The securities market regulator, Securities and Exchange Board of India has introduced several significant changes to the existing Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). These amendments aim to enhance corporate governance, transparency, and compliance requirements for listed entities, particularly those with high-value debt securities and those listed on the SME Exchanges. Below is a summary and analysis of the key changes:
Amendment
Analysis
Enhanced BRSR Reporting
Regulation 3 (Business Responsibility and Sustainability Report): The term “assurance” in the proviso to sub-regulation (2)(b) is replaced with “assessment or assurance of the specified parameters,” broadening the scope of reporting obligations.
Regulation 34 (Annual Report): Similar changes are made to in Regulation 34 ensuring a more comprehensive evaluation of sustainability parameters in the Business Responsibility and Sustainability Report.
Increased Threshold for High Value Debt Listed Entities (HVDLEs) and corporate governance norms
The threshold for applicability of regulations 15 to 27 to entities with listed non-convertible debt securities is raised from Rupees Five Hundred Crore to Rupees One Thousand Crore;
A new provision allows entities crossing this threshold during a financial year to comply within six months, with disclosures starting from the third quarter post-trigger.
HVDLEs with listed specified securities to comply with regulations 15 to 27
A new provision is incorporated to ensure that LODR Regulations apply to an HVDLE, they remain applicable till value of the outstanding listed debt securities as on March 31 in a year, reduces and remains below the specified threshold for a period of three consecutive financial years.
A new chapter has been introduced for corporate governance norms to be followed by HVDLEs.
New rules for calculation of maximum number of directorships
Regulation 17A (Maximum Number of Directorships): The explanation is amended to include HVDLEs in the cumulative count of listed entities for directorship limits. Consequently, limits on committee positions has also been amended to now included positions held in HVDLEs;
A new Explanation (2) excludes the directorship(s) held by a person on an ex-officio basis due to statute or applicable contractual framework in case of public sector undertakings and entities set up under a public private partnership arrangement;
Provisions related to HVDLEs will come into effect from 6 months from March 27, 2025 or the next Annual General Meeting (AGM), whichever is later.
Corporate Governance Norms for SME Exchange Listed Entities | Related Party Transactions | Independent directors
From April 1, 2025, regulation 23 (related party transactions) has been made applicable to SME exchange-listed entities and which has either paid up equity share capital exceeding Rupees ten crore or net worth exceeding Rupees twenty-five crore, as on the last day of the previous financial year;
Where the provisions of regulation 23 become applicable at a later date to a listed entity which has listed its specified securities on the SME Exchange, it shall ensure compliance with the same within six months from such date;
Compliance to aforementioned provisions remain applicable until the thresholds are unmet for three consecutive financial years.
For SME Exchange-listed entities, a related party transaction is deemed material if it exceeds Rupees Fifty Crore or 10% of the annual consolidated turnover (whichever is lower) from April 1, 2025.
Enhanced BRSR Reporting
Regulation 3 (Business Responsibility and Sustainability Report): The term “assurance” in the proviso to sub-regulation (2)(b) is replaced with “assessment or assurance of the specified parameters,” broadening the scope of reporting obligations.
Regulation 34 (Annual Report): Similar changes are made to in Regulation 34 ensuring a more comprehensive evaluation of sustainability parameters in the Business Responsibility and Sustainability Report.
ELP Comments
In order to address various corporate governance lapses in SME-listed entities, the changes strengthen governance frameworks, particularly for SME-listed entities. In addition, with respect to HVDLEs, an exclusive chapter on corporate governance norms will likely have a greater impact in accountability for larger corporates.
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