- Nectar Lifesciences Limited (‘Company/Nectar’) is listed on Bombay Stock Exchange (‘BSE’) and National Stock Exchange (‘NSE’). Nectar was falling under top covered 1000 listed entities based on market capitalization as on March 31, 2021. But for FY 2022 and FY 2023 it was not covered under top 1000 listed entities based on market capitalisation.
- Regulation 34 of SEBI (Listing and Disclosure Obligation) Regulations 2015 (‘LODR’) read with SEBI circular dated May 10, 2021 (‘BRSR Circular’) made filing of Business Responsibility and Sustainability Reporting (‘BRSR’) in new format mandatory for top 1000 listed entities based on market capitalization with effect from FY 2023.
- As per Regulation 3(2) of LODR provisions of LODR which become applicable to listed entities on basis of market capitalization criteria shall continue to apply to such entities even if they fall below such thresholds.
- As Nectar was falling under top 1000 listed entities as on March 31, 2021 it filed Business Responsibility Report for FY 2021 in old format.
Clarification sought by Company:
- Now the question that arises is that whether Nectar will have to file BRSR report for FY 2022 and FY 2023 also in new format as it was falling under top 1000 listed entities as on FY 2021 but not thereafter? i.e. Whether BRSR is applicable to the company for the financial year 2022-2023 and perpetually?
Clarification by SEBI:
- SEBI considered the submissions and cited relevant text of Regulation 34(2)(f) of SEBI LODR which states that: “(f) for the top one thousand entities based on market capitalization of a BRR describing initiatives taken by the listed entities from an environmental, social and governance perspective, in format as specified by board from time to time:”
Provided that the requirement of submitting a BRR shall be discontinued after the financial year 2021–22 and thereafter, with effect from the financial year 2022–23, the top one thousand listed entities based on market capitalization shall submit a BRSR in the format as specified by the Board from time to time.
Provided further that even during the financial year 2021–22, the top one thousand listed entities may voluntarily submit a BRSR in place of the mandatory BRR…”
- Further SEBI cited Regulation 3(2) of LODR regulations which states that:
“The provisions of these regulations which become applicable to listed entities on the basis of market capitalization criteria shall continue to apply to such entities even if they fall below such thresholds.” This sub regulation was made effective from May 5,2021.
- Further as per Para 7 of BRSR, “In terms of the aforesaid amendment, with effect from the financial year 2022-2023, filing of BRSR shall be mandatorily for the top 1000 listed entities (by market capitalization) and shall replace existing BRR…” Therefore, SEBI clarified from above regulations and circular that until 2021 -2022 the top 1000 listed entities based on market capitalization had to submit BRR in their annual report, thereafter from financial year 2022-2023, such listed entities were required to submit BRSR.
- Further by virtue of Regulation 3(2) of LODR, any listed entity which is amongst 1000 listed entities in the financial year ending on March 31,2022 or any financial year thereafter, would be required to BRSR report for all upcoming financial years.
- Hence SEBI was of the view that as the Company was in the top 1000 listed entities only for the financial year ending March 31, 2021 hence Company’s obligation under aforesaid provision was limited to the submission of BRR for that financial year.
- The Company was not in the list of top 1000 listed entities based on market capitalization as on March 31,2022 and March 31,2023, therefore the requirement under regulation 34(2)(f) and the proviso thereof does not become applicable to the company. Further, since regulation 3(2) was inserted with effect from May 5,2021, in context of regulation 34(2)(f), it shall apply only to the entities who were in top 1000 listed entities as computed on March 31,2022.
- Therefore, SEBI concluded in its clarification that since Company was in top 1000 listed entities only in the Financial year ending on March 31, 2021 and not thereafter, the company was not required to continue the submission of BRR. Further Company was not required to submit the BRSR under regulation 34(2)(f) of the LODR regulations.
Informal Guidance can be accessed at below link: https://www.sebi.gov.in/enforcement/informal-guidance/may-2023/request-for-informal-guidance-by-way-of-an-interpretative-letter-under-securities-and-exchange-board-of-india-informal-guidance-scheme-2003-regarding-the-applicability-of-business-responsibility-_72064.html
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