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Recent Amendments to Listing Regulations

Recent Amendments to Listing Regulations

The Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) lays down post listing obligations and disclosures to be given by companies with listed securities such as equity, Non-Convertible Debt Securities (NCDs), and Non-Convertible Redeemable Preference Shares (NCRPS). From the time LODR has been notified, significant amendments have been made to the regulations to streamline its implementation by companies.

Important amendments of the year 2020 and 2021 (till now) have been summarised below along with the important circulars issued in 2020.

Contents  hide 

1 SEBI (LODR) (AMENDMENT) REGULATIONS, 2021

2 Forensic Audit (Schedule III Part A)-

3 Asset Cover-

4 Half-yearly certificates-

5 Documents and intimation to Debenture Trustee-

6 Form of Trust Deed-

7 Roll over of debt securities-

8 Recovery expense fund-

9 Timeline for listing-

10 The following timelines have been stipulated by SEBI:

11 Listed debt securities secured by way of receivables/ book debts-

12 SEBI (LODR) (SECOND AMENDMENT) REGULATIONS, 2020

12.1 SEBI (LODR) (AMENDMENT) REGULATIONS, 2020

12.2 CIRCULAR DATED 22ND JANUARY, 2020

12.3 CIRCULAR DATED 31ST JULY, 2020

12.4 CIRCULAR DATED 7TH SEPTEMBER, 2020

12.5 CIRCULAR DATED 13TH NOVEMBER, 2020

12.6 · Stock Exchanges may deviate from the above, if found necessary, only after recording reasons in writing.

12.7 · This provisions mentioned in this circular shall come into force for compliance period ending on or after December 31, 2020.

12.8 CIRCULAR DATED 9TH DECEMBER, 2020

13 Related

SEBI (LODR) (AMENDMENT) REGULATIONS, 2021

In the latest amendment issued on 8th January, 2021, SEBI made changes to the Corporate Insolvency Resolution Process (CIRP) which says that the resolution plan (approved by the adjudicating authority)

shall have information regarding the following as well-

  • Pre and Post net-worth of the company;
  • Details of assets of the company post-CIRP;
  • Details of securities continuing to be imposed on the companies’ assets;
  • Other material liabilities imposed on the company;
  • Detailed pre and post shareholding pattern assuming 100% conversion of convertible securities;
  • Details of funds infused in the company, creditors paid-off;
  • Additional liability on the incoming investors due to the transaction, source of such funding, etc.;
  • Impact on the investor – revised P/E, RONW ratios, etc.;
  • Names of the new promoters, key managerial persons(s), if any, and their past experience in the business or employment. In the case where promoters are companies, history of such company and names of natural persons in control;
  • Brief description of business strategy.”

Also following elements shall be disclosed in the plan as well:

  • Proposed steps to be taken by the incoming investor/acquirer for achieving the MPS;
  • Quarterly disclosure of the status of achieving the MPS;
  •  The details as to the delisting plans, if any approved in the resolution plan.

In the year 2020, there are three amendments which were brought about, they all are discussed below-

SEBI (LODR) (THIRD AMENDMENT) REGULATIONS, 2020

On 8 October 2020, SEBI has issued another set of amendments to the LODR through the SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2020. The amendments primarily relate to companies which have listed their NCDS/ NCRPS on the recognised stock exchanges. Additionally, relate amendments have been made to the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (Debt Listing Regulations) and SEBI (Debenture Trustees) Regulations, 1993 (Debenture Trustees Regulations). The main amendments in SEBI (LODR) Regulations have been summarise below-

Forensic Audit (Schedule III Part A)-

Events like fraud or default or arrest of a promoter, KMP (Key Managerial Personnel), changes in directors, KMP, auditor, compliance officer and resignation by the auditor and independent director needs to be report to the stock exchange within 24 hours. Now, in addition to this, the companies are require to disclose to Stock Exchange about the forensic audit initiate along with the details of the fact of initiation, name of entity initiating the audit and the reasons for the audit.

Also Final forensic audit report (other than for forensic audit initiate by regulatory / enforcement agencies) on receipt needs to be disclose by the list entities along with comments of the management.

Asset Cover-

SEBI has now removed regulation 54(3) of the LODR Regulations, which provided an exemption from the maintenance of asset cover to regulated financial sector entities issuing unsecured debt securities for meeting capital requirements. Also, now the listed entities have to maintain a 100% asset cover for their listed non-convertible debt securities at all times which shall be sufficient to discharge the principal amount

Half-yearly certificates-

Earlier, the LODR Regulations required listed entities to submit a half-yearly certificate regarding maintenance of 100% asset cover by either a practicing company secretary or a practicing chartered accountant. Pursuant to the LODR Amendment Regulations, the aforesaid half-yearly certificate must now be provide by the statutory auditor and is also required to incorporate compliance with all covenants in respect of the listed debt securities. Also earlier, NBFC’s and bonds secured by a guarantee were exempt from providing this certificate, however,

now only bonds secured by government guarantee are exempt.

Documents and intimation to Debenture Trustee-

All covenants of the issue (including side letters, accelerated payment clause, etc.)

are to be intimate to the Debenture Trustee by all the list entities.

As a result of these changes, the SEBI (Debenture Trustees) Regulation Amendment also introduced in 2020. Following were changes made in this-

Form of Trust Deed-

The trust deed shall now consist of two parts as-

Part A: containing statutory/standard information pertaining to the debt issue,

Part B: containing details specific to the particular debt issue.

Roll over of debt securities-

An issuer that desires to roll over the debt securities issued

by it can only do so upon passing of a special resolution. A 21days notice was earlier require but now it has been reduce to a 15days notice now.

Recovery expense fund-

The issuer is now require to create a REF in the manner as may be specify by SEBI from time to time. This provision will come into force with effect from January 1, 2021, and all the applications for listing of debt securities made on or after January 1, 2021, are require to comply with the condition of the creation of the REF. For existing issuers, whose debt securities are already list on the stock exchange(s),

SEBI has given an additional time period of 90 days to comply with the terms of this circular for the creation of the REF. 

Timeline for listing-

On October 5, 2020, SEBI by way of its circular standardised timelines for listing of securities issued on a private placement. This circular will come into force with effect from December 1, 2020.

The following timelines have been stipulated by SEBI:
S. N. Details of Activities Due Date
1. Closure of issue ‘T’
2. Receipt of funds To be completed by T + 2 trading day
3. Allotment of securities To be completed by T + 2 trading day
4. Issuer to make listing application to stock exchange(s) To be completed by T + 4 trading day
5. Listing permission from stock exchange(s) To be completed by T + 4 trading day

In case of delay in listing of securities beyond the timelines stipulated above, the issuer will be required to pay penal interest of 1% per annum over the coupon rate for the period of delay to the investor. Further,

the issuer will be permit to utilize the issue proceeds of its subsequent privately place issuances of securities only after receiving final listing approval from stock exchanges.

Listed debt securities secured by way of receivables/ book debts-

In cases where list debt securities are secured by way of receivables/ book debts, the DT is require to:

On a quarterly basis- carry out the necessary due diligence and monitor the asset cover in the manner as

may be specified by SEBI; and

On a half yearly basis- obtain a certificate from the statutory auditor of the issuer giving the value of receivables/ book debts,

including compliance with the covenants of the offer document or IM, in the manner as may be specified by SEBI.

SEBI (LODR) (SECOND AMENDMENT) REGULATIONS, 2020

RECENT AMENDMENTS TO LISTING REGULATIONS

On 5th August, 2020, SEBI by its notification published the second amendment in the year 2020 relating to SEBI Listing Regulations. The main amendments in this are summarise below-

  • A list entity was previously require to intimate the record date to the Stock Exchange, merely where the entity was list. However, by virtue of this amendment a list entity is require to make such intimation not only where it is list on the stock exchange but also where stock derivatives are available on the stock of the list entity or
  • where list entity’s stock form part of an index on which derivatives are available.
SEBI (LODR) (AMENDMENT) REGULATIONS, 2020

In January, the first amendment regulations for the year were release, which made only one change of replacing the year 2020 with 2020 in regulation 17 sub- regulation (1B)

extending the format of composition of board of directors till the year 2022

CIRCULAR DATED 22ND JANUARY, 2020
  • It provided the uniform structure for imposing fines as a first resort for non-compliance with certain provisions of the Listing Regulations, freezing of entire shareholding of the promoter and promoter group and the standard operating procedure for suspension of trading in case the non-compliance is continuing and/or repetitive
CIRCULAR DATED 31ST JULY, 2020

Investors have not been able to participate in open offers, buybacks and delisting of securities of list entities since the securities held by them were not in dematerialize form. It is clarify that shareholders holding securities in physical form are allow to tender shares in open offers, buy-backs through tender offer route and

exit offers in case of voluntary or compulsory delisting. However, such tendering shall be as per the provisions of respective regulations.

CIRCULAR DATED 7TH SEPTEMBER, 2020

With this circular, it has been decide to fix March 31, 2021 as the cut-off date for relodgement of transfer deeds. Further, the shares that are re-lodge for transfer

(including those request that are pending with the listed company / RTA, as on date)

shall henceforth be issue only in demat mode.

CIRCULAR DATED 13TH NOVEMBER, 2020

In order to ensure effective enforcement of continuous disclosure obligations by issuers of listed Non-Convertible Debt Securities or NCRPS or Commercial Papers,

it has been decide to lay down a uniform structure for imposing fines for non-compliance with continuous disclosure requirements. In view of the above and in the interests of investors and the securities market, it has been provide that-

· The Stock Exchanges shall levy fine and take action in case of non-compliances with continuous disclosure requirements by issuers of listed Non-Convertible Debt Securities and/ or NCRPS and/ or

Commercial Papers as specified in Annexure I and Annexure II of this circular respectively.

· Stock Exchanges may deviate from the above, if found necessary, only after recording reasons in writing.

RECENT AMENDMENTS TO LISTING REGULATIONS

· In case a non-compliant entity is list on more than one recognize stock exchange,

the concerned recognized stock exchanges shall take uniform action under this circular in consultation with each other.

· The recognized stock exchanges shall take necessary steps to implement this circular and

shall disclose on their website the action(s) taken against the entities for non-compliance(s); including the details of the respective requirement, amount of fine levied/ action taken etc.

· The amount of fine realize as per the structure provide in Annexure I of this circular shall be credit to the

“Investor Protection Fund” of the concerned recognized stock exchange.

· The fines specified in Annexure I of this circular shall continue to accrue till the time of rectification of the non-compliance and

to the satisfaction of the concerned recognized stock exchange. Such accrual shall be irrespective of any other disciplinary/enforcement action(s) initiate by recognize stock exchange(s)/SEBI.

· The recognized stock exchanges may keep in abeyance the action or withdraw the action in specific cases where a specific exemption from compliance with the requirements for continuous disclosures /moratorium on enforcement proceedings has been provided for

under any Act, Court/Tribunal Orders, etc.

· The above provisions are without prejudice to the power of SEBI to take action under the securities laws. 14

· This provisions mentioned in this circular shall come into force for compliance period ending on or after December 31, 2020.
CIRCULAR DATED 9TH DECEMBER, 2020

RECENT AMENDMENTS TO LISTING REGULATIONS

In order to increase the efficiency of the voting process, pursuant to public consultation, it was decide to enable e-voting to all the Demat account holders, by way of a single login credential,

through their Demat accounts. Demat account holders would be able to cast their vote without having to register again with the ESPs.

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