LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Summary of Changes to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015-Implications of Changes.

Vide Circular dated May 10, 2018, SEBI have notified  changes to the above Regulations, in partial acceptance of the some of the  recommendations made by the Uday Kotak Committee on Corporate Governance in its Report which was submitted to SEBI on October,5, 2017. The Report was subsequently placed in the public domain and responses from stakeholders were elicited till November, 4, 2017.

A summary of the changes accepted by SEBI and  their implications is given in this exposition. It is pertinent to note that to facilitate transition to the revised regime the provisions have been made prospective with most of the changes kicking in from April,1, 2019.Some of the changes  have applicability from October,1, 2018.The changes have a wide ramification and will certainly have the effect of raising the bar on  disclosure requirements  by some notches and also usher in, hopefully , a superior   quality of corporate governance ,considering the stringent regime  of disclosure in anvil. For facility of appreciation of the nuances of the changes proposed, this exposition is split into two parts, one which gives the reader an overview of the non-mandatory proposals and the other which deals incisively with the mandatory requirements and their implications.

Non-Mandatory Proposals:

The following changes may be considered by a listed company voluntarily:

Disclosures in the Annual Report on Board Evaluation

The following disclosures may be considered in the Annual Report:

Observations on Board Evaluation carried out for the year
Previous year's observations and actions taken thereon.
Proposed actions based on current year's observations

Group Governance Unit

Where the listed company has a number of unlisted subsidiaries, the Company may monitor the governance of the subsidiaries, either through a dedicated group governance unit or a governance committee consisting of Board Members.

The Company may also establish a strong and effective group governance policy.  The decision to set up a group committee/unit or having a group policy shall rest with the Board of the Company.

Medium Term and Long Term Strategy

The following disclosures may be made in the Board's Report with regard to the Company's Medium Term and Long Term Strategy:

As part of the Section on Management Discussion and Analysis, the disclosure on Medium Term and Long Term Strategy within the limits set by the firm's competitive position based on a time frame to be decided by the Board.

Articulation of Long Term metrics specific to the Company's Long Term Strategy to facilitate appropriate measurement of progress.

The above changes can be embraced voluntarily by a company  from April,1, 2019.

Mandatory Changes as notified:

Save as otherwise specifically stated in the regulations, the changes notified shall come into force from April 01, 2019

Amendments and Implications

Time lines

Regulation 2(1)(zb) - Definition of Related Party

The definition is being extended to include any person or entity belonging to the promoter or promoter group and who holds 20 % or more in the share capital.

Implication-As the definition is being widened in amplitude, it will be  necessary  for Companies  to re-map the list of related parties to cover the above genre of persons.

W.e.f. 01.04.2019

Regulation 16 (1)(b)(ii) and (viii) - Definition of Independent Director

Existing definition is being tightened to clarify that any person who is a member of the promoter group of the company shall also not be considered as an Independent Director. This change is in sync with Section 149  of the Companies Act, 2013 (hereinafter “the Act').

Further, any person who is an Independent   Director , shall not be a non-independent director of another company on the Board of which a non-independent director of the company is an independent director.

Implications: Fresh declarations have to be obtained by Companies from their Independent Directors   as  of 30.09.2018  incorporating the above requirements..



Regulation 16 (1)(c): Definition of material subsidiary made more stringent

At present a subsidiary of the listed company is to be considered as a “material subsidiary', where the subsidiary's income or net worth exceeds 20% of the consolidated income or net worth of the listed company in the preceding financial year.

The above threshold is being reduced to 10%.

It is pertinent to note that consequent upon the above   . many more unlisted subsidiaries shall come within the ambit of a “material subsidiary' due to the reduced threshold as above.

It is also important to note that the threshold for determining materiality of a subsidiary has been retained at the existing threshold of 20% for the purposes of Regulation 24(1) which interalia, prescribes that an Independent director of the Holding company shall sit on the Board of the Material subsidiary .

W.e.f. 01.04.2019

Regulation 16 (1)(d): Definition of Senior Management

The existing definition of the term “Senior Management' is not specific, in that it is inclusive and covers   all members of the Management  standing in a hierarchy which is one level below the Executive Directors including all Functional Heads. This definition   allows for application of discretion on the part of companies in determining persons who shall form part of “Senior Management'.

The definition is being made more specific and shall include the persons occupying positions one level below:

  1. The CEO/MD/Whole-time Director (WTD)/Manager including a CEO/Manager who are not part of the Board.
  2. Company Secretary and CFO

Implications: Arising out of the above , it will be necessary for Companies to re-identify persons who shall be  part of Senior Management as per the above.

W.e.f. 01.04.2019

Regulation 17 - Changes relating to Board of Directors

Reg. 17(a) - Woman Director - At present the woman director on the Board need not be an Independent Director.

It is proposed that the top 500 listed companies (based on Market cap of the previous FY) shall have at least one Independent Woman Director.

The top 1000 listed companies shall have at least one Independent Woman Director. 

Implications: SEBI has observed that to satisfy the norm for appointing a Woman Director, many reputed companies have resorted to the practice of appointing the spouses of the promoters as directors. To discourage such an approach ,SEBI has ruled that the woman director shall have to necessarily be an Independent director. The transition contemplated shall happen in a phased manner depending on the market capitalization of Companies.

Insertion of New Regulation 17(1)(c) - Minimum no. of directors

Top 1000 listed companies shall have at least  a minimum of 6 directors.

Top 2000 listed companies shall have at least  a minimum of 6 directors.

Implications: Many of the listed company Boards are compact and have a strength which is below the above threshold. Companies will now have to fall in line with the above norm. The Board has to have a reasonable size to ensure that there is a free exchanges of views amongst the directors so that different perspectives are available to facilitate objective decision making   by the Board.

Insertion of New Regulation 17(1A)-Appointment of non-executive director including Independent Director whose  age exceeds 75 years

Where it is  proposed to either  appoint or to continue with the appointment of a non-executive director who is 75 years in age, such appointment shall be by a special resolution of the  members and there shall be an explanatory statement in the Notice   in justification of   such appointment.

Implications: Listed Companies normally take recourse to the appointment of retired bureaucrats, Senior Counsels as Independent Directors to lend stature to their Boards. The age bar as contemplated will yield to a more vibrant Board.

Insertion of New Regulation 17(1B)- Delinking the  position of Chairman and Managing Director

The top 500 companies shall ensure that the Chairman of the Board shall be :

  1. A Non-Executive  Director
  2. Shall not be related to the Managing Director or CEO

The above provision shall not apply to a company which does not have any identifiable promoters as per the shareholding pattern filed with the exchange.

Implications: There exist several   reputed listed companies who have an executive chairman holding the reins and who  doubles  up in the capacity of Managing director as well. The above proposal will put an end to this practice

Insertion of New Regulation 17(2A)- Quorum for Board Meetings

Quorum shall be one third of total strength of the Board or three directors, whichever is higher and shall include at least one independent director.

For top 1000 companies(w.e.f.1.4.2019)

For top 2000 companies(W.e.f.1.4.2020)

Attendance through Video conferencing shall be considered for the purpose of determining quorum.

Implications: The above change is   primarily intended to align the Listing Regulations with the provisions of the Act.

Insertion of New Regulation 17(6)(ca)- Approval of shareholders by special resolution for payment of remuneration to a single non-executive director (w.e.f.1.4.2019)

Where the annual remuneration payable to a single non-executive director exceeds 50% of the total annual remuneration payable to all non-executive directors, approval of shareholders by special resolution shall be obtained each year for such payment.

Implications: The above proposal will ensure that the disparity in the payments made to non-executive Directors in particular by way of commission based on Net profits is narrowed down and ensure that companies justify such disparity, if any, by seeking consent of the Members.

Insertion of New Regulation 17(6)(e)- Compensation to Executive Directors

Where the remuneration payable to Executive Directors who are either promoters or members of the promoter group exceeds 5 crores or 2.5% of the net profits of the Company, whichever is higher, or where the company has more than one such director, if the remuneration exceeds 5% of the net profits, such payment will require approval of the shareholders by special resolution.

The special resolution shall be valid till the expiry of the term of the director.

Implications: The above proposal is salutary in that it will eliminate the tendency of certain companies to patronize their executive directors , belonging to the promoter clan by paying abnormal amounts of remuneration regardless of their contribution to the company.

Substitution of existing Regulation 17(10) by new regulation - evaluation of Independent Directors

The evaluation of Independent Directors shall be done by the entire Board and the evaluation   will consider the performance of the Directors as also fulfillment of their criteria of independence as per the regulations and their independence from the Management.

In the process of evaluation, the director evaluated shall not participate.

Implications: The evaluation process shall undergo a change and will have to factor in the criteria additionally set out above.

Insertion of New Regulation 17(11)- Board's recommendation for approval of any special business by shareholders(w.e.f.1.4.2019)

The Explanatory Statement for seeking approval of shareholders for any item of special business shall set forth clearly the recommendations of the Board for each such item.

Implications: The above change in our view is only of theoretical value since every resolution which is proposed by the Board to the shareholders has to necessarily carry its recommendation.

Insertion of New Regulation 17A- Maximum no. of directorships

A person shall not be a Director in more than 8 listed companies(W.e.f 1.4.2019)

 A person shall not be a Director in more than 7 listed companies (w.e.f.1.4.2020)

A person shall not be an Independent director in more than 7 listed companies. This restriction   already exists in Regulation 25(1) of the SEBI(LODR)Regulations, 2015.

WTD/MD in a listed company shall not serve as Independent Director in more than 3 listed companies. Proviso under Regulation 25(1) of the existing Regulations already provides for the above embargo.

 It is clarified that   for the purpose of this sub-clause,  a listed entity  shall mean only a Company  whose equity shares are listed on the stock exchanges.

W.e.f. 01.04.2019

W.e.f. 01.04.2020

W.e.f. 01.04.2019

W.e.f. 01.04.2020

W.e.f. 01.04.2019

W.e.f. 01.04.2019

W.e.f. 01.04.2019

W.e.f. 01.04.2019


Insertion of New Regulation 19(2A) - Nomination & Remuneration Committee - Quorum

The present Regulations do not specify a quorum for the above Committee. Hence, the minimum quorum shall be the presence of either two   members or 1/3rd of the total strength of the Committee, whichever is greater, subject to the presence of at least one Independent Director.

Insertion of New Regulation 19(3A) - Nomination & Remuneration Committee - Minimum no. of Meetings

The Committee shall meet at least once a year. As Meetings of the above Committee are need-based , the above stipulation has been proposed. However, it is pertinent to note that the Committee ought to meet at least once a year, given its responsibility under the Statute for carrying out the evaluation of the performance of the directors.

W.e.f. 01.04.2019

W.e.f. 01.04.2019

Regulation 20 - Stakeholders' Relationship Committee

The scope of functioning of the Company is being widened to consider various aspects of interest of the security holders. At present the Committee is required to only address grievances of investors. SEBI contemplates that the Committee should have a larger role to play and it has accordingly culled out additional areas of responsibility for the Committee which have been articulated elsewhere in this discussion..

Insertion of New Regulation 20(2A) - Composition of Stakeholders' Relationship Committee.

 The present Regulations do not contain any provisions relating to composition of the above Committee.

As per the amendment, the composition shall be a minimum of three directors with at least one Independent Director.

Regulation 20(3) - Presence of Chairman of the Stakeholders' Relationship Committee at the AGM(w.e.f.1.4.2019)

The present regulations do not provide for the compulsory presence of the Chairman of the above Committee at the AGM. Such presence will now become necessary.

Implication: The above amendment has been proposed to align the Regulations  with Section 178(7)of the  Act.

Insertion of New Regulation 20(3A) - Frequency of Meetings of Stakeholders' Relationship Committee

The Committee shall meet at least once a year.

Implications: The above proposal is somewhat paradoxical given the responsibility of the Committee to periodically review the redressal of investor grievances. In our view, SEBI should have mandated that the Committee should meet at least twice in an year.

W.e.f. 01.04.2019

W.e.f. 01.04.2019


W.e.f. 01.04.2019

Insertion of New Regulation 21(3A) - Frequency of Meetings of Risk Management Committee(RMC)

The Committee shall meet at least once a year.

The periodicity of meetings of the above Committee ought  to have been half-yearly ,given that the Committee has to articulate and mitigate business risks which are ever so ambivalent, given the dynamics of the ecosystem

Regulation 21(4) - Terms of reference of RMC

Committee should specifically monitor and review cyber security in the company.

The  Act under Rule 28 of the Companies( Management  and Administration)Rules,2014 enjoins upon the Managing Director or the Director responsible for ensuring, inter alia, security of electronic records. The above insert in the Regulations is intended to ensure that there is alignment with the Act as regards cyber security.

Regulation 21(5)- Applicability of RMC(w.e.f.1.4.2019)

Applicability of RMC shall be extended to top 500 companies determined on the basis of market capitalization instead of 100 at present. The market cap will be determined with reference to the company's financials for the immediately preceding year.

W.e.f. 01.04.2019

W.e.f. 01.04.2019

Regulation 23 - Related Party Transaction(RPT)

Regulation 23(1) - Policy on RPT

The Board should approve the clear thresholds for RPTs. Policy on RPTs should be reviewed by the Board once in every three years and updated accordingly.


In the light of the above, it would be necessary that the existing company policy   on RPTs is reviewed providing for definitive thresholds and the policy shall also be subjected to review once in three years.

Insertion of new Regulation 23(1A) - Payments to related parties for brand usage/royalty

Where the value of the payment for the above purposes does not exceed 2% of the annual consolidated turnover of the company, the transaction shall not be considered as material and no shareholder approval will be called for. It would be relevant to note that where it comes to determination of materiality of RPTs not belonging to the above genre, the existing threshold of 10% of annual consolidated turnover as provided in the existing Explanation under Regulation 23(1) shall continue since this Explanation has not been deleted.

Regulations 23(4) & 23 (7) -  Eligibility of Related parties to vote

At present related parties cannot vote on any material RPT. Therefore, they have to abstain from voting. This provision is being amended to provide that   while related parties shall not vote to approve the transaction, they   can either abstain from voting or vote against the transaction. Therefore they cannot have an affirmative vote but can vote against the RPT or abstain from voting.

Insert of New Regulation 23(9) - Disclosure of RPT to Stock Exchange

Within 30 days from the date of publication of its financial results starting from the half year ending 31.03.2019, the Company shall disclose to the Stock Exchange details of RPTs on a consolidated basis to the stock Exchanges and also publish the same on its website in the format prescribed in the accounting standards.

Implication: This is a new requirement which has to be ensured from the half year ending March, 31, 2019. Companies will have to realign themselves with the above requirements effective from half year ending March,31, 2019.

W.e.f. 01.04.2019

W.e.f. 01.04.2019

W.e.f. 1.4..2019

w.e.f.half  year ending March,31,2019

Governance Requirements relating to Material subsidiary-Amendment to Regulation 24(1)

At present it is necessary to appoint on the Board of a “Material unlisted subsidiary' at least one Independent director of the listed company. This requirement is applicable only to a material subsidiary in India. This requirement is being extended to cover an overseas Subsidiary as well.

The definition of “material subsidiary' for the purpose of this Regulation shall remain unchanged and it shall mean a Subsidiary whose income   or net worth exceeds 20% of the consolidated turnover or net worth of the Company and its subsidiaries in the immediately preceding financial year.

Implications- It is important to note that whereas in Regulation 16(1)(c )the definition of "material subsidiary" has been amended to reduce the threshold of income or net worth to 10% from the earlier limit of 20%  for the purpose of Regulation 24 above , the threshold will remain unchanged at 20% as in the existing Regulations.



Insert of new Regulation 25-Secretarial Audit

All listed companies and their material Subsidiaries which are incorporated in India shall be subjected to Secretarial Audit by a practicing Company Secretary and the Report on such audit shall be annexed to the Board's Report.

Implications- We would point out that given the revised definition of “material subsidiary' in Regulation 16(1)(c) above, secretarial audit will apply to a subsidiary of a listed company if it is “material' as per the threshold contemplated in Regulation 16 above.

Substitution of  Regulation 25(1)- No person can be  Alternate Director for ID

As per existing Regulation, any person can be appointed Alternate Director for an Independent Director for the period of the ID's stay outside India. Such appointment shall not be allowed effective from 01.10.2018

Implications-In our view, this is yet another endeavor to synchronize the Regulations with the amended provisions of the  Act.Section 161(2) as amended does not allow the director of the same company to act as an alternate for another director in the same company.

Insertion of new Regulation 25(8)-Declaration by Independent Director

Every ID shall at the first meeting after his appointment shall provide a declaration as to his independence and also confirm that he is not aware of any circumstances which could impact his ability to discharge his duties by applying his independent judgment and without any external influence.

The above declaration has to be provided by the ID at the first Meeting of the Board held in every financial year.

The declaration provided has to be taken on record by the Board.

Implications-Upon coming into force of the above Regulation , it would be necessary to obtain declarations of independence from directors on the lines indicated above.

Insert of Regulation 25(10) - Need for Directors and Officers Insurance (D&O Insurance) for Independent Directors

The top 500 companies shall undertake D&O Insurance for all its IDs of such quantum and for such risks to be determined by the Board.

Implications: Most listed Companies take out D&O policies for its directors. It may be necessary to revisit the policies and cover such risks as determined by the Board.

W.e.f. from financial year ending March 31, 2019


W.e.f. 01.10.2018

(e) Deletion of proviso under Regulation 29 (1) (f)- Proposal for issue of bonus shares

As per present regulation, if the proposal for a bonus issue is not part of the Board agenda, there is no need to make a prior intimation to the stock exchanges on the same and it can be considered at the Meeting of the Board. Effective from 01.10.2018, prior intimation for bonus issue will have to be given to stock exchanges and the recommendation should be part of the board agenda.

The above change is in the right direction. Some of the listed companies have taken the investors and the markets alike unawares by coming up with bonus announcements without a predetermined agenda , causing unnecessary turbulence in the market. It is appropriate that a bonus announcement is pre-disclosed to the market so that markets are appropriately insulated.

W.e.f. 01.10.2018

(f) Insert of new Regulation 32(7A) - Disclosure regarding end use of preferential allotment / Qualified Institutional Placement

Where funds are raised though the above process, the utilization of such funds has to be disclosed in the Annual Report till the funds are fully utilized.

The requirement of providing end-use of details of funds previously applicable to IPOs. The above provision will bring in transparency on end use of security issues of the above genre.


Regulation 33 - Amendments regarding disclosure of Financial Results

Where the Company has subsidiaries, it has to provide consolidated financial results to the stock   exchanges. The option which was available to the company earlier under the Regulations   with regard to publication of consolidated financial results , shall no longer be available, thus making publication of consolidated results compulsory.

Regulation 33(3)(e) - Limited review for Q4 Results being made compulsory

As per existing position, when a company publishes its audited financial results for the year end, the figures for the last quarter of the year are balancing figures, representing the difference between the year-end audited figures and the 9 months figures.

It is proposed to make limited review of the figures by the auditors for the last quarter of the year compulsory.

The above change is welcome given that the present Regulations provide for disclosure of numbers for the last quarter by way of a differential between the audited numbers and the cumulative numbers for the last three quarters . Making the last quarter numbers subject to a limited review by the auditors adds to their authenticity

Insert of new Regulation 33(3)(g) - Requirement of half-yearly cash flow statement along with financial results

Provision of statement of half yearly cash flow statement along with consolidated/standalone results being made compulsory.

Implications: This proposal will elevate the levels of transparency as far as dissemination of the financial results of the company.

Insert of new Regulation 33(3)(h) - Audit/Limited Review to be ensured by company on at least 80% of consolidated revenue, assets and profits

Where the company has subsidiaries and publishes consolidated results, it shall ensure that at least 80% of the consolidated revenue, assets and profits are subject to limited review every quarter.

By making limited review compulsory to the extent of 80% of the Company's income , the authenticity associated with the consolidated data will be enhanced.

Insert of new Regulation 33(3)(i) - Disclosure of aggregate effect of material adjustments in last quarter results

In the results of the last quarter of the financial year, company shall disclose by a note the aggregate effect of material adjustments made in the results of that quarter which pertain to earlier periods.

The above initiative will lead to avoidance of distortion in the financial data presented.

 Insert of new Regulation 33(8) - Statutory Auditor to undertake limited review of audit of all companies whose accounts are being consolidated with the company(w.e.f.1.4.2019)

The statutory auditor shall carry out a limited review of the Audit of all the companies whose accounts are consolidated in accordance with AS 21 and the guidelines to be issued by SEBI.

W.e.f. 01.04.2019

W.e.f. 01.04.2019


W.e.f. 01.04.2019

W.e.f. 01.04.2019

Insert of New Regulation 34(1)in place of existing provision -Dispatch of Annual Report to shareholders

As per existing provisions, the Company is required to submit to the Stock Exchange its Annual Report within 21 days from the date of its adoption by the shareholders at the AGM. Changes are being made to the above provision as under:

  1. The Annual Report shall be submitted to the Stock Exchanges and also published on the Company's website simultaneous with the commencement of dispatch of the same to the shareholders.
  2. If any changes are made to the Annual Report, the revised copy thereof along with the details and explanation for such changes shall be sent to the stock exchanges within 48 hours after the conclusion of the AGM.

It is logical that the Stock exchanges should receive the Company's annual Report simultaneously with the shareholders. The requirement to send the Report after the conclusion of the AGM was retrograde in nature.

With respect to Annual Report for the year ending 31.03.2019 onwards

Regulation 36(1)(a) - Dispatch of soft copy of Annual Report to Members

At present, soft copy of Annual Report can be sent only to those members whose email ids are registered with the Company for this specific purpose. This provision is being eased to provide that soft copies of the annual report can be sent to those shareholders whose ids are registered with the depositories   and   with the company.

Insert of New Regulation 36(5)in relation to appointment of Statutory Auditors

Along with the Notice to the shareholders for the appointment/re-appointment of the statutory auditors, the following additional disclosures are to be provided in the Notice as part of the Explanatory statement:

  1. Proposed fees along with terms of appointment
  2. In case of appointment of new auditor, any material change in the fee payable from that paid to the outgoing Auditor along with the rationale for such change
  3. Basis of recommendation for the appointment including details with regard to credentials of the Auditors proposed to be appointed.

The above additional disclosure requirements will provide the basis for the rationale of the fee structure to the auditors as also to a better appreciation of the credentials of the Auditors.

With respect to Annual Report for the year ending 31.03.2019 onwards

W.e.f. 01.04.2019

Insert of new Regulations 44 (5) and 44(6) - Timelines for holding AGM and webcast of AGM proceedings

  1. The top 100 listed companies based on market cap shall hold their AGMs within 5 months from the date of conclusion of the FY.
  2. The top 100 listed companies shall also arrange for a one way live telecast of the proceedings of the AGM.

This proposal is out of sync with the provisions of the Act as far as the time lines for holding the AGM is concerned. As regards web casting the issue of operational guidelines will be necessary.

W.e.f. 01.04.2019


Regulation 46(2)- Additional information to be disseminated to the shareholders

The following additional information shall be provided to the shareholders under a separate section on the company's website:

  1. Details of credit ratings obtained for all outstanding instruments, updated immediately upon revision.
  2. Audited financial statements of each subsidiary should  be uploaded at least 21 days prior the date of the AGM of the company.

As changes in rating are so far announced only to the Stock exchanges . the investor at large is  unaware of the changes unless he follows the stock closely and keeps himself abreast of corporate announcements. Seeking the provision of such information in the Annual Report is thus appropriate.

W.e.f. 01.10.2018

W.e.f. 01.04.2019

Amendments in Schedules:

Widening the role of Audit Committee

Through a new insert in Part C to Schedule II, the Audit committee shall review the utilization of loans/advances/investments made by the holding company in the subsidiary, which exceeds 100 crores or 10% of the asset size of the subsidiary, whichever is lower, including review of existing loans/advances/investments.

This proposal is salutary in that there would be better monitoring of funds provided to the subsidiary.

Extended role of Nomination & Remuneration Committee

The Committee shall additionally recommend to the Board all remuneration payable to Senior Management.

Extension in the scope of functioning of the Stakeholders' Relationship Committee

Apart from its existing responsibility of addressing grievances of investors, the following additional areas will be considered by the committee:

  1. Review of measures taken for effective exercise of voting rights by shareholders.
  2. Review of adherence to service standards adopted by the company in respect of services extended by the Registrar and Share Transfer Agent.
  3. Review of measures and initiatives taken to reduce the quantum of unclaimed dividends and ensuring timely receipt of dividend warrants, annual reports by the shareholders of the company.

The Committee will now be in a position to play a pro-active role vis-à-vis the Security holders in the Company. e)Disclosure of Events to the Stock Exchanges without application of guidelines for materiality

  1. Where the Auditors of the company have resigned, the detailed reasons for such resignation as provided by the auditors shall be disclosed by the Company immediately and in any case not later than 24 hours of receipt of such reasons.
  2. Where there is a resignation of an Independent Director, within 7 days from the resignation, following disclosures have to be made to the exchange:
  1. Detailed reasons for resignation as provided by the Director.
  2. The Director shall along with the detailed reasons provide also a conformation that there are no material reasons other than those provided.
  3. The confirmation in (2) above shall be disclosed by the Company to the Exchange.

The additional disclosures called for as above will make it imperative for the company to come out clean as to the reasons associated with the change in the Auditors and Directors as opposed to coming out with cryptic reasons such as “due to Health reasons' as is usually the case with resignation of directors. If there is a Board room conflict which is simmering, the investor will get forewarned due to the requirements of the above disclosures. 

Changes in Disclosure of Financial Results

  1. With regard to audit qualifications, where the impact of qualifications is not quantifiable, the Management shall mandatorily make an estimate, which the Auditor shall review and report accordingly.
  2. The Management would be permitted not to provide an estimate on matters such as going concern or matters which are subjudice in which case it shall provide the reasons therefor and the Auditors shall review and report accordingly.

Changes in Disclosure in Annual Report

  1. Additional disclosure for RPTs: In respect of transactions with any person belonging to the promoter/promoter group, which holds 10% or more, disclosure has to be as per the format prescribed in the relevant accounting standards.
  2. Additional disclosures in Management Discussion and Analysis (MD&A) Report - being part of the Board's Report

In case there is a significant change of 25% or more as compared to the previous year, in the following key financial ratios, detailed explanation for such changes are to be provided in the MD&A

  1. Debtors turnover (b) Inventory Turnover (c) Interest coverage ratio (d) debt equity (e) operating profit margin (f) net profit margin


In sector specific equivalent ratios as applicable.

Details of any changes in Return on net worth as compared to previous year with explanation.

 (g) Additional disclosures in Report on “Corporate Governance'

1)   With effect from Mach,31,2019, a chart/matrix setting out the skills/expertise/competence of the directors shall be provided providing the list  of core skills/expertise/competencies as identified by the Board in the context of the Company's business and those actually available with the Board.

2)   With effect from FY ended March 31, 2020, the names of the directors who possess such skills/expertise/competence should be provided in the Report.

3)   There shall be a confirmation that ,in the opinion of the Board, the independent directors fulfill the conditions specified in the Regulations and are independent of the Management.

4)   In case of resignation of Independent Director during continuance of his tenure, the detailed reasons for the resignation should be provided along with the confirmation by such director that there are no other material  reasons for the resignation other than those provided in the Annual Report.

5)  Details of all credit ratings obtained by the company along with revisions thereto during the FY for mobilizing funds, both in India or abroad.

6)   Details of utilization of funds raised through preferential allotment /qualified institutional placements.

7) A certificate from a practicing company Secretary that none of the directors of the company have been debarred or disqualified from appointment as Director by SEBI/MCA or any other statutory authority.

8)   In case the Board has not accepted any recommendation of any committee which is mandatorily required, the details thereof should be provided along with the reasons.

9)  Total fees for all services rendered by the statutory auditors to the company and its subsidiaries on a consolidated basis.


The compliance requirements   that will be ushered through the above changes are no doubt going to be arduous and daunting. However, given the objectives associated with the amendments, the changes have to be welcomed as it will elevate the levels of governance which is the paramount need of the day. What is however, discordant is the fact that as elaborated above, many of the changes are not in harmony with the provisions of the Companies Act, 2013.It may not be a bad idea to introspect down the road and develop a separate chapter in the Act on compliance requirements as applicable to listed companies so that the dichotomy   between the Regulation and the Act can be put at rest.

W.e.f. 01.04.2019

W.e.f. 01.04.2019

W.e.f. 01.04.2019

W.e.f. 01.04.2019

W.e.f. 01.04.2019

With w.e.f  from FY ended 31.03.2019 onwards

W.e.f. FY ended 31.03.2019 onwards

W.e.f. FY ended 31.03.2019 onwards

"Loved reading this piece by Ramaswami Kalidas?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"

Tags :

Category Corporate Law, Other Articles by - Ramaswami Kalidas