The Securities and Exchange Board of India (SEBI) introduced the Listing Obligations and Disclosure Requirements (LODR) Regulations in 2015 to enhance transparency and improve corporate governance among listed entities in India. These regulations set forth the obligations of listed companies to disclose material information and ensure compliance with various governance standards. The LODR regulations are crucial for maintaining investor confidence and ensuring that the securities market operates efficiently and fairly.
Certain Key Amendments in the December 2024 SEBI LODR Amendment Regulations
On 12 December 2024, SEBI introduced Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) (Third Amendment) Regulations, 2024 (“Amendment Regulations”), aimed at refining corporate governance and compliance standards for listed entities. These amendments, effective from December 31, 2024, include several key changes such as:
- Broadening the scope of exemptions to related party transactions (RPTs)
The Amendment Regulations have broadened the scope of exemption for RPTs. Corporate actions, such as dividend, stock splits and rights issues, by subsidiaries of listed entities or actions uniformly applicable to all shareholders will be exempted from RPT requirements.
The Amendment Regulations provide that payments of remuneration and sitting fees to directors, key executives, and senior management (excluding promoter group members) will not require approval from the audit committee. Additionally, independent directors on the audit committee can ratify RPTs within three months of the transaction or in the immediate next meeting, whichever is earlier.
- Investor Grievance Redressal Mechanisms
The Amendment Regulations strengthens investor grievance redressal mechanisms, ensuring that listed companies address investor concerns more effectively and transparently through filing of a quarterly report by the listed entity.
- Appointment of women independent director
All listed companies ranked 1,001 to 2,000 will be required to appoint at least one woman independent director. This was previously only applicable to the top 1,000 listed companies.
- Secretarial Audit
Every listed entity and its material unlisted subsidiaries incorporated in India to undertake Secretarial Audit by a Secretarial Auditor who must be a Peer Reviewed Company Secretary and should annex a Secretarial Audit Report with the annual report of the listed entity. Futhermore, the tenure of individual auditor should not be more than 5 (five) years in the same entity and the auditor would not be eligible for re-appointment in the same entity for 5 (five) years from completion of their term.
- Website
Listed entities are required to maintain a functional website containing information regarding basic details of the company, including (a) Articles of Association and Memorandum of Association and; (b) brief profile of board of directors including directorship and full-time positions in body corporates.
- Promoter Reclassification
Per the Amendment Regulations, promoters seeking reclassification must submit a request with the rationale to the listed company. The company’s board will review the request and provide its views within two months. A no-objection certificate from the stock exchanges must be obtained, and exchanges will have 30 days to make a decision. The final reclassification will require shareholder approval.
- Audio Recordings of Earnings Calls
Listed companies will now be required to provide audio recordings of post-earnings or quarterly calls before the next trading day. This aims to increase transparency and ensure that investors have access to timely information.
- Appointment/Reappointment of Key Personnel
The appointment or a re-appointment of a person, including as a managing director or a whole time director or a manager, who was earlier rejected by the shareholders at a general meeting, can be done only with the prior approval of the shareholders and for considering the appointment or re-appointment of such person, a detailed explanation and justification by the Nomination and Remuneration Committee and boards of directors for recommending such person is now required.
Conclusion
The Amendement Regulations reflect SEBI’s ongoing commitment to enhancing corporate governance and transparency in the Indian securities market. These amendments are likely to have a significant impact on the securities regulatory landscape in India, encouraging listed companies to adopt more rigorous governance practices and enhancing the overall integrity of the securities market.
The Amendment Regulations’ notification may be accessed at: