The Securities and Exchange Board of India ("SEBI") has recently amended the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations") pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025 ("LODR Amendment Regulations"), which came into force on March 27, 2025.
A brief overview of the amendments made to the LODR Regulations is as follows:
Obligations of 'high value debt listed entities' which have listed their 'specified securities'
In Regulation 15, the threshold for a listed entity which has listed its non-convertible debt securities ("NCDs") to qualify as a 'high value debt listed entity' has been increased from Rs. 500 crore (Rupees five hundred crore) to Rs. 1,000 crore (Rupees one thousand crore) of outstanding value of listed NCDs.
Further, a specific explanation has been included in Regulation 15 to state that in case a 'high value debt listed entity' has its specified securities (i.e., equity shares and convertible securities) listed, it shall comply with the corporate governance requirements specified in Regulations 15 to 27.
In the event the value of the outstanding listed NCDs becomes equal to or more than the specified threshold of Rs. 1,000 crore (Rupees one thousand crore) during the course of a year, a 'high value debt listed entity' is required to ensure compliance with the relevant provisions within 6 (six) months from the date of such trigger, and also to ensure that the disclosures of such compliance are made in the corporate governance compliance report on and from the third quarter following the date of such trigger. Further, these provisions will continue to apply till the value of the outstanding listed NCDs as on March 31 in a year reduces and remains below the specified threshold for a period of 3 (three) consecutive financial years.
SME Listed Entities
Earlier, listed entities which had listed their specified securities on the SME Exchange ("SME Listed Entities") were exempted from compliance with certain identified corporate governance requirements. Pursuant to the amendment, such SME Listed Entities, if they have either paid up equity share capital exceeding Rs. 10 crore (Rupees ten crore) or net worth exceeding Rs. 25 crore (Rupees twenty five crore) as on the last day of the previous financial year, will have to comply with Regulation 23 (Related party transactions) of the LODR Regulations with effect from April 1, 2025 and until such time the equity share capital and the net worth of such entity reduces and remains below the specified threshold for a period of 3 (three) consecutive financial years.
Further, in the event the provisions of Regulation 23 of the LODR Regulations become applicable later to a SME Listed Entity, such entity must ensure compliance with the said regulation within 6 (six) months from such later date.
Additionally, Regulation 23 has been amended to provide that, with effect from April 1, 2025, in the event a SME Listed Entity enters into a transaction with a related party the said transaction will be considered material in case the said transaction to be entered into individually or taken together with previous transactions during a financial year exceeds Rs. 50 crore (Rupees fifty crore) or 10 (ten) % of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever being the lowest.
Maximum number of directorships
Regulation 17A, which deals with the maximum number of directorships for directors of listed entities, has been amended to provide that, for the purpose of calculating the maximum number, the count for the number of listed entities on which a person is a director/ independent director shall be not only those entities whose equity shares are listed on a stock exchange but also 'high value debt listed entities'. However, this shall not come into effect for a period of 6 (six) months from the date of publication of the LODR Amendment Regulations in the official gazette or the date of annual general meeting, whichever is later.
Further, it has been clarified that the directorship(s) held by a person on an ex-officio basis due to a statute or applicable contractual framework in case of public sector undertakings will not be included while calculating the maximum number of directorships.
Corporate governance norms for a listed entity which has listed its NCDs
A new Chapter VA has been inserted which deals with corporate governance norms for a 'high value debt listed entity' ("HVDLE") which has only listed its NCDs and does not have any listed specified securities. It has been clarified that the HVDLEs shall be determined on basis of value of principal outstanding of listed debt securities as on March 31, 2025, irrespective of the date of notification of the LODR Amendment Regulations.
These corporate governance norms are similar to those already in place for HVDLEs which have listed their specified securities, including in respect of composition of board of directors, maximum number of directorships, constitution of audit committee, nomination and remuneration committee, stakeholders relationship committee and risk management committee, related party transactions, and obligations of independent directors, senior management, key managerial personnel, directors and promoters.
Concluding remarks
Earlier, the corporate governance norms specified in Regulations 15 to 27 of the LODR Regulations were applicable to HVDLEs even where they were purely debt listed and did not have their specified securities listed. With the recent amendments, a separate framework has been introduced for purely debt listed HVDLEs. Additionally, the threshold for HVDLEs has been aligned with that specified for 'Large Corporates'.
Whilst the corporate governance norms are largely similar to those for listed entities which have also listed their specified securities, necessary carve outs have been made in cases where such norms maybe relevant from an equity perspective but not from a purely debt perspective. For instance, with regard to constitution of the Nomination and Remuneration Committee ("NRC") and Stakeholders Relationship Committee ("SRC"), with a view to avoid constitution of multiple committees by HVDLEs, relaxations have been provided for the board of directors of HVDLEs to choose whether to constitute the NRC/ SRC, or to ensure that the functions of the NRC/ SRC are discharged by the board of directors. Similarly, with regard to constitution of the Risk Management Committee ("RMC"), the board may choose whether to constitute the RMC, or to ensure that the functions of the RMC are discharged by the Audit Committee or the board of directors.
Another much-needed relief is the introduction of a sunset clause for applicability of corporate governance norms on HVDLEs. Pursuant to the amendment, these norms will continue to apply till the 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 3 (three) consecutive financial years.
A copy of the LODR Regulations (amended till December 12, 2024) and the LODR Amendment Regulations can be accessed here and here.
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