To strengthen corporate governance practices and disclosure requirements, Sebi has notified new rules, including that top 1,000 listed firms will have to formulate a dividend distribution policy.
The regulator has also put in place a framework in relation to applicability, constitution and role of the Risk Management Committee (RMC) and eased norms for re-classification of a promoter as a public shareholder, according to a notification dated May 5.
In addition, the regulator has asked listed firms to make available audio and video recordings of analyst and investor meets on their websites as well as stock exchanges within 24 hours or before the next trading day and also notified rules regarding Business Responsibility and Sustainability Report (BSSR).
Sebi has amended Listing of Obligations and Disclosure Requirements (LODR) rules and the new rules have come into effect from May 5.
In a notification, Sebi said the requirement for formulation of dividend distribution policy by the existing top 500 listed entities has been extended to the top 1,000 listed entities on the basis of market capitalisation.
The other listed entities can disclose their dividend distribution policies on a voluntary basis on their websites and provide a web-link in their annual reports.
In addition, requirement to constitute the RMC has been extended to the top 1,000 listed entities by market capitalisation from the existing top 500 listed entities.
The RMC need to have minimum three members with majority of them being members of the board of directors, including at least one independent director.
The quorum for a meeting of the RMC need to be either two members or one third of the members of the committee, whichever is higher, including at least one member of the board of directors in attendance.
"The meetings of the Risk Management Committee shall be conducted in such a manner that on a continuous basis not more than 180 days shall elapse between any two consecutive meetings," as per the notification.
The role of the RMC has been specified which, includes formulation of a detailed risk management policy and monitoring its implementation; periodic review of such policy; review of the appointment, removal and terms of remuneration of the chief risk officer (if any).
Further, the regulator has rationalised the existing framework pertaining to reclassification of promoter/ promoter group entities.
This includes exemption from existing requirements, in cases of reclassification pursuant to an order of the regulator under any law in line with existing exemption already available in cases of resolution plan approved under the Insolvency and Bankruptcy Code.
The exemption has also been provided from the requirement of seeking approval of shareholders in cases where the promoter seeking reclassification holds shareholding of less than 1 per cent, subject to the promoter not being in control, Sebi said.
In addition, exemptions have been granted in few procedural requirements related to reclassification such as obtaining request from promoter, approval from the board and shareholders in case of open offer under Sebi Takeover Regulations and scheme of arrangement.
This exemption would be subject to the outgoing promoter's intent of reclassification being disclosed in the letter of offer or scheme of arrangement alongwith fulfilling other requirements such as not being in control and not being represented on the board.
Also, it has reduced the time gap between the date of board meeting and shareholders' meeting for consideration of reclassification request, to a minimum of one month and a maximum of three months. The existing requirement in this regard is minimum period of three months and maximum of six months.
To address information asymmetry amongst shareholders, Sebi has asked listed firms to make available audio and video recordings of analyst and investor meets on their websites as well as stock exchanges within 24 hours or before the next trading day.
Presently, a listed entity is required to disclose the schedule of analyst or institutional investors meet and presentations made in such meetings, to the stock exchanges and on its website.
Also, written transcripts of post-earning conference need to be made available on websites of listed companies and respective stock exchanges within five working days after such calls.
The information need to be hosted on the website of the listed entity for a minimum period of five years and thereafter as per the archival policy of the listed entity, as disclosed.
The requirement for disclosure(s) of audio/ video recordings and transcript will be voluntary with effect from April 1, 2021 and mandatory with effect from April 1, 2022.
Further, Sebi said that a listed entity and its material unlisted subsidiaries incorporated in the country need to undertake secretarial audit and annex a secretarial audit report given by a company secretary in practice, in such form as specified, with the annual report of the listed entity.
The secretarial compliance report need to be submitted to stock exchanges within 60 days from end of each financial year, the Securities and Exchange Board of India (Sebi) said.
With regard to BSSR, Sebi said disclosure requirements under business responsibility and sustainability reporting, covering environmental, social and governance perspectives will be applicable to the top 1,000 listed entities by market capitalisation.
The requirement of submitting a business responsibility report will be discontinued after the financial year 2021-22 and thereafter, with effect from the financial year 2022-23, the top 1,000 listed entities based on market capitalisation will submit a business responsibility and sustainability report in the format specified by Sebi.
For the purpose of this clause, market capitalisation should be calculated as on March 31 of every financial year.
The remaining listed entities, including those which have listed their specified securities on the SME Exchange, can voluntarily submit such reports.