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
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.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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