Friday, November 6, 2015

Enhanced Disclosure Requirements for Listed Companies

SEBI this week issued a series of circulars pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”), which seek to streamline and enhance the disclosure obligations of listed companies. The three different circulars are briefly discussed below.


In the case of shareholders’ meetings, SEBI has prescribed that a listed company must submit to the stock exchange the results of voting within 48 hours of the meeting. The details submitted must include the date of the meeting, the total number of shareholders as on the record date, and the numbers of those who attend in person or by proxy and those via video conferencing. The details should also include an agenda-wise break-up and whether a matter requires an ordinary resolution or special resolution.

More importantly, the total number of votes polled must be split into three categories, namely (i) promoter and promoter group, (ii) public institutions, and (iii) public non-institutions. This way, shareholders and the investing public will be clearly in a position to ascertain the manner in which votes were cast, and also the attitude of promoters as well as institutional shareholders. Since institutional shareholders are becoming more influential in the voting process, this disaggregated information will be helpful to the investors. Another piece of information to be disclosed is whether the promoter or promoter group are interested in the agenda or resolution. This would become crucial in related party transactions as well as M&A deals between group companies. Overall, the transparency initiatives are welcome as it could help boost shareholder participation.


In addition to shareholder value, both the Companies Act as well as SEBI’s regulations have focused on stakeholder responsibility. Hitherto, the reporting of these aspects was governed through the Government of India’s “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business”. The reporting requirements have now been subsumed into the Listing Regulations, due to which SEBI has streamlined the disclosures as well.

SEBI’s objectives are evident in its statement as follows:

At a time and age when enterprises are increasingly seen as critical components of the social system, they are accountable not merely to their shareholders from a revenue and profitability perspective but also to the larger society which is also its stakeholder. Hence, adoption of responsible business practices in the interest of the social set –up and the environment are as vital as their financial and operational performance. This is all the more relevant for listed entities which, considering the fact that they have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive continuous disclosures on a regular basis.

The disclosure requirements span a number of different aspects of social responsibility such as ethics, bribery and corruption, product matters, employment, human rights and the like. SEBI’s circular also contains detailed Principles to Assess Compliance with Environmental, Social and Governance Norms.


Listed companies with Indian Depository Receipts (IDRs) are required to file with the stock exchange the holding pattern of IDRs within 15 days of the end of each quarter. They are also required to submit to the stock exchange a comparative analysis of the corporate governance provisions that are applicable in its home country and in other jurisdictions in which its equity shares are listed along with the compliance of the same vis-à-vis the corporate governance requirements under the Listing Regulations. This will provide more information to the investors regarding governance requirements and compliance. SEBI has also prescribed detailed procedures for two-way fungibility of IDRs.

Among the various disclosures requirements, those pertaining to IDRs may be least significant given that hardly any companies have made use of the market for IDR offerings.


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