REGULATORY AND POLICY UPDATES
SEBI notifies circular for modifying the disclosure requirements under Regulation 31 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Securities and Exchange Board of India ("SEBI") through its circular dated 20.03.20251 ("Circular") has modified the disclosure requirements under Regulation 31 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations") regarding shareholding patterns and dematerialised holdings.
The Circular modifies SEBI's Master Circular No. SEBI/HO/CFD/PoD2/CIR/P/0155 dated 11.11.2024, which prescribed the formats for disclosure of specified securities.
The key modifications are:
A. Enhanced disclosures in shareholding pattern (Table I-IV):
- Details of non-disposal undertakings, other encumbrances, and total number of pledged shares or encumbered shares must be disclosed by listed entities.
- Underlying outstanding convertible securities also includes ESOPs i.e. the existing header of column X as 'No. of shares underlying outstanding convertible securities (including warrants, ESOPs etc.)'.
- Additional column has been introduced to capture fully diluted shareholding, including warrants, ESOPs, and other convertible securities.
B. Amendments in Table II (Promoter & Promoter Group):
A footnote has been added to specify the promoter and promoter group members with nil shareholding.
Stock exchanges are directed to update their website and notify the particulars of the Circular to all listed entities and update their byelaws and regulations. Depositories must update their systems to reflect these changes.
The Circular will come into force with effect from the quarter ending 30.06.2025.
SEBI notifies online filing system for reports filed under Regulation 10(7) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
SEBI, through its circular dated 20.03.20252 ("Takeover Circular") has introduced an online system for filing reports under Regulation 10 (7) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations"). As per Regulation 10 (7) of the Takeover Regulations, acquirers were required to submit a report along with supporting documents and a non-refundable fee to SEBI for any acquisition or increase in voting rights pursuant to certain exemptions under Regulation 10 and these reports were submitted via email at cfddcr@sebi.gov.in.
SEBI has now enabled the filing of these reports through the SEBI Intermediary Portal ("SI Portal") at https://siportal.sebi.gov.in/. In the initial phase, the online filing system will apply only to reports filed under Regulation 10(1)(a)(i) and Regulation 10(1)(a)(ii) of Takeover Regulations (i.e., exemptions from acquisitions between persons named as promoters and/or persons within the promoter groups), while reports for other exemptions under Regulation 10 will continue to be submitted via email. However, the aforementioned reports will be filed parallelly through the SI Portal and through email, commencing from the date of the Takeover Circular, i.e., 20.03.2025 till 14.05.2025.
However, from 15.05.2025, the submission of these reports will be permitted only through the SI Portal, and email submissions will no longer be accepted. Additionally, from the date of the Takeover Circular, fee payments for these reports will also be facilitated through the SI Portal.
SEBI amends Framework on Social Stock Exchange.
SEBI, through its circular dated 19.03.20253 ("SSE Amendment") has amended the minimum application size for subscribing to zero coupon zero principal instruments ("ZCZPI") from INR 10,000 to a lower amount, i.e., INR 1,000 under the framework on Social Stock Exchange ("SSE"). The SSE Amendment would come into effect immediately upon publication of the SSE Amendment, i.e., 19.03.2025.
SEBI updates framework on alignment of interest for AMC Employees with unitholders.
SEBI, through its circular dated 21.03.2025 ("AMC Circular") has introduced amendments to the regulatory framework governing the alignment of interest of designated employees of Asset Management Companies ("AMCs") with the interests of unitholders, commonly referred to as the 'skin in the game' requirements4. These amendments, introduced through modifications to SEBI (Mutual Funds) Regulations, 1996, were notified on 14.02.2025 and 04.03.2025 ("MF Regulations").
Accordingly, in terms of Regulation 25 (16B) of MF Regulations, the Master Circular for Mutual Funds dated 27.06.2024 ('Master Circular') has been modified and will be applicable from 01.04.2025.
Under the revised framework, AMCs are now required to mandatorily invest a slab-wise percentage of the designated employees' gross annual cost to company in the mutual fund schemes they oversee. Employees will be categorized based on their roles, with higher investment obligations for key personnel such as the CEO, CIO, fund managers, investment research teams, and members of the investment committee.
For designated employees managing liquid fund schemes, SEBI has introduced an exception allowing up to 75% (seventy-five per cent) of the minimum investment requirement to be allocated to higher-risk schemes managed by the AMC. The applicable risk level will be determined based on the risk-o-meter of the immediately preceding month.
To enhance transparency, mutual fund schemes will be required to publicly disclose, on stock exchange websites, the aggregate amount invested by designated employees in each scheme every quarter. These disclosures must be made within 15 (fifteen) days from the end of each quarter.
SEBI extends the implementation timeline for industry standards on related party transactions.
SEBI had mandated listed entities to adhere to the Industry Standards (to be formulated by the Industry Standards Forum) on 'Minimum Information to be Provided for Review of the Audit Committee and Shareholders for Approval of a Related Party Transaction' ("Industry Standards") through its circular dated 14.02.2025. The compliances on listed entities for reporting as per the Industry Standards were to take effect from 01.04.2025.
However, in response to feedback from stakeholders requesting an extension, SEBI through its circular dated 21.03.20255 has revised the effective date of compliance with the Industry Standards to 01.07.2025.
The Industry Standards Forum, comprising of ASSOCHAM, CII and FICCI will also incorporate stakeholder feedback and release simplified Industry Standards to meet the revised timelines.
SEBI amends LODR Regulations to introduce corporate governance for high-value debt listed entities.
SEBI on 27.03.20256 has notified the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025 ("LODR Amendment") to amend the LODR Regulations. The LODR Amendment introduces Chapter VA, setting out corporate governance requirements for High-Value Debt Listed Entities ("HVDLEs") that have only non-convertible debt securities ("NCDs") listed with an outstanding value of INR 1,000 Crores or more and no listed specified securities. The LODR Amendment shall come into force on the date of its notification in the Official Gazette, i.e., 28.03.2025
The key provisions of the Amendment are following:
A. Applicability of Chapter VA: The new provisions apply to listed entities with only non-convertible debt securities and an outstanding value of INR 1,000 Crores or more. Once applicable, the entity will continue to comply with these norms until the outstanding debt securities fall below INR 1,000 Crores for three consecutive financial years.
B. Board Composition for HVDLEs: The board must have a balanced mix of executive and non-executive directors. At least 50% (fifty per cent) of the board should be non-executive directors and there must be at least 1 (one) woman director on the board. A person cannot be a director in more than 7 (seven) listed entities. A person can serve as an independent director in not more than 7 (seven) listed entities. A whole-time/managing director in a listed entity can be an independent director in not more 3 (three) listed entities.
C. Vigil Mechanism and Mandatory Committees: Each HVDLE shall formulate a vigil mechanism/ whistle blower policy for directors and employees to report genuine concerns. HVDLEs must mandatorily establish these committees: (i) Audit Committee; (ii) Nomination and Remuneration Committee; (iii) Stakeholder Relationship Committee; and (iv) Risk Management Committee.
D. Policy on Related Party Transactions ("RPTs"): HVDLEs must establish a policy on the materiality of related party transactions, defining clear threshold limits, subject to board approval and review at least once every 3 (three) years. A transaction involving brand usage or royalty will be considered material if it exceeds 5% (five percent) of the annual consolidated turnover in a financial year. Prior approvals are required from the audit committee and debenture trustee before proceeding with an RPT. After obtaining approval from debenture holders, a shareholder resolution must be passed. HVDLEs must disclose RPTs to stock exchanges semi-annually, along with standalone financial results. These provisions apply to transactions entered into on or after 01.04.2025.
E. Governance of Unlisted Material Subsidiaries of HVDLEs: At least 1 (one) independent director must be appointed on the board of an unlisted material subsidiary. The audit committee of the HVDLE must review the subsidiary's financial statements and investments. Board minutes of the subsidiary must be presented to the HVDLE's board. The management of the unlisted subsidiary must inform HVDLE's board about significant transactions. The HVDLE cannot reduce its shareholding to 50% (fifty percent) or below or relinquish control of the material subsidiary without a special resolution.
E. Secretarial Audit & Compliance: HVDLEs and their material unlisted subsidiaries must undergo a secretarial audit. The annual secretarial report must be included in the annual report. A secretarial compliance report must be submitted to stock exchanges within 60 (sixty) days from the financial year end. HVDLEs may provide in the annual report, a business responsibility and sustainability report on the environmental, social and governance disclosures as specified in clause (f) of the sub-regulation (2) of the Regulation 34, in the format as may be specified by the Board from time to time.
To view the full article please click here.
Footnotes
1 SEBI circular for disclosure of holding of specified securities in dematerialized form.
2 SEBI circular on Online Filing System for reports filed under Takeover Regulations.
3 SEBI | Framework on Social Stock Exchange (SSE).
6 SEBI LODR Amendment Regulations dated 27.03.2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
