The Securities and Exchange Board of India (SEBI) has proposed amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to strengthen corporate governance practices and disclosure requirements.
The market regulator also aims to ease the compliance burden on listed entities, harmonize with the Companies Act, 2013, and maintain consistency within the LODR Regulations.
Under the proposed changes, SEBI has mulled the insertion of a new sub-regulation, as per which the provisions of the regulations which become applicable to listed entities on the basis of market capitalization criteria will continue to apply to such entities even if they fall below such thresholds.
The report noted that certain provisions of the LODR are applicable to a defined set – top 100, 500, 1000, 2000 — of listed entities on the basis of market capitalization.
Since market capitalization is dynamic, entities which form part of the defined set may vary due to change in market capitalization, and stock exchanges have observed instances wherein listed entities complying with specific regulations had stopped complying with the requirements once their market capitalization decreased and they fell out of the top m-cap category, as per the report.
“In the interest of good corporate governance, it is proposed that provisions that become applicable to a listed entity on the basis of market capitalization, shall continue to apply irrespective of change in the market capitalization,” it said.
Further, SEBI also noted that corporate governance provisions specified in regulations 17 to 27, clauses (b) to (i) of sub-regulation (2) of regulation 46 and paragraph C, D and E of Schedule V are applicable to listed entities with paid-up capital of more than 10 crore and net worth above 25 crores.
Among other proposals, it has now proposed to insert a new proviso, which provides that once these regulations become applicable to a listed entity, they shall continue to remain applicable irrespective of subsequent changes in equity share capital or net-worth of such entity.
SEBI has sought public comments on the proposals by October 11, 2020.