On 27-3-2025, the Securities and Exchange Board of India notified the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025 to amend the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The provisions came into force on 27-3-2025.
Key Points:
Chapter V A regarding Corporate Governance for a Listed Entity which has listed its Non- Convertible Debt Securities has been introduced.
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Applicability:
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The provisions of this Chapter will be applicable to a listed entity which only has non-convertible debt securities listed with an outstanding value of Rs. 1000 crore and above and does not have any listed specified securities.
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In case, this Chapter becomes applicable to “high value debt listed entity” (‘HVDLE’), these regulations will be applicable 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 three consecutive financial years.
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In case of Infrastructure Investment Trust, the governance norms specified under SEBI (Infrastructure Investment Trusts) Regulations, 2014 will be applicable.
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In case of a Real Estate Investment Trust registered, the governance norms specified under the SEBI (Real Estate Investment Trust) Regulations, 2014 will be applicable.
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Provisions of Companies Act, 2013 will continue to apply, wherever applicable.
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Board of Directors of HVDLE:
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It will have an optimum combination of executive and non-executive directors with at least 1 woman director and not less than 50% of the board of directors will comprise of non-executive directors.
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Directors will have to comply with the following conditions with respect to maximum number of directorships:
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Person cannot be a director of more than 7 listed entities;
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Person can serve as an independent director in not more than 7 listed entities;
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Person serving as whole time director/ managing director in any listed entity can serve as an independent director in not more than 3 listed entities.
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The following committees will be created under this Chapter:
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Audit Committee;
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Nomination and Remuneration Committee;
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Stakeholder Relationship Committee;
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Risk Management Committee.
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Policy on materiality of Related Party Transactions:
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A policy will be formulated on materiality of Related Party Transactions and on dealing with related party transactions including clear threshold limits duly approved by the board of directors;
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It will be reviewed by the board of directors at least once in every 3 years;
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A transaction involving payments made to a related party with respect to brand usage or royalty will be considered material if the transactions to be entered into individually or taken together with previous transactions during a financial year, exceed 5% of the annual consolidated turnover of the HVDLE as per the last audited financial statements of the HVDLE.
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All transactions and subsequent material modifications will require prior approval of the audit committee of HVDLE.
Omnibus approvals will be valid for a period not exceeding 1 year.
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All material related to party transactions and subsequent material modifications will require prior No-Objection Certificate from the Debenture Trustee.
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After obtaining approval of the debenture holders, approval of the shareholders through resolution will be obtained.
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HVDLE will have to submit to the stock exchange disclosures of related party transactions along with its standalone financial results for the half year, in the format as specified by the Board.
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The provisions of this regulation will be applicable to all transactions entered into or after 1-4-2025.
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Corporate governance requirements with respect to unlisted material subsidiary of HVDLE:
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At least 1 independent director should be on the Board of Directors of an unlisted material subsidiary;
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The audit committee should review the financial statements, particularly the investments made by the unlisted material subsidiary;
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Minutes of meeting of the Board of Directors should be placed at the meeting of board of directors of the HVDLE;
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The management of the unlisted material subsidiary will hvae to periodically bring to the notice of the board of directors of the HVDLE, a statement of all significant transactions and arrangements entered into by the unlisted material subsidiary;
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A HVDLE cannot dispose of shares in its unlisted material subsidiary resulting in reduction of its shareholding to less than or equal to 50% or relinquish the control over the subsidiary without passing a special resolution in its General Meeting.
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Secretarial Audit and Secretarial Compliance Report:
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Every HVDLE and its material unlisted subsidiaries incorporated in India will have to undertake secretarial audit and will have to annex a secretarial report given by company secretary with the annual report of the listed entity.
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Every HVDLE will have to submit a secretarial compliance report to stock exchanges within 60 days from the end of each financial year.
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