i.e., by13^th August, 2023

“Provided that any continuing event or information which becomes material pursuant to notification of these amendment regulations shall be disclosed by the listed entity”

Continuing events

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• Product launch on 3rd June, 2023
• Expected impact on turnover 5% by the end of

half year ended 30^th Sept, 23

• Threshold of materiality fixed by co. in policy:

10%

• Technical tie-up with start-up for technological

assistance

• Expected impact on net profits 5.5% within a period of 3 years
• Threshold of materiality fixed by co in policy 10%
• Commencement of commercial production:

10^th Jan, 2023

• Expected impact on turnover 7% by the end of FY

23-24

• Threshold of materiality fixed by co. in policy:

10%

• Adoption of new brand logo on 31^st January, 23
• Expected impact on turnover/ profit/ net worth NIL
• Threshold of materiality fixed by co. in policy: 10%
• Closure of factory unit on 15^th February, 23
• Expected impact on turnover 9%
• Expected impact on profits 3.5%
• Threshold of materiality fixed by co in policy 10%
• Non-renewal of license as on 3rd March, 23
• Expected impact on turnover NIL
• Threshold of materiality fixed by co. in policy: 10%

Market Rumors!!

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What has changed? MR 1/4

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Mainstream media & rumors 2/4

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• Applicable from?
• 1st October, 2023 - for top 100 listed entities
• ◼ 1st April, 2024 - for top 250 listed entities

Applicable on whom?

• Top 100 listed entities based on market
• capitalization as on 31^st March, 2023 Top 250 listed entities based on market
• capitalization as on 31^st March, 2024
• _Ty Once applicable, always applicable – reg 3(2)
• pe of reported event?

rumours of an impending specific material

• event or information in terms of Reg 30 Not general in nature, specific to LE

• Mainstream media (definition u/ Reg 2(1)(ra)) “mainstream media” shall include print or electronic mode of the following:
1. Newspapers registered with the Registrar of

Newspapers for India;

• News channels permitted by Ministry of Information and Broadcasting under Government of India;

Content published by the publisher of news and current affairs content as defined under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code)

Rules, 2021; and

iv. Newspapers or news channels or news and current affairs content similarly registered or permitted or regulated, as the case may be, in jurisdictions outside India;

Some questions & suggestive approach (3/4)

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• Is the LE required to continuously monitor all sources of mainstream media?
• Need for response by the LE arise only once

the LE becomes aware of the same

• Practically impossible for LE to keep track of

all sources of mainstream media

• Is the LE required to respond to all rumours?
• Only such rumours that relate to material

information under Reg 30

• What if the rumour pertains to an UPSI that has not reached the desired level of certainty so as to disclose the same?
• What if the LE confirm the rumour?
• In such cases, current stage of such information is required to be disclosed

Suggestive approach

• Rumours that are specific to the company
• They relate to something which is internal to the company, or in case of external event, the Company has more knowledge than the public in general
• The company becomes aware, or reasonably, is deemed to be

aware of the rumour

• There is a significant impact on the Company’s securities

Looking outside the borders (4/4)

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• Section 202.3 of NYSE Manual
• Relates rumours with unusual market activity. If unusual market activity is arising out of rumours, then the company to give prompt clarification.
• Listed entities to contact the Exchange on

becoming aware of rumours.

• Prompt investigation by Exchange on such rumours

• Part VI of Appendix 7A (SGX Rules)
• require prompt confirmation and clarification of
• Public circulation of information, whether by an article published in a newspaper, by a broker's market letter, or by word-of-mouth
• likely to have, or has had,
• an effect on the price of the issuer's listed

securities

• a bearing on investment decisions

Timelines, timelines, timelines!!

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Timelines for disclosure

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• Reg 30(6) specifies timelines for disclosure of material events and information
• Guidance on information emanating/ not emanating within the organization may be referred to in Consultation Paper

Stricter timelines!

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Events to be disclosed within 12 hours

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• Acquisition (including agreement to acquire), Scheme of Arrangement (amalgamation/ merger/ demerger/restructuring), or sale or disposal of any unit(s), division(s), the whole or substantially the whole of the undertaking, or subsidiary, or sale of the stake in associate company of the listed entity or any other restructuring
• Issuance or forfeiture of securities, split or consolidation of shares, buyback of securities, any restriction on transferability of securities or alteration in terms or structure of existing securities including forfeiture, reissue of forfeited securities, alteration of calls, redemption of securities etc
• Agreements impacting listed entity where listed entity is a party
• Change in directors, key managerial personnel (Managing Director, Chief Executive Officer, Chief Financial

Officer , Company Secretary etc.), senior management,Auditor and Compliance Officer (except for resignation)

• Managing Director or the Chief Executive Officer of the listed entity is indisposed or unavailable to fulfil

requirements of his/her role in a regular and consistent manner

• Appointment or discontinuation of share transfer agent.
• Issuance of Notices, call letters, resolutions and circulars sent to shareholders, debenture holders or

creditors or any class of them or advertised inthe media by the listed entity.

• Amendments to memorandum and articles of association of listed entity, in brief
• Initiation of Forensic audit

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Events to be disclosed within 24 hours

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• New Ratings(s) or Revision in Rating(s
• Agreements impacting listed entity where listed entity is not a party
• Fraud/defaults by promoter or director or key managerial personnel or senior management or subsidiary or

by listed entity or arrest of key managerial personnel or senior management or promoter or director.

• Change in directors, key managerial personnel (Managing Director, Chief Executive Officer, Chief Financial

Officer , Company Secretary etc.), senior management,Auditor and Compliance Officer due to resignation

• Resolution plan/ Restructuring in relation to loans/borrowings from banks/financial institutions
• One time settlement with a bank
• Winding-up petition filed by any party / creditors
• Proceedings of Annual and extraordinary general meetings of the listed entity
• CIRP related events

Amending policies

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Amendments to ‘Materiality Policy’

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• Reg 30(4)(ii) of LODR
• Requires LE to frame a policy for determination of

materiality

• Based on criteria specified in Reg 30(4)
• Amendments further require policy to assist “relevant” employees
• In identifying any potential material event, and
• Reporting the same to authorized KMP
• Who can be “relevant employees”?
• Depending on the nature of event; events may be

diverse and may arise anywhere within the LE

• Material event/ information may flow from any department of LE
• Hence HoD of all departments may be included
• Are DPs the “relevant employees” for escalating the

information?

• Are the “relevant employees” required to

determine materiality of an event or information?

• No, ultimate responsibility rests with authorized

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• Relevant employees are required to identify any potential material event and report to KMP for further determination and disclosure
• How can “relevant employees” assist in the same?
• Needs to be sensitized on events/ information that are usually considered material
• Quantitative thresholds may be provided with
• Additional guiding criteria to supplement
• Amendments required in the Policy?
• Guidance on some specific items in Schedule III
• Guidance on determination of “impact”
• Indisposal/unavailability of CEO/MD - circumstances
• Can LE have internal SOPs instead of complete disclosure in the policy?
• Seems to be so, policy, in turn, may refer to the

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Amendments to Schedule III

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Schedule III amendments – quick glance

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• Schedule III provides an indicative list of events and

information that require disclosure under Reg 30

• Classified into 5 parts on the basis of nature of

securities

• Part A deals with specified securities
• Sub-divided into 4 Paras
• Para A deals with events which shall be disclosed without any application of the guidelines for materiality as specified in sub-regulation (4) of regulation (30)
• “deemed” material events
• Para B deals with events which shall be disclosed upon application of the guidelines for materiality referred sub- regulation (4) of regulation (30)
• “tested” material events

• Para C further requires disclosure of –
• Any other information/event viz. major

development that is likely to affect business,

e.g. emergence of new technologies, expiry of patents, any change of accounting policy that may have a significant impact on the accounts, etc. and brief details thereof and any other information which is exclusively known to the listed entity which may be necessary to enable the holders of securities of the listed entity to appraise its position and to avoid the establishment of a false market in such securities.

• Specific cases followed by general clause
• Para D requires disclosure of all other events and information as may be specified by SEBI from time to time.

Acquisition and disposals

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What is covered?

• Acquisition(s) (including agreement to acquire),
• Scheme of Arrangement (amalgamation, merger,

demerger or restructuring),

• sale or disposal of
• any unit(s),
• division(s),
• whole or substantially the whole of the

undertaking(s) or

• Meaning of “undertaking” to be ref to from sec 180(1)(a)

Whether following covered?

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• Divestment of stake in Joint Venture

• subsidiary of the listed entity,
• sale of stake in associate company of the listed entity or
• any other restructuring

Acquisition and disposals (1/2)

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What is covered?

• Acquisition(s) (including agreement to acquire),
• Scheme of Arrangement (amalgamation, merger,

demerger or restructuring),

• sale or disposal of
• any unit(s),
• division(s),
• whole or substantially the whole of the

undertaking(s) or

• Meaning of “undertaking” to be ref to from sec 180(1)(a)

Whether following covered?

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• Divestment of stake in Joint Venture

Acquisition and disposals (2/2)

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Acquisition

• Explanation 1 – provides ‘exhaustive’ definition
• acquiring control, whether directly or indirectly; or
• acquiring or agreement to acquire shares or voting rights in a company, whether existing or to be incorporated, 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; or
• there has been a change in holding from the last disclosure made under sub-clause (a) of clause (ii) of the Explanation to this sub-paragraph and such change exceeds two per cent of the total shareholding or voting rights in the said company; or
• the cost of acquisition or the price at which the shares are acquired exceeds the threshold specified in sub-clause (c) of clause (i) of sub-regulation (4) of regulation 30.

Disposal

• Explanation 2 – provides ‘inclusive’ meaning
• an agreement to sell or sale of shares or voting rights in a company such that the company ceases to be a wholly owned subsidiary, a subsidiary or an associate company of the listed entity; or
• an agreement to sell or sale of shares or voting rights in a subsidiary or associate company such that the amount of the sale exceeds the threshold specified in sub-clause (c) of clause

(i) of sub-regulation (4) of regulation 30.

Reporting frauds

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• Fraud or defaults by
• a listed entity,
• its promoter,
• director,
• Shifted from “tested” material to “deemed” material
• key managerial personnel,
• senior management

• Meaning of ‘fraud’
• shall include fraud as defined under Regulation 2(1)(c) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003
• Indicates that frauds pertaining to capital markets are covered, however, definition is ‘inclusive’
• Meaning of ‘default’
• shall mean non-payment of the interest or principal amount in full on the date when the debt has become due and payable.

• or subsidiary or
• arrest of
• key managerial personnel,
• senior management,
• promoter
• or director of the listed entity,
• whether occurred within India or abroad:

• In case of ‘revolving’ facilities - if the outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for more than thirty days.
• Only such ‘default’ which has or may have an

impact on the listed entity

Disclosing certain agreements

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• Reg 30A read with Schedule III
• Parties to the agreement
• the shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, employees of the listed entity or
• of its holding, subsidiary or associate company,
• among themselves or with the listed entity or with a third party
• Listed entity may not be a party
• Nature of agreement
• either directly or indirectly or potentially or whose purpose and effect is
• impact the management or
• control of the listed entity or
• impose any restriction or
• create any liability upon the listed entity

• Exclusions to the requirement of disclosure
• If entered into in normal course of business
• Except where the same has an impact on management/

control of the listed entity

• Any subsisting agreements as on date of notification also requires to be reported
• Timelines to be specified by SEBI
• Cycle of disclosure
• Entering into agreement or signing agreement to enter into

agreement

• Disclose to listed entity within 2 working days
• On becoming aware of the same
• Listed entity to disclose within 24 hours
• If LE is a party – within 12 hours

• Any recission, alteration, amendment
• Disc. in website

• Complete details of such agreements
• Disclosure in Annual Report (for FY 22-23 or FY 23-24)
• No. of subsisting agreements as on date of notification
• Salient features of agreement
• Link of the webpage where complete details are available

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Disclosing regulatory actions

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• Newly inserted clauses under Sch. III. A.A – (19) and (20)
• Actions covered under Clause (19) -
• Action(s) initiated or orders passed by any regulatory,

statutory, enforcement authority or judicial body, in respect of

• search or seizure; or
• re-opening of accounts under section 130 of CA, or
• investigation under the provisions of Chapter XIV of CA
• Actions covered under Clause (20) –
• Action(s) taken or orders passed by any regulatory, statutory,

enforcement authority or judicial body, in respect of

• suspension;
• imposition of fine or penalty;
• settlement of proceedings;
• debarment;
• disqualification;
• closure of operations;
• sanctions imposed;
• warning or caution; or
• any other similar action(s) by whatever name called

• Against whom?
• the listed entity or its directors, key managerial personnel, senior management, promoter or subsidiary,
• in relation to the listed entity
• What is required to be disclosed?
• name of the authority;
• nature and details of the action(s) taken, initiated or order(s)

passed;

• date of receipt of direction or order, including any ad-interim or interim orders, or any other communication from the authority;
• details of the violation(s)/contravention(s) committed or

alleged to be committed;

• impact on financial, operation or other activities of the listed

entity, quantifiable in monetary terms to the extent possible.

• Event covered under Sch. III.A.B
• Pendency of any litigation(s) or dispute(s) or the outcome

thereof which may have an impact on the listed entity

• Delay or default in the payment of fines, penalties, due₄s₆,

etc. to any regulatory, statutory, enforcements

Other disclosures

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• Absence of CEO/ MD
• to fulfil the requirements of the role in a regular

manner

• for more than 45 days in any rolling period of 90 days
• Eg.
• To be disclosed along with reasons
• May generally include instances of prolonged illness,

serious ailments, etc.

• Announcements/ communications not already

in public domain

• by directors, promoters, key managerial personnel or senior management of a listed entity
• through social media intermediaries or

mainstream media

• in relation to any event or information which is material for the listed entity in terms of regulation 30

• Change in SMPs also to be disclosed
• Detailed reasons of resignation along with letter of

resignation

• For KMP, SMP, Co or director
• Voluntary revision of financial statements u/s 131 of CA

Other disclosures

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• Absence of CEO/ MD
• to fulfil the requirements of the role in a regular

manner

• for more than 45 days in any rolling period of 90 days
• Eg.
• To be disclosed along with reasons
• May generally include instances of prolonged illness,

serious ailments, etc.

• Announcements/ communications not already

in public domain

• by directors, promoters, key managerial personnel or senior management of a listed entity
• through social media intermediaries or

mainstream media

• in relation to any event or information which is material for the listed entity in terms of regulation 30

• Change in SMPs also to be disclosed
• Detailed reasons of resignation along with letter of

resignation

• For KMP, SMP, Co or director
• Voluntary revision of financial statements u/s 131 of CA

Sale, lease or disposal of undertakings

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Disposal outside a ‘Scheme’

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• Applicable on sale, lease or otherwise disposal of ◼ Approvals required

• Whole or substantially the whole of ◼

‘undertaking’ of LE

• As defined u/s 180(1)(a) of CA (refer next

slides)

• Exclusions from requirement
• Transfer to WoS exempt

• However, subsequent transfer from WoS is

covered

• Compliance to be ensured prior to dilution

of stake below 100%

• by virtue of a covenant covered under an agreement with an RBI reg. financial institution or SEBI regd. DT

Prior approval of shareholders through special

resolution (SR), and

• Approval of majority of public shareholders

(MoM)

• Votes of public shareholder being a party to such disposal, directly or indirectly, to be excluded

• Disclosures required (in expl. statement to

SH)

• object and commercial rationale of such sale/

disposal

• Use of proceeds arising therefrom

Undertaking and substantial undertaking

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• Explanation (i) to Section 180(1)(a) of CA
• “undertaking” shall mean an undertaking in which
• the investment of the company exceeds twenty per cent. of its net worth as per the audited balance sheet of the preceding financial year
• or an undertaking which generates twenty per cent. of the total income of the company during the previous financial year;
• Therefore, ‘undertaking’ u/s 180 require meeting the twin tests –
• Subjective meaning of ‘undertaking’ to be met
• Quantitative thresholds of investment or income to be

triggered

• “Undertaking” is not a defined term
• Reference may be drawn from other laws and judicial precedents on the subject

• Explanation (ii) to Section 180(1)(a) of CA
• the expression “substantially the whole of the

undertaking” in any financial year shall mean

• twenty per cent. or more of the value of the undertaking as per the audited balance sheet of the preceding financial year;

Other amendments

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• Reg 17(1D) of Listing Regulations
• Fresh approval of shareholders once in every 5

years

• W.e.f. 1^st April, 2024
• For directors continuing for more than 5 years as on

31^st March, 2024

• Approval to be obtained in the first general meeting held after 31^st March, 2024
• Who would be covered?
• Generally promoter NEDs who are appointed without

a fixed term

• Non-applicability
• WTD, MD, Manager, ID
• Term cannot exceed 5 years at a time as per extant

provisions already

• Director retiring as per Sec 152(6) of CA
• 1/3^rd of rotational directors retire at every AGM and placed before shareholders for approval
• Director appointed pursuant to the order of a Court or a Tribunal
• Nominee director of the Government on the board of LE
• other than a public sector company
• Nominee director of a financial sector regulator on

the board of LE

• Nominee director of RBI reg fin institution or SEBI

regd DT

• Under an existing lending/ debenture subscription 62

agreement

Other amendments

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• Which positions are covered? ◼ Vacancy arising from expiration of term of director
• Timeline of 3 months is not applicable
• To be filled not later than the date of vacation
• Not required if the composition is in

accordance with applicable laws

• Appointment in interim capacity

• Timelines within which vacancy to be filled
• Not later than 3 months from date of vacancy
• Timelines specified under CA
• Sec 203 specifies 6 months in case of vacation of office

of KMP

• Is CS not covered?
• Same gets covered under Compliance Officer

• To be made in accordance with the laws applicable in case of a fresh appointment to such office,
• what does it imply?
• interim appointees should also be

qualified to hold office as such

• manner of appointment to be similar as that for a regular appointee
• the obligations under such laws are made applicable to such person

Other amendments

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• Fresh shareholders’ approval for special rights

granted to shareholders

• once in every 5 years starting from the date of grant of

such rights.

• Existing special rights shall be subject to approval within 5 years from date of notification
• Exclusions to the requirement of re-approval
• RBI reg fin institution or SEBI regd DT
• Under a lending arrangement in normal course of

business or debenture subscription agreement

• If it becomes shareholder as a consequence of such agreement
• Cyber Security Incidents
• cyber security incidents/breaches or loss of data/documents to be disclosed in quarterly corporate governance report
• Disclosures under Annual Report
• Particulars of senior management including the changes

therein since the close of the previous financial year.

• Information of agreements disclosed under Clause

(5A) of Sch.III.A.A.

• BRSR Core and mandatory assurance
• Applicable to top 1000 listed entities
• Core shall comprise of key performance indicators as

specified by SEBI

• To be also extended to value chain of listed entities
• Meaning to be specified by SEBI
• Effective date and manner to be specified by SEBI
• Other listed entities – may voluntarily disclose
• Timelines for compliance with corporate

governance provisions by HVDLEs

• Compliance on “comply or explain” basis extended till

31st March, 2024

• Disclosure of payment status to SEs by debt-

listed entities

• Certificate regarding status of payment of interest or dividend or repayment or redemption of principal of non-convertible securities, within one working day of it becoming due
• Details to be submitted during beginning and end of

quarter has been omitted

Actions

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• Multiple actionables arise on account of amendments
• Some of them are immediate in nature
• Major actionables include –
• Amending the Materiality Policy
• Framing SOP for assistance by “relevant employees” in reporting potentially material information
• Identification of events that escaped disclosure and becomes material as per revised criteria of materiality
• Identification of agreements binding listed entity

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CS Naveen Chandra�Regional Legal Counsel – SA & ANZ�Kennametal India Limited�prakash.naveenchandra@gmail.com

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