SEBI (LODR) Amendment Regulations, 2018 By CS Hardeep Singh Arora



Dear Professional Colleagues,

SEBI (LODR) Amendment Regulations, 2018 was Notified on 9th May 2018.

Covering Major Amendments

These regulations shall come into force with effect from April 1, 2019, unless the separate dates are specifically provided.

Objects of Amendment

  • Transparency in dealing with Listed Entities.

  • Strengthen Investor Confidence.

  • Recognition of Secretarial Audit.

  • Wide-ranging

(by covering of TOP 2000 Companies by April 2020 instead of top 500 Companies).

Changes in Definitions
  • 2 (1) (zb): Related Party

includes any person or entity belonging to the promoter or promoter group of the listed entity and holding 20% or more of shareholding in the listed entity shall be deemed to be a related party.

  • 16 (1) (b) (ii) and (viii): Independent directors

such persons are ineligible :-

  1. who are member of the promoter group of the listed entity, or
  2. who is not a non-independent director of another company on the board of which any non-independent director of the listed entity is an independent director .
  • 16 (1) (c) material subsidiary

Earlier threshold was twenty and it’s now reduced to Ten percent.

means a subsidiary, whose income or net worth exceeds Ten percent of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

  • 16 (1) (d) senior management

Includes chief executive officer/managing director/whole time director/manager (including chief executive officer/manager, in case they are not part of the board) and shall specifically include company secretary and chief financial officer:”

17 Composition of Board

17(1) (a) Requirement to appoint Woman Independent Director (WID)

  1. By the top 500 listed entities shall have at least one WID by April 1, 2019 and
  2. By the top 1000 listed entities shall have at least one WID by April 1, 2020

17(1) (c) Minimum No. of directors (newly inserted clause)

Board of directors shall comprise of not less than six directors.

  1. By top 1000 listed entities by April 1, 2019 and
  2. By top 2000 listed entities by April 1, 2020.
  • 17(1) (1A) (newly inserted sub-regulation)

No listed entity shall appoint a person or continue the directorship of any person as a non-executive director who has attained the age of seventy five years unless a special resolution is passed to that effect, in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such a person.

  • 17(1) (1B) (newly inserted sub-regulation) W.e.f April 1, 2020

By top 500 listed entities shall ensure that the Chairperson of the board of such listed entity shall – 

(a) be a non-executive director;

(b) not be related to the Managing Director or the Chief Executive Officer as per the definition of the term “relative” defined under the Companies Act, 2013:

* Not Applicable

The listed entities which do not have any identifiable promoters as per the shareholding pattern filed with stock exchanges.

  • 17(2) (2A) (newly inserted sub-regulation)

The quorum for every meeting of the board of directors shall be one-third of its total strength or three directors, whichever is higher, including at least one independent director.

(Participation of the directors by video conferencing or by other audio-visual means shall also be counted for the purposes of such quorum)

Applicability-

By top 1000 listed entities with effect from April 1, 2019 and

By top 2000 listed entities with effect from April 1, 2020.

Explanation -

The top 1000 and 2000 listed entities shall be determined on the basis of market capitalization, as at the end of the immediate previous financial year.

  • 17 (6) (ca) (newly inserted clause)

The approval of shareholders by special resolution shall be obtained every year, in which the annual remuneration payable to a single non-executive director exceeds fifty per cent of the total annual remuneration payable to all non-executive directors, giving details of the remuneration thereof.”

  • 17 (6) (e) fees or compensation to executive directors (newly inserted clause)

Executive directors who are promoters or members of the promoter group, shall be subject to the approval of the shareholders by special resolution in general meeting, if-

(i) the annual remuneration payable to such executive director exceeds rupees 5 cr or 2.5 percent of the net profits of the listed entity, whichever is higher; or

(ii) where there is more than one such director, the aggregate annual remuneration to such directors exceeds 5 percent of the net profits of the listed entity.

  • 17A Maximum number of directorships (newly inserted regulation)

(1) A person shall not be a director in more than eight listed entities with effect from April 1, 2019 and in not more than seven listed entities with effect from April 1, 2020

Provided that a person shall not serve as an independent director in more than seven listed entities.

(2) Notwithstanding the above, any person who is serving as a whole time director / managing director in any listed entity shall serve as an independent director in not more than three listed entities.

19 Nomination and remuneration committee (NRC)

Reg. 19(2A) Quorum for Meeting (newly inserted sub-regulation)

The quorum for a meeting shall be either two members or one third of the members of the committee, whichever is greater, including at least one independent director in attendance.

20 Stakeholders Relationship Committee (SRC)

Reg. 20(2A) (newly inserted sub-regulation)

At least three directors, with at least one being an independent director, shall be members of the Committee.

21 Risk Management Committee (RMC)

Reg. 21(5) Applicability

Pursuant to amendment, provisions of this regulation shall be applicable to top 500 listed entities, instead of 100. 

As per newly inserted regulations i.e Reg. 19 (3A) Reg. 20 (3A) & Reg. 21(3A)

NRC, SRC & RMC all committees are required to meet at least once in a year.

23 Related party transactions (RTP)

Reg. 23 (1A) (newly inserted sub-regulation)

Notwithstanding the above (sub-reg. (1) i.e policy on materiality of RTP) a transaction involving payments made to a related party with respect to brand usage or royalty shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceed two percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.

  • 23 (9) (newly inserted sub-regulation)

The listed entity shall submit within 30 days from the date of publication of its standalone and consolidated financial results for the half year; disclosures of related party transactions on a consolidated basis, in the format specified in the relevant accounting standards for annual results to the stock exchanges and publish the same on its website.

24A Recognition of Secretarial Audit. (newly inserted regulation)

Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a company secretary in practice, in such form as may be specified with effect from the year ended March 31, 2019.

25 (1) Obligations with respect to independent directors.

An alternate director cannot be appointed for an independent director w.e.f. October 1, 2018. If any alternate director already appointed, he shall not continue with such appointment.

  • 29 (1) (f) Exemption provided for giving of prior intimation to the stock exchange(s) in case of the declaration of bonus issue by the listed entity.
  • 32 (7A) Statement of deviation or variation (newly inserted sub-regulation)

Where an entity has raised funds through preferential allotment or qualified institutions placement, the listed entity shall disclose every year, the utilization of such funds during that year in its Annual Report until such funds are fully utilized

  • 34 (1): Submission of annual report and notice of AGM sent to shareholders to the stock exchange on or before commencement of dispatch to shareholders. In case of changes, revised copy along with explanation to be sent within 48 hours of AGM.
  • 36 (4) Documents & Information to shareholders (newly inserted sub-regulation)

The disclosures made by the listed entity with immediate effect from date of notification of Amendment Regulations shall be in XBRL format and submitted to stock exchange and on its website in a readable / searchable format.

  • 36 (5) Appointment of statutory auditor (newly inserted sub-regulation)

Notice sent to shareholders for appointment/re-appointment of auditors shall include disclosures as a part of the explanatory statement in relation to proposed fees and credential of the auditors.

  • 44 (5) & (6) (newly inserted sub-regulations)

The top 100 listed entities by market capitalization shall hold their annual general meetings within a period of five months from the date of closing of the financial year and shall provide one-way live webcast of the proceedings of the annual general meetings.

  • 46(2)(s) Audited financial statements of subsidiaries (newly inserted sub-clause)

Audited financial statements of each subsidiary of the listed entity in respect of a relevant financial year, is required to be uploaded at least 21 days prior to the date of the annual general meeting.

Lex comply

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