Steps to be taken by Compliance Officers in the sea of Amendments By CS Shikha Maloo

Dear Professional Colleagues,

In the array of amendments in SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (SEBI LODR) and the Companies Act, 2013 (Act), the compliance for the listed entities has increased significantly. Circulars issued by NSE and BSE add a significant amount of spice to the already overburdened scenario.

Amendment in SEBI LODR has changed the entire corporate governance structure of the company. Specific timelines 
have been provided in order to ensure a smooth transition, however, there are some amendments which require the immediate attention of Compliance Officers and must have already been considered for the notice of the ensuing AGM.

This article focuses on the significant actions that a Compliance officer has to undertake in the coming months in relation to the amendments in SEBI LODR and the Act apart from the ones already taken up for the purpose of the ensuing AGM.

Let us take a look at the compliances to be done by listed entities for the coming months. The same is for proper planning and better compliance in the coming months ahead:

1. KYC being the current buzzword

Both MCA and NEAPS have issued notification/circular in relation to the same. MCA has issued DIR 3 KYC wherein all the directors who have been allotted DIN on or before March 31, 2018, have to give their details. DIR 3 KYC has to be filed on or before August 31, 2018. Filing of the form on or after September 01, 2018 would attract a penalty of Rs. 5000.

Compliance officers of a listed entity are supposed to ensure that the directors of their companies file their DIR 3 KYC within the due date. NSE has also issued a circular dated July 05, 2018, directing the listed entities to upload a copy of PAN alongside the details of every director. Listed entities should also note that any change in the aforesaid information/details has to be updated within 7 days of such change. Failure to adhere will be treated as non-compliance. The compliance officer should upload the same within July 31, 2018, at NEAPS.

2. Also, ensure DEMAT of the shares of your Company:

Regulation 40 of SEBI LODR has been amended in order to ensure that shares must be held in the DEMAT form in case of transfer of securities. Listed Companies and their Registrars and Transfer Agents (RTAs) are hereby advised that, with effect from December 5, 2018, it should be ensured that shares which are lodged for transfer shall be in dematerialized form only.

BSE has issue circular on July 05, 2018, hereby directing the listed entities to carry out the following actions:

  • To take special efforts through their RTAs to send a letter under Registered/Speed post to the holders of physical certificates appraising them about the amendment and sensitise them about the impact of the regulation on the transfer of shares held by them in physical form w.e.f December 5, 2018;
  • RTAs may also be advised to send two reminders, preferably at a gap of 30 days, to such shareholders who continue to hold their shares in physical form, advising them to get the same dematerialized;
  • Listed Companies shall prominently place information on their website intimating the investors about the proposed change and provide appropriate guidance on how to dematerialize their shares; and
  • Listed companies should ensure that the signature cards of all the holders of physical securities are handed over to its RTA at the earliest.
The Compliance Officers of a listed entity may send such letters along with the Notice and Annual Report of the ensuing AGM of their company, if not already sent. The intention behind the following amendment is to ensure ease of transfer and reduction risk related to physical transfer. This amendment would further ensure that the shares are held in demat form only.

3. Do not forget to Identify the SBO of the Company:

Another significant step was taken in the form of notifying the Companies (Significant Beneficial Owners) Rules, 2018. Identification and analysis of the Significant Beneficial Owner of the company as on June 13, 2018, and obtaining the declaration from them and further submitting the same to the registrar within a period of 30 days from the date of receiving the declaration from the significant beneficial owner.
4. Also, check whether Directors and Officers insurance are in place:

D and O insurance need to be undertaken by the top 500 listed entities for all their independent directors of such quantum and for such risks as may be determined by its board of directors, by October 01, 2018.
5. Check your Independent Directors:

SEBI LODR has amended the definition of Independent Director by adding that the ID should not be a member of the promoter group of the company. Also, he/she should not be a non-independent director of another company on the board of which any non-independent director of the listed entity is an independent director. Suitable steps have to be taken for their replacement.
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