Introduction of BRSR Core: In order to enhance the reliability of ESG disclosures SEBI has introduced the concept of BRSR (Business Responsibility and Sustainability Report) Core. It contains a limited set of Key Performance Indicators (KPIs), for which listed entities shall need to obtain reasonable assurance. From FY 2023 – 24, BRSR Core would be applicable to top 150 listed entities (by market capitalization). Gradually these provisions would be made applicable to top 1000 listed entities by FY 2026 – 27.
ESG disclosures for value chain of listed entities: A number of companies have significant ESG footprints in their value chain. In order to increase transparency, ESG disclosures and assurance (BRSR Core only) shall be introduced for the value chain of listed entities, with certain thresholds that shall be specified. The above said requirements of disclosure and assurance shall be applicable to the top 250 listed entities (by market capitalization), on a comply-or-explain basis from FY 2024 – 25 and FY 2025 – 26, respectively.
Amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations to facilitate more comprehensive and timely disclosure:
- Disclosure of material events or information by listed entities: With respect to timely disclosure of material events or information by listed entities SEBI has inter-alia, approved the following amendments to LODR Regulations:
- Introduction of a quantitative threshold for determining the ‘materiality’ of events/information.
- Stricter timeline for disclosure of material events/information for which decision has been taken in the meeting of the board of directors (within 30 minutes) and which are emanating from within the listed entity (within 12 hours).
- Market rumors to be verified and confirmed, denied or clarified, as the case may be, by top 100 listed entities by market capitalization effective from October 1, 2023 and by top 250 listed entities with effect from April 1, 2024.
- Disclosure for certain types of agreements binding listed entities.
- Strengthening corporate governance at listed entities by empowering shareholders: With respect to strengthening of corporate governance norms at listed entities SEBI has approved the following amendment to be carried out in SEBI LODR:
- Periodic shareholders’ approval for any special right granted to a shareholder of a listed entity to address the issue of the perpetuity of special rights.
- Strengthening the extant mechanism of sale, lease or disposal of an undertaking of a listed entity outside the ‘Scheme of Arrangement’ framework.
- Periodic shareholders’ approval for any director serving on the board of a listed entity to do away with practice of permanent board seats.
- Streamlining timeline for submission of first financial results by newly listed entities: The timeline for submission of first financial results by newly-listed entities has been streamlined in order to overcome the challenges in immediate submission of financial results post listing and to ensure that there is no omission in submission of financial results.
- Timeline to fill up vacancy of Directors and other officials of listed entities: Listed entities shall be required to fill up the vacancy of Directors, Compliance Officer, Chief Executive Officer and Chief Financial Officer within a period of three months from the date of such vacancy, to ensure that such critical positions are not kept vacant.
- Extension of “Comply or Explain” period for Large Corporates (LCs) to meet their financing needs from debt market through issuance of debt securities to the extent of 25% of their incremental borrowings in a financial year: As per SEBI Circular dt: November 26, 2018 and April 13, 2022 ‘Large Entities’ as defined in these circular’s was required to borrow 25% of their incremental borrowing from debt market in a block of two years. SEBI has now decided to extend this period by one year. So now requirement of borrowings for large corporates will have to complied with be extended in a contiguous block of three years. This amendment can be assumed to be with immediate effect. Official amendment to SEBI Circular dt: November 26, 2018 and April 13, 2022 may be made in due course.
- Extension of ‘Comply or Explain’ period for the High Value Debt Listed Entities (HVDLEs) in respect of corporate governance norms and simplification of disclosure requirements pertaining to the payment of interest/ coupon and redemption amount: Based on industry feedback, SEBI has decided to extend the ‘comply or explain’ period for the HVDLEs in respect of corporate governance norms (i.e. regulation 16 to 27 of LODR Regulations) till March 31, 2024. Further SEBI has approved the proposal to consolidate the disclosure requirements under Regulation 57 of the LODR Regulations.
Amendments to SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, with the objective of increasing transparency and streamlining certain issue processes:
- Disclosures regarding Underwriting: SEBI had a consultation paper dt: February 22, 2023 floated a proposal for hard underwriting as against soft underwriting in case of Initial Public Offers and disclosure of same in offer document. Now SEBI has approved amendment in this regard stating that if underwriting for shortfall in demand or to cover subscription risk is opted by the issuer, the same shall be disclosed in the offer document prior to issue opening.
- Pre-condition for announcing Bonus Issue, and issuance of bonus only in demat mode: In the same consultation Paper dt: February 22. 2023 SEBI had proposed some changes pertaining to issue of bonus shares by listed entities. SEBI has now stated that listed entity can announce bonus issue of shares, only after obtaining approval from the stock exchanges for listing and trading of all the pre-bonus securities issued by it. Bonus issue shall be made only in dematerialised form.
Introduction of concept of General Information Document (GID) and Key Information Document (KID) for issuance of Bonds/ Commercial Paper and streamlining of disclosures: In order to do away with multiple filings of placement memoranda by issuers for non-convertible securities and Commercial Paper proposed to be listed and to promote ease of doing business for issuers, SEBI has now decided to introduce the concept of General Information Document (GID) and Key Information Document (KID).
A GID shall contain the information and disclosures specified in common schedule and shall be filed with the Stock Exchanges at the time of the first issuance. The GID shall have a validity period of one year. Thereafter, for subsequent private placements of non-convertible securities and/or Commercial Paper within the validity period, only a KID shall be required to be filed with the Stock Exchanges containing material changes. The same shall facilitate ease of doing business for the issuers.
To begin with, the said concept is proposed to be made applicable on a ‘comply or explain’ basis till March 31, 2024 and mandatory thereafter. In order to ensure parity in disclosures required to be made in a prospectus for public issuance of debt securities/ Non-Convertible Redeemable Preference Shares and placement memorandum for private placement of non-convertible securities proposed to be listed, the Board approved the proposal to introduce a common schedule for disclosures.
Stock Brokers Related
Amendments to Stock Brokers Regulations to institute a formal mechanism for prevention and detection of fraud or market abuse by stock brokers: SEBI has approved to provide for a framework for an institutional mechanism for prevention and detection of fraud or market abuse by stock brokers. Accordingly, SEBI (Stock Brokers) Regulations, 1992 will be amended to provide as under: Systems for surveillance of trading activities and internal controls; Obligations of the stock broker and its employees; Escalation and reporting mechanisms; and Whistle blower policy. The approved amendments will come into effect from October 01, 2023.
SEBI Board note can be accessed at below mentioned link:
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