One Successful Year of ZappyNews!

We heartily thank you all for the moral support and enthusiasm that helped us cross 12 successful editions and one year of ZappyNews newsletter. We hope each of our editions has given you some updates on our industry and we promise to continue with our best efforts providing you all latest updates and information related to your business.

In this edition, we will see in detail about SEBI LODR along with our usual Legal Term and updates from MCA, SEBI, RBI and IT Departments.

 Saranya Deivasigamani,
CEO

LODR

We all know that compliance with the listing agreement is a crucial factor that has to be made within specified time limits. To streamline such compliances and the provisions of existing listing agreements for different segments of capital markets such as equity shares (including convertibles), non-convertible debt securities, etc., Securities and Exchange Board of India (SEBI) on September 2, 2015 issued the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’).

The Regulations were made effective from December 01, 2015. But Regulations relating to (i) passing of ordinary resolution instead of special resolution in case of all material related party transactions subject to related parties abstaining from voting on such resolutions, in line with the provisions of the Companies Act, 2013, and (ii) re-classification of promoters as public shareholders under various circumstances, shall be effective from September 02, 2015 itself.

Applicability

The Listing Regulations are applicable to a listed entity who has listed any of the following designated securities on recognized stock exchange(s):

1. Specified securities i.e. equity shares and convertible securities listed on Main Board, or SME Exchange or Institutional Trading Platform;
2. Non-convertible Debt Securities, Non-convertible Redeemable Preference Shares, Perpetual Debt Instrument, Perpetual Non-cumulative Preference Shares;
3. Indian depository receipts;
4. Securitised Debt Instruments;
5. Units issued by mutual funds;
6. Other securities as may be specified by SEBI

All listed entities shall be required to execute a “Uniform Listing Agreement” with recognized Stock Exchanges within six months from effective date of the Listing Agreement i.e. September 02, 2015. The format of the said Listing Agreement has already been issued by SEBI.

General Obligations of Listing – Chapter II of Listing Regulations

1. The listed entity which has listed securities shall make disclosures and abide by its obligations under these regulations in accordance with the Principles enunciated in the Listing Regulations.
2. The principles of Listed Entities whose specified securities are listed on recognized stock exchange(s) are similar to those provided under Clause 49 of the Equity Listing Agreement which broadly categorized under following headings:
   1. 1. The rights of shareholders
      2. Timely information:
      3. Equitable treatment:
      4. Role of stakeholders in corporate governance
      5. Disclosure and transparency
      6. Responsibilities of Board of Directors:

Common Obligations of Listed Entities – Chapter III of Listing Regulations

It is pertinent to note the compliances under this Chapter have to be adhered to by listed entities who have listed any or all of the designated securities (equity shares and/or convertible securities, non-convertible debt securities, non-convertible redeemable preference shares, perpetual debt instrument, perpetual non-cumulative preference shares, Indian depository receipts, securitised debt instruments, units issued by mutual funds and any other securities) as may be specified by the SEBI.

1. The listed entity shall ensure that KMP, directors, promoters or any other person is dealing with the listed entity, complies with responsibilities or obligations, if any, assigned to them under these regulations
2. Company Secretary of the Company who shall be “Compliance Officer” shall ensure compliances under these regulations.
3. “Compliance Certificate” to be provided to Stock Exchanges by Compliance Officer and Share Transfer Agent duly signed by both the compliance officer of the listed entity and the authorised representative of the share transfer agent.
4. The listed entity to have a Policy for Preservation of Documents duly approved by Board.
5. The listed entity shall file the reports, statements, documents, filings and any other information with the recognised stock exchange(s) on the electronic platform and proper infrastructure shall be put in place by listed entity.
6. Dividend/ Interest / Redemption or Repayment shall be paid in electronic mode and if not possible than by warrant ‘payable at par’ or cheque and if the amount exceeds INR. 1500 per warrant or cheque it has to be delivered through Speed Post only and Courier or ordinary post shall not be allowed.
7. The listed entity shall file with the recognised stock exchange(s) on a quarterly basis, within twenty one days from the end of each quarter, a statement giving the number of investor complaints pending at the beginning of the quarter, those received during the quarter, disposed of during the quarter and those remaining unresolved at the end of the quarter. The said statement shall be placed before the Board on Quarterly basis.

Obligations of listed entity which has listed its specified securities

The listed entities whose equity shares and convertible securities are listed on recognized Stock Exchanges shall comply under this Chapter:

1. The audit committee will have to also review adverse opinion on audit report and disclaimer of opinion on the audit report.
2. All existing material related party contracts or arrangements entered into prior to the date of notification of these regulations i.e. September 02, 2015 and which may continue beyond such date shall be placed for approval of the shareholders in the first General Meeting subsequent to notification of these regulations.
3. All related parties irrespective of the fact whether the party is related to a particular transaction or not will be abstained from voting on any material related party transaction.
4. Modification or reclassification of the status of the shareholders shall be allowed only on an application made by Company to stock exchanges and all relevant evidence and on being satisfied with the compliance of conditions mentioned in this regulation.
5. When a new promoter replaces the previous promoter subsequent to an open offer or in any other manner, re-classification may be permitted subject to the approval of shareholders in the general meeting and compliance of the conditions mentioned in Regulations.
6. The Financial Results shall be approved by the Board of Directors which was not specifically provided under Listing Agreement earlier.
7. The listed entity shall on the direction issued by the Board, carry out necessary steps, for rectification of modified opinion and/or submission of revised proforma financial results, in the manner specified in Schedule VIII of the Listing Regulations.
8. There is no mention to submit the explanation of the reasons for variations between the unaudited quarterly or year to date financial results and the results amended pursuant to limited review for the same period.
9. The financial results shall be submitted to the stock exchange within thirty minutes of the conclusion of the meeting of the Board in which they were approved.
10. The timeline to give prior intimation regarding the date of the Board meetings in which the financial results will be considered has been reduced to five days prior to the meeting.
11. Listed entity shall inter-alia give prior intimation for fund raising by way of the further public offer, rights issue, American Depository Receipts/Global Depository Receipts/Foreign Currency Convertible Bonds, qualified institutions placement, debt issue, preferential issue or any other method and for determination of issue price. Provided that intimation shall also be given in the case of any annual general meeting or extraordinary general meeting or postal ballot that is proposed to be held for obtaining shareholder approval for further fundraising indicating the type of issuance.
12. The redundant requirement of serving six copies of Annual Report has been done away with altogether but sending Annual Report is now required to be sent to Stock Exchanges within 21 days of the same getting approved by the shareholders in the Annual General Meeting which earlier was required to be sent as soon as they were sent to shareholders.
13. Disclosure pertaining to Loans and advances in the nature of loans where there is: (I) no repayment schedule or repayment beyond seven years or (II) no interest or interest below section 372A of Companies Act, 1956 by name and amount was required to be provided to Consolidated Financial Statements in Annual Report, the same has been done away with in the Listing Regulations.
14. The listed entity shall submit to the stock exchange(s) an “Annual Information Memorandum” in the manner specified by the Board from time to time.
15. Disclosure of commodity price risk or foreign exchange risk and commodity hedging activities is required to be provided in Annual Report.
16. Every listed entity shall make disclosures of any events or information which, in the opinion of the board of directors of the listed company, is material.
17. The listed entity shall frame a Board approved policy for determination of materiality, based on criteria specified in the regulation 30 of the Listing Regulations and disclose on its website.
18. The Board needs to authorize one or more KMP(s) for determining the materiality of a certain event, and the contact details of such personnel shall also be disclosed to the stock exchange(s) and as well as on the listed entity’s website.
19. The listed entity shall make disclosures updating material developments on a regular basis, till such time the event is resolved/closed, with relevant explanations.
20. The listed entity shall disclose all material events or information with respect to subsidiaries for the listed entity.
21. Change in the name of the listed entity shall be done only after receiving confirmation from Stock Exchange upon filing an application for the same.
22. The Company whose specified securities are listed i.e. equity and/or convertible securities shall maintain functional website and inter – alia the following information shall be disclosed which are additional requirements apart from one already required under exiting Listing Agreement:

SEBI through the Listing Regulations though seems to have made a sincere effort in consolidating the different Listing Agreements pertaining to various securities under Capital Markets and bringing them under one Umbrella Regulations and also getting a statutory recognition and enforceability through the Regulations, it would be interesting to wait and watch on how effective in true sense it would turn out for the Regulator and the respective Stakeholders to which it applies. But one thing is clear, stakeholders especially the professionals like Company Secretaries, particularly who would be responsible for ensuring the compliances under the Regulations.

Legal Term

Dictum

A statement, comment, or opinion. An abbreviated version of obiter dictum, “a remark by the way,” which is a collateral opinion stated by a judge in the decision of a case concerning legal matters that do not directly involve the facts or affect the outcome of the case, such as a legal principle that is introduced by way of illustration, argument, analogy, or suggestion.

MCA Updates

• Notification published under Companies (Mediation and Conciliation) rules,2016 dt. 9 Sept., along with Form MDC 1 and MDC 2. These Rules contain definitions of relevant terms, process of formation of panel of mediators/ conciliators, requisite qualifications and experience of mediators and conciliators, disqualifications, application and appointment, scope of work, procedure for disposal of matters and duties of mediators/ conciliators, etc.

SEBI Updates

• Notification published on Restrictions on Promoters and Whole-Time Directors of Compulsorily
• Delisted Companies Pending Fulfillment of Exit Offers to the Shareholders.

RBI Updates

• Master Direction- Non-Banking Financial Company – Account Aggregator (Reserve Bank) Directions, 2016 were made on September 2.
• Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 were made on September 1.

Income Tax Updates

• The Direct Tax Dispute Resolution Scheme Rules, 2016 (hereinafter referred to as ‘the Rules’) have been notified. It provides an opportunity to tax payers who are under litigation to come forward and settle the dispute in accordance with the provisions of the Scheme.