SEBI , LODR,2015

JK SHAH CLASSES
 In 2015, SEBI has revamped the listing agreement compliance requirement and replaced it with the new SEBI
(Listing Obligation & Disclosure Requirements) Regulation, 2015 notified on September 2, 2015 which came into
force from December 1, 2015.
OBJECTIVE OF REGULATION

 To align the listing agreement with the Companies Act, 2013.

 To consolidate the provisions of existing listing agreements for different segments.
APPLICABILITY

The LODR are applicable to a listed entity which has listed any of the following designated securities on RSE:
❖ Specified securities i.e. equity shares and convertible securities listed on main Board, or SME Exchange or
institutional Trading Platform;
❖ Non-convertible Debt Securities, Non-convertible Redeemable Preference Shares, Perpetual Debt Instrument,
Perpetual Non-cumulative Preference Shares;
❖ Indian depository receipts;
❖ Securitized Debt Instruments;
❖ Units issued by mutual funds;
❖ Other securities as may be specified by SEB1.
CATEGORIES OF OBLIGATIONS OF LISTED ENTITIES

1. Common Obligation which are applicable to all listed entities.

2. Obligation of Listed Entities whose specified securities are listed.
3. Obligation of Listed entities which has listed its
➢ Non-convertible Debt Securities, OR
➢ Non-convertible Redeemable Preference shares, OR
➢ Both
1. Obligation of listed entities which has listed its Specified Securities and Nonconvertible Debt Securities or Non-
convertible Redeemable Preference shares or Both.
2. Obligation of Listed entities which has listed its Indian Depository Receipts.
3. Obligation of Listed entities which has listed its debt instruments.
4. Obligation of Listed entities which has listed its Mutual Fund units.
COMPLIANCES UNDER SEBI (LODR) REGULATIONS, 2015
YEARLY COMPLIANCE
CORPORATE GOVERNANCE UNDER SEBI (LODR) REGULATIONS,
2015

 Corporate governance denotes the process, structure and relationship through which the BOD oversees what the
management does. It is also about being answerable to different stakeholders. Corporate governance deals with laws,
procedures, practices and implicit rules that determine a company's ability to take informed managerial decisions. The
ICSI definition: Corporate Governance is the application of best management practices, compliance of law in true letter
and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social
responsibility for sustainable development of all stakeholders.
 Non-applicability-
These provisions will not apply to the listed entity having:
PSC up-to Rs. 10 Cr., and
Net worth not up-to Rs. 25 Cr., as on the last day of the PY.
The listed entity which has listed its specified securities on the SME Exchange. 3. An entity undergoing Insolvency Resolution
Process under IBC, 2016.
COMPOSITION OF BOARD OF DIRECTORS

Minimum number of directors;

SEBI (LODR) (Amendment) Regulations, 2018 propose to increase the minimum number of directors on the BOD
to 6 instead of 3 on the BOD of the top 1000 listed entities by 1st April 2019 and for the top 2000 listed entities
by 1st April 2020.
Women Director:
The Companies Act and SEBI (LODR) Regulations require at-least one woman director to be on the board of
listed entities who may be either an independent or a non independent director
The SEBI (LODR) (Amendment) Regulations, 2018 require at least one independent woman director on the board of
the top 500 listed entities by 1st April 2019 and for the top 1000 listed entities by 1st April 2020.
EXECUTIVE/NON-EXECUTIVE DIRECTOR

 The BOD of the company shall have an optimum combination of ED and NED with at least one woman director:
✓ Not less than 50% of the BOD shall comprise of NED;
✓ The number of independent directors would depend on whether the Chairman is ED or NED;
✓ If the BOD has a Non-Executive Chairman, at least 1/3 of the BOD should comprise of independent directors;
✓ If the Board has an Executive Chairman, at least 1/2 of BOD should comprise of independent directors.
Special Note: If the regular non-executive Chairman is a promoter of a listed company or is related to
promoter or persons occupying management positions at the board level or at one level below the board, at
least 50% of the BOD of the company should consist of independent directors.
 Appointment or Continuation of a person as a NED on attaining the age of 75 years will require shareholders'
approval by a Special Resolution.
Limit on Directorship-
The Amendments restrict maximum directorships to 8 listed entities and 7 listed entities w.e.f. 1st April 2019 and 1st
April 2020 respectively
Limit on appointment of independent Directors-
➢ A person shall not serve as an independent director in more than 7 listed companies; OR
➢ Any person who is serving as a WTD in any listed company shall serve as an independent director in not more
than 3 listed companies.
QUORUM OF THE BOARD MEETING

 SEBI (LODR) (Amendment) Regulations, 2018 require the quorum for every meeting of the BOD of the listed
entity to be l/3rd of its total strength or 3 directors, (w.i.h), including at least 1 independent director.
 The participation of the directors by video conferencing or by other audio-visual means shall also be counted for
the purposes of such quorum. The above amendment for top 1,000 listed entities shall come into effect from 1st
April 2019 and for top 2,000 listed entities shall come into effect from 1st April 2020.
BOARD COMMITTEES

 Mandatory Committees under SEBI (LODR) Regulations, 2015 are:

• Audit Committee
• Nomination and Remuneration Committee
• Stakeholders Relationship Committee
• Risk Management Committee
VARIOUS TYPES OF COMMITTEES UNDER SEBI (LODR)
REGULATIONS, 2015

 AUDIT COMMITTEE-
The constitution of Audit Committee is mandated under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.
Audit Committee Provisions in Companies Act Section 177 of the Companies Act, 2013
The following companies are required to constitute an Audit Committee:-
1. Every Listed Public Companies, or
2. Unlisted public companies having:
(a) PSC of Rs. 10 Cr. or more;
(b) T.O. of Rs. 100 Cr. or more;
(c) Aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 50 Cr. or more. Members:
Minimum 3 directors with majority being Independent Directors.
ROLE OF AUDIT COMMITTEE:

a) The recommendation for appointment, remuneration and terms of appointment of auditors;

b) Review and monitor the auditors' independence and performance, and effectiveness of audit process;
c) Examination of the financial statement and the auditors' report thereon; d) Approval or any subsequent
modification of transactions of the company with related parties;
d) Scrutiny of inter-corporate loans and investments;
e) Valuation of undertakings or assets of the company, wherever it is necessary;
f) Evaluation of internal financial controls and risk management systems;
g) Monitoring the end use of funds raised through public offers and related matters
h) Establishment of Internal Control Systems
i) Investigation
DISCLOSURE IN BOARD'S REPORT

 Section 177(8) of the Act provides that the Board's report shall disclose:
1. Composition of an Audit Committee.
2. Where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in
the report along with the reasons therefor.
 Establishments of Vigil Mechanism:
Every listed company and the companies belonging to the following class or classes shall establish a vigil mechanism
for their directors and employees to report genuine concerns or grievances:-
1. The companies which accept deposits from the public;
2. The companies which have borrowed money from banks and public financial institutions in excess of Rs. 50 Cr.
AUDIT COMMITTEE PROVISIONS IN SEBI (LODR), 2015
[REGULATION 18]

 Members:
✓ The Audit Committee shall have minimum 3 directors as members;
✓ 2/3rd of the members of Audit Committee shall be independent directors;
✓ All members of Audit Committee shall be financially literate and at least 1 member shall have accounting or
related financial management expertise.
 Chairman: The Chairman of the Audit Committee shall be an Independent director and shall be present at AGM
to answer shareholder's queries.
 Secretary: The Company Secretary shall act as the Secretary to the committee.
INVITEES:

 The Audit Committee may invite such of the executives, as it considers appropriate to be present at the meetings
of the committee.
 The finance director, head of internal audit and a representative of the statutory auditor may be present as
invitees for the meetings of the Audit Committee.
 Number of Meetings: At least 4 times in a year and the maximum gap between 2 meetings shall not exceed 120
days.
 Quorum: Either 2 members or l/3rd of the members of Audit Committee whichever is greater subject to
minimum of 2 independent members present in the meeting.
ADDITIONAL ROLE OF AUDIT COMMITTEE IN LODR:

 The role of the Audit Committee includes the following:

➢ Oversight of company's financial reporting process & disclosure of financial information.
➢ Recommending to the Board appointment, re-appointment and the replacement or removal of the statutory
auditor and the fixation of audit fees.
➢ Approval of payment to statutory auditors for any other services rendered.
➢ Reviewing, with the management, the annual or quarterly financial statements before submission to the board for
approval.
➢ Reviewing, with the management, performance of statutory and internal auditors, and adequacy of the internal
control systems.
➢ Reviewing the adequacy of internal audit function.
➢ Scrutiny of inter-corporate loans and investments.
➢ Valuation of undertakings or assets of the listed entity, wherever it is necessary.
➢ Evaluation of internal financial controls and risk management systems.
➢ Discussion with internal auditors of any significant findings and follow up.
➢ Discussion with statutory auditors before the audit commences, about the nature and scope of audit.
➢ Review of utilization of loans/advances/investment by the holding company in the subsidiary exceeding Rs. 100
crore or 10% of the asset size of the subsidiary, whichever is lower. (Effective from: 1st April 2019)
 Compliance: A listed entity is required to comply both with the Companies Act, 2013 as well as SEBI (LODR)
Regulations, 2015. Whereas, other entities who need to constitute Audit Committee will comply with Companies
Act, 2013
 .
NOMINATION AND REMUNERATION COMMITTEE

 The NRC helps the BOD relating to the appointment of the members of the BOD. This Committee finalizes the
conditions of employment and remuneration of senior management, and to management's and personnel's remuneration
and incentive schemes.
 NRC provisions in Companies Act [Section 178 of the Companies Act, 2013]
Constitution of NRC:
The following companies are required to constitute a Nomination Committee:
1. Every listed Public Companies, or
2. Unlisted public companies having:
a) PSC of Rs. 10 Cr or more;
b) T.O of Rs. 100 Cr or more;
c) aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 50 Cr or more.
 Members: NRC committee shall consist of 3 or more NED out of which not less than 1/2 shall be independent
directors.
 Formulation of Policy: The NRC shall consider the following while formulating the policy :-
a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of
the quality required to run the company successfully;
b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and
c) remuneration to directors, KMP and senior management involves a balance between fixed and incentive pay
reflecting short and long-term performance objectives appropriate to the working of the company and its goals.
ROLE & RESPONSIBILITIES OF NOMINATION AND REMUNERATION
COMMITTEE

a. Identifying the persons who are qualified to become Directors and who may be appointed in senior management;
b. Recommend to the BOD the appointment and removal of any director;
c. Specify the mariner for effective Evaluation of Board, Director's Committees performance;
d. Formulation of the parameters for determining qualifications, positive attributes and independence of a Director,
and
e. Recommend a policy relating to the remuneration for the Directors, KMP and other employees.
NRC PROVISIONS IN SEBI (LODR), 2015 [REGULATION 19]

 Members: The company shall set up a NRC which shall comprise at least 3 directors, all of whom shall be NED
and at least 1/2 shall be independent.
 Chairman: The Chairman of the committee shall be an independent director. The Chairman of the NRC shall
present at the AGM and answer the shareholders' queries in this regard.
ADDITIONAL ROLE UNDER LODR:

 Formulation of criteria for evolution of performance of Independent director and the BOD.
 Devising a policy on diversity of BOD.
 To extent or continue the terms of appointment of Independent Director.
 The role of the NRC of the board of a listed entity will also include recommendations made to the BOD on all
the payments made, in whatsoever form, to the senior management.
Meeting: NRC is required to meet at least once in a year.
Quorum: Either 2 members or 1 /3rd of the members of the committee, whichever is greater, including at least one
independent director in attendance.
STAKEHOLDERS RELATIONSHIP COMMITTEE (SRC)

 SRC provisions under Companies Act, 2013 [Section 178(5)]

 Constitution: A company has to constitute a SRC where such company has more than 1000 shareholders,
debenture-holders, deposit-holders and any other security holders at any time during a FY.
 Chairperson: The Chairperson of a SRC shall be a non-executive director or other member of the BOD.
 SRC provisions under SEBI (LODR), 2015 [Regulation 20] The listed entity shall constitute a SRC to
specifically look into the mechanism of redressal of grievances of shareholders, debenture holders and other
security holders.
 Members: The company shall set up an SRC which shall comprise at least 3 directors, at-least one of whom shall
be independent.
 Chairperson: The Chairperson of this committee shall be a NED.
 Meeting: Members of the SRC shall meet at-least once in a year.
ADDITIONAL ROLE OF SRC UNDER LODR

 Resolving the grievances of the security holders of the listed entity including complaints related to
transfer/transmission of shares, non-receipt of annual report, non-receipt of declared dividends, issue of
new/duplicate certificates, general meetings, etc.
 Review of measures taken for effective exercise of voting rights by the shareholders.
 Review of adherence to the service standards adopted by the listed entity in respect of various services being
rendered by the Registrar & Share Transfer Agent.
 Review of the various measures and initiatives taken by the listed entity for reducing the quantum of unclaimed
dividends.
 Ensuring timely receipt of dividend warrants/Annual Reports/statutory notices by the shareholders of the
company.
RISK MANAGEMENT COMMITTEE [REQUIRED ONLY U/R 21 OF
(LODR)]

 The top 500 listed entities, determined on the basis of market capitalisation, shall lay down the procedures about
the risk assessment and minimization procedures:
a. The Board is responsible for framing, implementing and monitoring the risk management plan.
b. The company shall also constitute a RMC. The Board shall define the roles and responsibilities of the RMC.
VIGIL MECHANISM [REGULATION 22]

 The listed entity shall formulate a vigil mechanism for directors and employees to report genuine concerns and
provide for adequate safeguards against victimization of directors or employees or any other person who avail the
mechanism.
RELATED PARTY TRANSACTION [REGULATION 23]

 DEFINITION OF RELATED PARTY [Regulation 2(1)(zb)] "Related Party means a related party as defined u/s
2(76) Companies Act, 2013 or under the applicable AS."
 Deemed Related Party- 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.
 Definition of Related Party Transaction [Regulation 2(1)(zc)] A transfer of resources services or
obligations between a listed entity and a related party, regardless of whether a price is charged or not whether in
single or multiple transactions." Note: Related party transaction definition is wide in LODR as compared to
Companies Act, 2013.
 MISCELLANEOUS-
Secretarial Audit As per SEBI (LODR) (Amendment) Regulations, 2018, from the year ending 31st March 2019, every
listed entity and its material unlisted Indian subsidiaries is required to annex with its annual report, a secretarial audit
report given by a PCS.
ANNUAL GENERAL MEETING

Reduction in Time limit for prescribed Companies

Top 100 listed entities are required to hold their AGM within 5 months from the date of closing of the FY, instead of
6 months.
Webcast of proceedings of the meeting
Top 100 listed entities are required to provide one way live webcast of the proceedings of the AGM.
IN-PRINCIPAL APPROVAL

 The listed entity, before issuing securities, shall obtain an 'in-principle' approval from RSE in the following manner:-
➢ Where the securities are listed only on RSE having NTT, from all such SE;
➢ Where the securities are not listed on any RSE having NTT, from all the SE in which the securities of the issuer
are proposed to be listed;
➢ Where the securities are listed on RSE having NTT as well as on the RSE not having NTT, from all RSE having
NTT.