Regulatory updates

Recently, MCA, vide circular dated 5 May 2022 had extended the facilityof holding Annual General Meeting (AGM) and Extraordinary General Meetings (EGMs) through VC/OAVM till 31 December 2022. In line with this, The Securities and Exchange Board of India (SEBI), had also been receiving various representations from the stakeholders of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) with respect to the extension of facilities to conduct annual meetings and other meetings of unitholders through VC/OAVM.

Accordingly, SEBI, through its circular dated 3 June 2022 has extended the facility for conducting annual meeting and other meetings of unitholders of REITs and InvITs through VC/OAVM till 31 December 2022 (Earlier: 30 June 2022).

---

To access the text of the circular, please click here

Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (LODR Regulations) require listed entities to submit to the stock exchange a statement showing holding of securities and shareholding pattern separately for each class of securities, in a format and manner prescribed by SEBI.

SEBI, vide a circular dated 30 November 2015 (the circular) has inter alia stipulated the manner of representation of holding of specified securities and the format for disclosure of holding of specified securities. As per the circular, the holding of the specified securities, will be divided into the following three categories, namely (a) promoter and promoter group, (b) public and (c) nonpromoter non-public. While disclosing ‘Public shareholding’, the circular requires companies to consider the following:

1. For disclosure under category ‘Institution’, the shareholder should fall under the category ‘Qualified Institutional Buyer’ as defined under Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
2. All other Public Shareholding shall be displayed under Categories ‘Central Government/State. Government(s)/President of India’ or ‘Non-Institutions’
3. Names of the shareholders holding 1 per cent or more than 1 per cent of shares of listed entity is to be disclosed.
4. Names of the shareholders who are persons acting in concert, if available, shall be disclosed separately.

The circular has also prescribed the format for disclosure of shareholding of specified securities as below:

1. Table I: Summary statement holding of specified securities
2. Table II: Statement showing shareholding pattern of the promoter and promoter group
3. Table III: Statement showing shareholding pattern of the public shareholder
4. Table IV: Statement showing shareholding pattern of the non-promoter non-public shareholder
5. Table V: Statement showing details of significant beneficial Owners.

The SEBI, vide circular dated 30 June 2022 has modified the circular as below (amendment circular):

1. Amendments while disclosing public shareholding: Companies will no longer need to consider points (1) and (2) (above) while disclosing public shareholding under the LODR regulations read with the circular.
2. Revised formats: Revised formats of Table III and Table IV have been prescribed by the amendment circular.
3. Disclosure of foreign ownership limits: Listed entities are required to disclose details pertaining to foreign ownership limits in a prescribed format (which will be considered as Table VI under clause 5 of the circular).

The amendment circular would be effective from the quarter ending 30 September 2022.

---

To access the text of the amendment circular, please click here

To access the text of the circular, please click here

The Government of India, vide its budget speech for FY 2019-20 had proposed to initiate steps towards creating a Social Stock Exchange⁹, under the regulatory ambit of the Securities and Exchange Board of India (SEBI).

Accordingly, in September 2019, SEBI constituted a Working Group (WG) to inter alia make recommendations with respect to possible structures and mechanism of an SSE within the securities market domain. Subsequently, in September 2020, SEBI constituted a Technical Group (TG)¹⁰ to recommend on matters related to the scope of work, eligibility criteria and regulation of social auditors.

Based on the recommendations of the WG and the TG, and the public comments received on the recommendations of the WG and the TG, on 25 July 2022, SEBI introduced regulations pertaining to SSE by making amendments to the following regulations:

• The SEBI (Issue of Capital and Disclosure Requirements ) Regulations, 2018 (ICDR Regulations)¹¹ by inserting a chapter on ‘Social Stock Exchange’
• The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations)¹² by adding a chapter on ‘Obligations of a Social Enterprise’, and
• The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations)^>13

The key amendments have been discussed below:

A. Amendments to ICDR Regulations

The ICDR Amendment Regulations have inserted a new chapter, ‘Chapter X-A, Social Stock Exchange’ in the ICDR Regulations, which deals with various aspects of an SSE and introduces the concept of a Zero Coupon Zero Principal Instrument (ZCZP), which can be issued by Not for Profit Organisations (NPOs). Some of the key aspects pertaining to the SSE and ZCZP are as follows:

• Meaning and Applicability: According to the ICDR Amendment Regulations, a ‘Social Stock Exchange’ means a separate segment of a recognised stock exchange having nationwide trading terminals, permitted to register NPOs¹⁴ and/or list the securities issued by NPOs in accordance with the provisions of the ICDR Regulations. The provisions of Chapter X-A would apply to:
  ‐ NPOs seeking to only get registered with an SSE,
  ‐ NPOs seeking to get registered and raise funds through an SSE, and
  ‐ For Profit Social Enterprises¹⁵ seeking to be identified as a Social Enterprise (SE)¹⁶ under the provisions of Chapter X-A of the ICDR Regulations.
• Access to SSE: An SSE would be accessible only to institutional and non-institutional investors. Other classes of investors, as SEBI deems fit may also be permitted to access the SSE.
• Governance of SSE: Every SSE should constitute an SSE Governing Council to have an oversight on its functioning. The composition and terms of reference of the Governing Council would be specified by SEBI from time to time.
  
• Eligibility conditions for being identified as a social enterprise¹⁷ : An NPO or a For Profit Social Enterprise (FPSE), in order to be identified as a social enterprise, must establish primacy of its social intent by engaging in activities such as eradicating hunger, poverty, malnutrition and inequality, promoting health care including mental healthcare, sanitation and making available safe drinking water, promoting education, employability and livelihoods, protection of national heritage, art and culture and so on. It should target underserved or less privileged population segments or regions recording lower performance in the development priorities of central or state governments.
  Such an enterprise should have at least 67 per cent of its activities, qualifying as eligible activities through one or more of the following:
  ‐ at least 67 per cent of the immediately preceding three-year average of revenues comes from providing eligible activities to members of the target population,
  ‐ at least 67 per cent of the immediately preceding three-year average of expenditure has been incurred for providing eligible activities to members of the target population, and
  ‐ members of the target population to whom the eligible activities have been provided constitute at least 67 per cent of the immediately preceding three-year average of the total customer base and/or total number of beneficiaries.
  
• Registration with SSE: An NPO that seeks to raise funds through an SSE should mandatorily register with an SSE¹⁸. The minimum requirements for registration would be specified by SEBI, the SSE may specify additional eligibility requirements.
• Fund raising by social enterprises¹⁹: A social enterprise may raise funds through the following means:
  a.   A NPO may raise funds on an SSE through:
  ‐ Issuance of ZCZP instruments²⁰ to institutional investors and/or non-institutional investors,
  ‐ Donations through Mutual Fund schemes as specified by SEBI, or
  ‐ Any other means as specified by SEBI from time to time.
  b.  A FPSE may raise funds through:
  ‐ Issuance of equity shares on the main board, Small and Medium Enterprises (SME) platform or innovators growth platform or equity shares issued to an AIF including a Social Impact Fund,
  ‐ Issuance of debt securities, or
  ‐ Any other means as specified by SEBI from time to time.
• Other provisions: In addition to the above provisions, Chapter X-A of the ICDR Regulations stipulates regulations for the following:
  ‐ Cases when a social enterprise is not eligible to register or raise funds through a SSE or stock exchange
  ‐ Eligibility for issuance of ZCZP instruments
  ‐ Procedure for public and private issuance of ZCZP instruments
  ‐ Contents of a fund-raising document
  ‐ Other conditions relating to issuance of ZCZP instruments
  ‐ Termination of listing of ZCZP instruments from SSE

B.   Amendments to LODR Regulations
Some of the key amendments specified in the LODR Amendment Regulations are as follows:

• Applicability: The LODR Amendment Regulations inserted a chapter ‐ 'Chapter IX-A, Obligations of social enterprises'. The provisions of this chapter apply to:
  ‐ A FPSE whose designated securities are listed on the applicable segment of the Stock Exchange(s), and
  ‐ An NPO that is registered on the SSE(s).
• Issuer of ZCZP instruments would be considered as a ‘listed entity’: The LODR Amendment Regulations have added ZCZP instruments in the definition of ‘designated securities’, accordingly, an entity that issues a ZCZP instrument would be considered as a listed entity²¹ within the meaning of the LODR Regulations.
• Disclosure requirements - applicable to FPSE: A FPSE whose designated securities are listed on the Stock Exchange(s) should comply with the disclosure requirements contained in the LODR Regulations with respect to issuers whose specified securities are listed on the Main Board or the SME Exchange or the Innovators Growth Platform, as the case may be.
• Disclosure requirements – applicable to NPO: An NPO registered on the SSE(s), should make annual disclosures to the SSE(s) on matters specified by SEBI, within 60 days from the end of the financial year or within such period as may be prescribed.
  Additionally, the SSE(s) may specify other matters that need to be disclosed by the NPO on an annual basis.
• Intimations and disclosures by social enterprise to SSEs or stock exchanges:

‐ Materiality assessment: A social enterprise whose designated securities are listed on the SSE(s) should disclose to the SSE(s) its policy for determination of materiality, duly approved by its board or management, as the case may be, as well as any event²² that may have a material impact on the planned achievement of outputs or outcomes. All such events should also be disclosed on the social enterprise’s website.

‐ Details of Key Managerial Personnel: The board and management of a social enterprise would authorise one or more of its KMP for determining materiality of an event or information for the purpose of making disclosures to the SSE or the stock exchange as the case may be. Details of such KMP should be communicated to the SSE or to the stock exchange.

‐Annual impact report: A social enterprise, which is either registered with or has raised funds through an SSE should submit an annual impact report to the SSE in the format specified by SEBI²³. The annual impact report must be audited by a social audit firm employing social auditor(s)²⁴.

‐ Statement of utilisation of funds: A listed NPO should submit to the SSE(s) the following statement in respect of utilisation of the funds raised, on a quarterly basis:

1. Category-wise amount of monies raised,
2. Category-wise amount of monies utilised, and
3. Balance amount remaining unutilised²⁵.

The statement of utilization of funds should be given till the time the issue proceeds have been fully utilised or the purpose for which they were raised, has been achieved.

C. Amendments to AIF Regulations
The AIF Amendment Regulations have specified provisions with regard to raising of funds by an AIF by way of a ‘social impact fund’²⁶. Social impact fund has been defined as an AIF which invests primarily in securities, units or partnership interest of social ventures or securities of social enterprises and satisfies the social performance norms laid down by the fund. It issues “social units” to investors who agree to receive only social returns or benefits and no financial returns against their contribution. Some of the key amendments with respect to a social impact fund are given below:

• Each scheme of a social impact fund should have a corpus of at least five crore rupees,
• In case of a social impact fund which invests only in securities of NPOs registered or listed on a SSE, the minimum value of investment by an individual investor should be INR 2 lakh,
• Minimum grant that can be accepted for specific purpose from any person has reduced to INR10 lakh (instead of the existing INR 20 lakh)
• A social impact fund launched exclusively for a NPO registered or listed on an SSE, would be permitted to deploy or invest 100 per cent of the investable funds in the securities of such NPOs

The above amendments are effective from the date of publication in the Official Gazette (i.e., 25 July 2022).

---

To access the text of the ICDR Amendment Regulations, please click here

To access the text of the AIF Amendment Regulations, please click here

To access the text of the LODR Amendment Regulations, please click here

9. The rationale for setting up the SSE is to enhance transparency and make available information about for-profit social enterprises or non-profit organisations in public domain, which would augment the flow of funds in favor of such enterprises.
10. The technical group was built upon the recommendations of the WG
11. The amendments have been issued by the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 (ICDR Amendment Regulations)
12. The amendments have been issued by the SEBI LODR (Fifth Amendment) Regulations, 2022 (LODR Amendment Regulations)
13. The amendments have been issued by the SEBI AIF (Third Amendment) Regulations, 2022 (AIF Amendment Regulations)
14. An NPO means a social enterprise, which is any of the following entities:
    • A charitable trust registered under the Indian Trusts Act, 1882
    • A charitable trust registered under the public trust statute of the relevant state
    • A charitable society registered under the Societies Registration Act, 1860
    • A company incorporated under section 8 of the Companies Act, 2013
    • Any other entity as may be specified by SEBI
15. ‘For Profit Social Enterprise’ means a company or a body corporate operating for profit, which is a social enterprise for the purposes of the ICDR Regulations and does not include a company incorporated under section 8 of the Companies Act, 2013
16. A social enterprise means either a NPO or a For Profit Social Enterprise that meets the eligibility criteria specified in Chapter X-A;
17. Corporate foundations, political or religious organizations or activities, professional or trade associations, infrastructure and housing companies, except affordable housing, are not eligible to be identified as a social enterprise.
18. A NPO may choose to register with a SSE and not raise funds through it.
19. A social enterprise would be eligible to register or raise funds through a Social Stock Exchange, subject to the restrictions specified in Para 292H of the Regulations.
20. ZCZP instruments would have a specific tenure, they would be issued without any coupon and no principal amount would be payable on its maturity. Further, the public issuance of ZCZP instruments by a registered NPO in accordance with the ICDR Regulations would be deemed to be in compliance with Rule 19 of the Securities Contracts (Regulation) Rules, 1957.
21. ‘listed entity’ means an entity which has listed, on a recognised stock exchange(s), the designated securities issued by it or designated securities issued under schemes managed by it, in accordance with the listing agreement entered into between the entity and the recognised stock exchange(s).
22. The disclosure should be made not later than seven days or within such period as may be specified by SEBI, from the occurrence of the event and should comprise details of the event, including the potential impact of the event and the steps being taken by the social enterprise to address the same. Updates on this event should continue to be provided to the SSE on a regular basis till the time the event remains material.
23. The SSE may prescribe additional parameters, on which a social enterprise needs to report on an annual basis.
24. ‘Social Auditor’ means an individual registered with a self-regulatory organisation under ICAI or such other agency, as may be specified by SEBI, who has qualified a certification program conducted by the National Institute of Securities Market and holds a valid certificate.
25. The unutilised amount should be kept in a separate bank account.
26. This was earlier referred to as a social venture fund, it has now been renamed as a social impact fund

The Securities and Exchange Board of India (SEBI) introduced the concept of Green Debt Security (GDS) under the erstwhile SEBI (Issue and Listing of Debt Securities) Regulations, 2008¹⁸. SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 defines GDS as:

A debt security issued for raising funds that are to be utilised for project(s) and/or asset(s) falling under any of the following categories, subject to the conditions as may be specified by SEBI from time to time:

1. Renewable and sustainable energy including wind, solar, bioenergy, other sources of energy which use clean technology,
2. Clean transportation including mass/public transportation,
3. Sustainable water management including clean and/or drinking water, water recycling,
4. Climate change adaptation,
5. Energy efficiency including efficient and green buildings,
6. Sustainable waste management including recycling, waste to energy, efficient disposal of wastage,
7. Sustainable land use including sustainable forestry and agriculture, afforestation,
8. Biodiversity conservation, or
9. A category as may be specified by SEBI, from time to time.

Further, Chapter IX of SEBI’s operational circular dated 10 August 2021 specifies certain key concepts and provisions with regard to the issue and listing of GDS, including the disclosure requirements in the offer document, continuous disclosure requirements in annual report and financial results, responsibilities of the issuer, etc.

However, with an increase in focus towards sustainability reporting and multiple changes and events taking place in the sustainable finance space around the world, SEBI, on 4 August 2022 released a consultation paper on green and blue bonds as a mode of sustainable finance (the consultation paper). The consultation paper discusses some important concepts, including the present status of green bonds as a mode of finance in India, scope of blue bonds, overall global scenario of sustainable financing, etc. The consultation paper seeks comments on a proposed regulatory framework to:

• amplify the definition of GDS
• introduce the concept of blue bonds
• reduce compliance cost for issuers of GDS with while not creating any perverse incentives that may lead to ‘greenwashing’.

Some of the key points discussed in the consultation paper are as follows:

• Initiatives that may be financed through green bonds: The consultation paper mentions certain schemes/policies undertaken by the Government of India to achieve the climate change goals¹⁹ such as phasing out coals use, using biomass in coal power plants, etc. The consultation paper solicited views on whether such initiatives offer any scope of financing through green bonds.
• Introduction of blue bonds: The Government of India has announced an initiative to develop country’s blue economy by rolling out the road map of project Sagarmala. According to the World Bank, blue economy refers to the “sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem”. In this regard, deployment of blue bonds can emerge as an important source of finance for various aspects of the blue economy. The consultation paper has also suggested some initiatives for which blue bonds can be deployed, such as sustainable fishing, ocean resource mining, geoengineering techniques, etc. The consultation paper solicited views on whether the initiatives mentioned in the consultation paper offer any scope for financing through blue bonds, and whether any additional initiatives may be added to the list. It also seeks views on whether introduction of coloured bonds (e.g., blue bonds for blue economy, yellow bonds for solar power) would help increase channels for funding to green projects.
• Proposed amendments to SEBI guidelines to align with international principles: The consultation paper proposed recommendations by SEBI’s Corporate Bonds Securitisation Advisory Committee (CoBoSAC) to align the existing SEBI guidelines with the Green Bond Principles (GBP) published by the International Capital Market Association (ICMA). Some of the key amendments proposed in this regard include:

• Change in the definition of GDS under SEBI (Issue and Listing of Non - Convertible Securities) Regulations, 2021: It has been proposed to add pollution prevention and control, and circular economy adapted products, production technologies and processes as eligible categories for issuance of GDS in the definition of GDS.
• Utilisation of issue proceeds: It is proposed that utilisation of proceeds from each issue of GDS should be tracked and disclosed separately (bond by bond approach) or on an aggregated basis for multiple green bonds (portfolio approach), and the issuer should disclose the intended types of temporary placement for the balance of unallocated net proceeds, if any.
• Identification and management of perceived social and environmental risks: It has been proposed that the issuer may provide information on processes by which the perceived social and environmental risks associated with the project(s) proposed to be financed/refinanced are identified and managed.
• Appointment of third-party reviewers/certifiers/auditors: It has been recommended that an issuer may appoint external reviewers/certifiers/auditors for:

• Assessment of objectives of the green bond to be issued,
• Post-issue management of use of proceeds from the green bond, and
• Verification of internal tracking and fund allocation from the green bond proceeds to eligible green projects etc.

Consequent to this amendment, SEBI vide a circular dated 25 August 2022, has stated that AMCs should ensure a scheme wise disclosure of investments, as on the last date of each quarter, in securities of such entities that are excluded from the definition of an associate. The disclosures of investments would include ISIN wise value of investment and value as a percentage of Asset Under Management (AUM) of the scheme. Such disclosures should be provided on the websites of respective AMCs and on the website of the Association of Mutual Funds in India.

---

To access the text of the MF Amendment Regulations, please click here

To access the text of the SEBI circular dated 25 August 2022, please click here

18. SEBI (Issue and Listing of Debt Securities) Regulations, 2008 merged into SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, vide SEBI notification dated 9 August 2021.
19. These climate change goals were committed by India in the COP-26 summit held in Glasgow

On 25 July 2022, the Securities and Exchange Board of India (SEBI) had introduced new chapters to establish the broad framework relating to the Social Stock Exchange (SSE) by issuing the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 (ICDR Amendment Regulations), SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022 (LODR Amendment Regulations) and SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2022 (AIF Amendment Regulations).

Consequently, SEBI, vide a circular dated 19 September 2022 (the circular) issued further clarifications regarding the overall framework of SSE. The key guidelines specified in this regard include:

1. Minimum requirements for registration of a Not for Profit Organisation (NPO) with SSE: Regulation 292F of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) prescribes that a Non-Profit Organisation (NPO) may seek registration with an SSE, however it may or may not raise funds through the SSE. The circular has laid down the minimum requirements for registration of an NPO on an SSE as below:

• Registration: An entity should have been registered¹⁴ as an NPO for at least three years, and the registration certificate should be valid for at least the next 12 months.
• Disclosure of ownership and control: NPOs must disclose details with respect to their ownership and control and also submit prescribed documents such as the Memorandum of Association (MoA), Articles of Association (AoA), trust deed, bye-laws, constitution, etc.
• Income tax registration: The NPO should have a valid IT PAN, a registration certificate under Section 12A/12AA/12AB of the Income Tax Act, 1961 which would be valid for at least the next 12 months, a valid registration under Section 80G of the Income Tax Act, 1961 and should not have a notice or ongoing scrutiny by Income Tax.
• Minimum fund flows: The annual spending of an NPO desirous of being registered with an SSE, as per the audited financial statements for the past financial year should be at least INR50 lakhs. Additionally, the annual funding received by such an NPO as per the audited accounts should be at least INR10 lakh.

1. Minimum initial disclosure requirements for NPOs raising funds through the issuance of ZCZP Instruments : As per Regulation 292G(a) of the ICDR Regulations, an NPO which is eligible to get listed on an SSE, may raise funds by the issue of Zero Coupon Zero Principal (ZCZP) bonds, donations through mutual funds schemes, or other means, as specified by SEBI. Additionally, Regulation 292K specifies the procedure for public issue of ZCZP instruments by an NPO, including disclosure of certain requirements to be prescribed by SEBI.

The circular has now stipulated the minimum disclosures that should be provided by NPOs in the draft and final fundraising document when raising funds through ZCZPs. The key disclosures required in this regard include:

• Vision and strategy: Details of the organisation’s activities, interventions and programmes which are in line with the aims and objects stated in its constitution, and strategy formulation for accomplishing the vision.
• Target Segment: The target segment (i.e., those affected by the problem and how are they affected) and the approach to be followed to accomplish its planned activities should be disclosed. The NPO must disclose how its approach intends to improve inclusion of its customers/recipients.
• Governance and management: Details of the governing body, composition, dates of board meetings held, key managerial staff such as those in charge of programmes, fundraising, marketing, communication, finance, human resource, periodic performance appraisal process etc. should be disclosed.
• Financial results and related compliance requirements: Disclosure must be made of the audited financial statements for the last three financial years prepared in accordance with guidelines for NPOs issued by ICAI. It should also be noted that, there should not be any material qualifications or irregularities reported by the auditor. Additionally, the organisation should also be in compliance with the relevant income tax regulations.
• Social impact: Details of past social impact in terms of parameters specified under the minimum disclosures of the Annual Impact Report (AIR) should be disclosed.

1. Annual disclosure requirements by NPOs ¹⁵  registered on SSE Regulation 91C of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (LODR Regulations) provides that an NPO which is registered on a SSE is required to provide annual disclosures on matters specified by SEBI, within 60 days from the end of the financial year or within such period as may be specified. In this regard, SEBI vide the circular has issued the following list of disclosures that are required to be made on an annual basis:

1. Disclosures in the Annual Impact Report (AIR)¹⁷

As per Regulation 91E of the LODR Regulations, a Social Enterprise¹⁸ (SE), which is either registered with or has raised funds through an SSE, must submit the AIR to the SSE in the format specified by SEBI. The AIR must be audited by a social audit firm employing social auditors¹⁹.

In this regard, SEBI, vide its circular dated 19 September 2022 issued the general requirements and the minimum disclosures required to be made in an AIR by all SEs registered with or which have raised funds using the SSE. These requirements are listed below:

General requirements

• Time period for submission: The audited AIR should be submitted within 90 days from the end of the financial year
• Utilisation of funds: The AIR should explicitly provide the qualitative and quantitative aspects of the social impact generated by the entity/project or solutions for which funds have been raised on SSE. In case of an NPO registered as a SE without listing any security, the AIR must include details regarding the significant activities, intervention, programmes or projects during the year and the methodology for determination of significance must be explained.
• Social impact fund: A social impact fund where the underlying recipients of the funds are SEs that have registered or raised funds using the SSE, should disclose an overall AIR of the fund, disclosing details of all investee/grantee organisations where the fund has been deployed. Disclosure requirements An AIR should at a minimum cover the following aspects:
• Strategic intent and planning: It should include the social or environmental challenge addressed by the organisation, approach adopted to cater to the challenge, etc.
• Approach: The baseline status, key past performance trend, etc.
• Impact score card: Disclose details of the metrices monitored, trend in performance, etc.

1. Due date for submission of statement of utilisation of funds

Regulation 91F of the LODR Regulations requires a listed NPO to submit to the SSE(s) the following statement of utilisation of the funds raised on a quarterly basis:

1. Category-wise amount of monies raised,
2. Category-wise amount of monies utilised, and
3. Balance amount remaining unutilised.

The SEBI, vide its circular dated 19 September 2022 has prescribed that the aforementioned statement of utilisation of funds should be submitted within a period of 45 days from the end of the quarter.

---

14. Entities must be registered in India as any one of the following entities:
    1. A charitable trust registered under the Indian Trusts Act, 1882,
    2. A charitable trust registered under the public trust statute of the relevant state,
    3. A charitable trust registered under the Societies Registration Act, 1860, or
    4. A company incorporated under Section 8 of the Companies Act, 2013.
15. The SEBI circular dated 19 September 2022 contains the guidance note with respect to each of the above categories of disclosures.
16. It is to be noted that ICAI is in the process of publishing the uniform accounting and reporting framework for NGOs.
17. The circular also includes a guidance note which will enable preparation of the disclosures in an AIR.
18. A social enterprise means either an NPO or a For Profit Social Enterprise that meets the eligibility criteria as specified by SEBI
19. ‘Social auditor’ means an individual registered with a self-regulatory organisation under ICAI or such other agency, as may be specified by SEBI, who has qualified a certification program conducted by the National Institute of Securities Market and holds a valid certificate.

To access the text of the circular, please click here

SEBI in its board meeting dated 30 September 2022 took some key decisions pertaining to the following:

1. Disclosure of Key Performance Indicators (KPIs) and price per share of the issuer, in public issues, based on past transactions and past fund raising from the investors

In February 2022, SEBI had issued a consultation paper²⁰ recommending provisions relating to disclosures for ‘Basis of Issue Price’ section in an offer document. As per the consultation paper, issuers undertaking an Initial Public Offering (IPO) would be mandated to provide key disclosure of Key Performance Indicators (KPIs), as well as the price per share of issuer based on past transactions and past fund raising done from the investors, subject to the conditions specified in this regard. The said disclosures must be made under ‘Basis for Issue Price’ section of the offer document, and in the price band advertisement.

These proposals in the consultation paper have been approved by SEBI in its board meeting.

1. Introduction of pre-filing of offer documents in case of IPOs

In May 2022, SEBI had issued a consultation paper²¹ recommending that SEBI would introduce an alternate mechanism for regulatory review of offer document by permitting pre-filing of offer documents for issuers contemplating an IPO.

Pre-filing mechanism allows issuers to carry out limited interaction without having to make any sensitive information public. Further the document which incorporates SEBI’s initial observations would be available to investors for a period of at least 21 days, thereby, assisting them better in their investment decision making process. The existing mechanism of processing offer document shall continue in addition to this alternative mechanism of pre-filing.

These proposals in the consultation paper have been approved by SEBI in its board meeting.

1. Flexibility in approval process for appointment and/or removal of Independent Directors

Currently, as per the provisions of the LODR Regulations, appointment, re-appointment or removal of independent directors must be made through a special resolution.

The SEBI has now introduced a new optional provision in the LODR Regulations for appointment and removal of independent directors, appointed for the first term in listed entities. As per the alternate mechanism, if the special resolution passed does not get the requisite majority, then the following thresholds should be tested:

• Threshold for ordinary resolution, and
• Threshold for majority of minority shareholders.

If the resolution passed meets the above two thresholds, in the same voting process, then such a resolution would be deemed to have been approved by the shareholders. This would also be applicable for removal of an independent director, appointed under this alternate mechanism.

1. Amendment to LODR Regulations, in the context of schemes of arrangement

SEBI has approved amendments to the LODR Regulations, to introduce provisions pertaining to schemes of arrangement for debt listed entities, handling of unclaimed amounts pertaining to non-convertible securities of listed entities which do not fall within the definition of a ‘company’ under the Companies Act, 2013 and the Rules made thereunder. Additionally, amendments have been approved for continuous disclosure norms for entities with listed nonconvertible securities, pertaining to financial results and related requirements.

1. Inclusion of units of mutual funds under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations)

In July 2022, SEBI had issued a consultation paper²² which proposed to cover dealing in units of Mutual Funds under PIT regulations so as to harmonise the regulations governing trading in securities, while in possession of Unpublished Price Sensitive Information (UPSI).

The proposals in the consultation paper have been approved by SEBI in its board meeting.

---

20. Consultation Paper on Disclosures for ‘Basis of Issue Price’ section in offer document under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
21. Consultation Paper on Pre-filing of Offer Document in case of Initial Public Offerings
22. Consultation Paper on Applicability of SEBI PIT Regulations to MF units

To access the text of the minutes of the SEBI board meeting, please click here

In July 2022, the Securities and Exchange Board of India (SEBI) had introduced regulations pertaining to the Social Stock Exchange (SSE), It issued amendments to the following regulations:

1. The SEBI (Issue of Capital and Disclosure Requirements ) Regulations, 2018 (ICDR Regulations)⁶,
2. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations)⁷, and
3. The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations)⁸

Regulation 292D of the ICDR Regulations lays down the requirement for an SSE to constitute a Social Stock Exchange Governing Council (SGC)⁹ . In this regard, SEBI, vide a circular dated 13 October 2022 has prescribed details with respect to the composition and other terms of reference of the SGC. Some of the key guidelines issued include:

• Composition: The SGC must have a minimum of seven members, having representation from each of the seven prescribed categories¹⁰ in order to contribute to the functions and development of the SSE.
• Meetings of the SGC: The SGC would be required to have a minimum of four meetings in a financial year. The Board of the stock exchange should prescribe the procedure, frequency, quorum and other details for the meetings of the SGC.
• Other terms of reference: The main objective of establishing the SGC is to provide an oversight and guidance for facilitating smooth functioning of the operations of the SSE. A few important considerations in this regard include:

• Development of SSE: The SGC should provide expertise on matters relating to the listing function of SSE, growth of registration/listing of Social Enterprises (SEs) and the number of investors and the related procedures regarding their onboarding.
• Disclosures by SE: Oversee the adequacy of disclosures made by the SEs and facilitate development of the appropriate systems and processes towards the same.
• Review functioning of SSE: Review the functioning of the SSE by taking into consideration the feedback received from various stakeholders, and
• Other matters: Other matters regarding governance and development of the SSE.

---

To access the text of the circular, please click here

6. The amendments were issued by the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 (ICDR Amendment Regulations).
7. The amendments were issued by the SEBI LODR (Fifth Amendment) Regulations, 2022 (LODR Amendment Regulations)
8. The amendments were issued by the SEBI AIF (Third Amendment) Regulations, 2022 (AIF Amendment Regulations)
9. SGC is required to be constituted prior to seeking final approval from SEBI regarding introduction of SSE as a separate segment
10. The categories include:
    1. Philanthropic and social sectors including public/private sector donors,
    2. Not for Profit Organisations (NPOs),
    3. Information repositories,
    4. Social impact investors,
    5. Social audit profession/self-regulatory organisation for social auditors,
    6. Capacity building fund, and
    7. Stock exchange.

Recently, the Securities and Exchange Board of India (SEBI), vide a notification dated 14 November 2022 issued various amendments to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015 (LODR Regulations¹).

The amendments mainly pertain to the following areas:

• Appointment, re-appointment and removal of Independent Directors
• Appointment of monitoring agency in case of preferential issue and Qualified Institutions Placement
• Amendments relating to the financial reporting requirements of issuers of Non-Convertible Securities (NCS)
• Amendments relating to schemes of arrangement undertaken by issuers of NCS
• Unclaimed NCS and accrued benefits

These amendments are applicable from the date of publication in the Official Gazette, i.e., 14 November 2022. Some of the key changes introduced in this regard are discussed below:

a.   Appointment, re-appointment and removal of Independent Directors

Regulation 25(2A) of the Listing Regulations specifies that the appointment, re-appointment or removal of an Independent Director (ID) of a listed entity would be subject to the approval of shareholders by way of a Special Resolution (SR).

With a view to promote the participation of public shareholders² in the corporate governance framework of a listed company, SEBI, in its Board Meeting dated 30 September 2022 had approved an alternate threshold for the appointment and/or removal of IDs. The revised provisions have been subsequently incorporated in the LODR Amendment Regulations.

• Appointment of IDs: Where an SR for the appointment of ID fails to get the requisite majority of votes, in such cases, an alternate threshold would now need to be tested. In this regard, the appointment would be deemed to have been made if the following two conditions are satisfied:
  1. Ordinary majority³ has been achieved based on the votes cast by all shareholders (i.e., promoters as well as public shareholders), and
  2. Ordinary majority has been achieved based on the votes cast by public shareholders.
• Removal of IDs: Where an ID has been appointed through an SR, then he/she can also be removed only by passing an SR. However, if the appointment has been made using the alternate threshold criteria specified above, then removal would also need to be approved in the similar manner. These amendments are applicable to all the entities that have listed their specified securities⁴ as well as High Value Debt Listed Entities (HVDLEs)⁵.

b.   Appointment of monitoring agency in case of preferential issue and Qualified Institutions Placement (QIP) Regulation 32 of the LODR Regulations requires listed entities to submit a quarterly statement of deviation(s) or variation(s) to the stock exchange(s), thereby indicating deviation, if any, in utilization of the proceeds of the issue with the objectives of the issue⁶.

Before amendment, Regulation 32(6) of the LODR Regulations required listed entities to submit to the stock exchange(s) any comments or report received from a monitoring agency (where such an agency had been appointed) relating to utilisation of proceeds of a public issue or a rights issue. Such comments or report had to be submitted within 45 days from the end of each quarter.

With the issuance of the LODR Amendment Regulations, an issuer of NCS may appoint a monitoring agency for utilisation of proceeds of:

• Public issue
• Rights issue
• Preferential issue and
• QIP

(Emphasis added to highlight the change)

c.   Amendments relating to the financial reporting requirements for issuers of Non-Convertible Securities (NCS) Chapter V of the LODR Regulations specifies the obligations of an issuer of NCS, including the financial reporting requirements of issuers of NCS. Some key amendments and clarifications that have been introduced by the LODR Amendment Regulations, with respect to the financial reporting requirements of such entities include:

• Timeline for submission of financial results for the last quarter [Regulation 52(1)] The timelines for submission of un-audited or audited quarterly and year to date standalone financial results (standalone financial results) to the stock exchange for the last quarter has been updated to be within 60 days from the end of the quarter. (Before amendment, the LODR Regulations required the standalone financial results to be submitted to the stock exchange within 45 days from the end of all quarters, except for the last quarter⁷.)
• Submission of annual financial results by companies subject to CAG audit [Proviso to Regulation 52(2)(d)] SEBI has prescribed a revised framework for issuers of NCS who are subject to audit by the Comptroller and Auditor General of India (CAG). Such entities would need to adopt the following two-step process for the disclosure of annual financial results: Step 1: Such entities would need to submit the unaudited financial results along with the limited review report issued by the CAG, an auditor appointed by the CAG, or a practising Chartered Accountant, to the stock exchange(s), within 60 days from the end of the financial year. Step 2: Post this, the audited financial results are required to be submitted to the CAG within nine months from the end of the financial year⁸.
• Filing of statement of utilisation of proceeds and statement of material deviation(s) along with the financial results [Regulation 52(7) and 52(7A)] The LODR Amendment Regulations now requires an issuer of NCS to submit along with the quarterly financial results the following statements in a prescribed format to the stock exchange:
  1. A statement indicating the utilisation of issue proceeds of NCS (before amendment this statement was required to be submitted within 45 days from the end of every quarter)
  2. A statement disclosing material deviations in the use of proceeds obtained from the issue of NCS from the objects of the issue (before amendment, the timelines for submission of this statement⁹ and time period upto which¹⁰ this statement was required to be submitted was not clearly specified)
  These statements would be submitted till such proceeds have been fully utilised or the purpose for which the proceeds were raised has been achieved.

• Disclosure of ratios [Regulation 52(4)] Regulation 52(4) of the LODR Regulations requires issuers of NCS to disclose certain ratios/financial information in the quarterly and annual financial results¹¹. The LODR Amendment Regulations has omitted the requirement to disclose sector specific equivalent ratios. Further, it has been clarified that in case the ratios or information in Regulation 52(4) of the LODR Regulations is not applicable to a listed entity, it should disclose other ratio/equivalent financial information, as may be required under applicable law.
• Publication of consolidated financial results in newspaper by issuers of NCS [Regulation 52(8)] Regulation 52(8) of the LODR Regulations requires an issuer of NCS to publish the financial results and other specified details, within two working days of the conclusion of the meeting of the Board of Directors, in at least one English national daily newspaper, circulating in the whole or substantially the whole country. The LODR Amendment Regulations have now clarified that where entities have submitted both standalone as well as consolidated financial results to the stock exchange, it should publish only the consolidated financial results in the newspaper. (Before amendment, there was no clarification on whether the standalone results, consolidated results, or both standalone as well as consolidated results were required to be published in the newspaper.)

d.   Amendments relating to schemes of arrangement undertaken by issuers of NCS (Regulation 59A and 94A): Sections 230 to 234¹² of the Companies Act, 2013 specify the provisions with regard to the schemes of arrangements of the Insolvency and Bankruptcy Code (IBC) in certain circumstances. entered into by the companies. Regulations 37 and 94 of the LODR Regulations specify provisions regarding such schemes of arrangement, entered into by the entities which have listed their specified securities. However, no such provisions existed for issuers of NCS. In this regard, SEBI has introduced a framework pertaining to schemes of arrangements for issuers of NCS (Regulations 59A and 94A of the LODR Regulations). Some of the key provisions introduced are discussed below:

• Applicability: Regulations 59A and 94A of the LODR Regulations would be applicable to all the schemes of arrangement undertaken by the issuers of NCS. However, it would not apply to a restructuring proposal approved as part of a resolution plan by the National Company Law Tribunal (NCLT) under Section 31¹³ of the Insolvency and Bankruptcy Code (IBC) in certain circumstances.
• Obtaining NOC from the stock exchange: The LODR Amendment Regulations specify that every issuer of NCS, before filing the scheme of arrangement under Sections 230 to 234 or under Section 66¹⁴ of the Companies Act, 2013 should file the draft scheme of arrangement with the stock exchange(s), along with non-refundable fees¹⁵ for obtaining the No-Objection Letter (NOL). Such NOL would be valid for a period of six months from the date of its issuance.
• Sanctioning of scheme by NCLT: The issuer of NCS would place the NOL before the NCLT at the time of seeking approval for the scheme of arrangement. Upon sanction of the scheme by the NCLT, the issuer of NCS should submit such documents to the stock exchange as may be specified by SEBI/stock exchange from time to time.

e.   Unclaimed NCS and accrued benefits Regulation 61A of the LODR Regulations state that an issuer of NCS should not forfeit unclaimed interest/dividend/redemption amount and such amounts should be transferred to an escrow account opened in any scheduled bank and to the Investor Education and Protection Fund within a prescribed period of time.

The LODR Amendment Regulations have now inserted a new provision that in case of listed entities which do not fall within the definition of “company” under the Companies Act, 2013 and the Rules made thereunder, then any amount in the escrow account that remains unclaimed for seven years should be transferred to the Investor Protection and Education Fund.

---

To access the text of the LODR Amendment Regulations, please click here

To access the text of the circular, please click here

To access the text of the circular dated 9 December 2022, please click here

1. The amendments have been issued vide the SEBI LODR (Sixth Amendment) Regulations, 2022 (LODR Amendment Regulations).
2. Public shareholders refer to the shareholders other than the promoter and promoter group.
3. Ordinary majority is said to be achieved when the votes cast in favor of the resolution exceed the votes cast against the resolution.
4. Specified securities refer to the equity shares and convertible securities.
5. HVDLE refers to an entity which has listed its non-convertible debt securities and has an outstanding value of listed non-convertible debt securities of INR500 crore and above.
6. The objectives of the issue are mentioned in the offer document or explanatory statement to the notice for the general meeting
7. Requirements of Regulation 52(1) of the LODR Regulations
8. Before amendment, the two-step process for submission of audited financial results followed by issuers of NCS who were required to get their accounts audited by CAG was:
   1. The first level audit must be carried out by the auditor appointed by the CAG, and the audited financial results need to be submitted to the stock exchange(s) within 60 days from the end of the financial year, and
   2. After the completion of audit by the CAG, the financial results are required to be submitted to the stock exchange(s) within nine months from the end of the financial year.
9. Timeline refers to the time period from the end of the quarter within which these statements need to submitted. Post amendment, it has been clarified that this needs to be submitted along with the quarterly financial results.
10. Time period upto which refers to till when will such statements be submitted to the stock exchanges. Post amendment, it has been clarified that this needs to be submitted till such proceeds have been fully utilised or the purpose for which the proceeds were raised has been achieved.
11. Before amendment, the ratios prescribed by Regulation 52(4) included Debt-equity ratio, Debt service coverage ratio, Interest service coverage ratio, Outstanding redeemable preference shares (quantity and value), Capital redemption reserve/debenture redemption reserve, Net worth, Net profit after tax, Earnings per share, Current ratio, Long term debt to working capital, Bad debts to account receivable ratio, Current liability ratio, Total debts to total assets, Debtors’ turnover, Inventory turnover, Operating margin per cent, Net profit margin per cent, and Sector specific equivalent ratios, as applicable.
12. 1. Section 230: Power to compromise or make arrangements with creditors and members
    2. Section 231: Power of Tribunal to enforce compromise or arrangement
    3. Section 232: Merger and amalgamation of companies
    4. Section 233: Merger or amalgamation of certain companies
    5. Section 234: Merger or amalgamation of company with foreign company
13. Section 31: Approval of resolution plan
14. Section 66: Reduction of share capital
15. The fees to be paid to the stock exchanges has been prescribed in Schedule XI of the LODR Regulations.
16. The registered valuer should be independent
17. The merchant banker should be independent
18. The accounting treatment should be in compliance with all the Accounting Standards specified by the Central Government under Section 133 of the Companies Act, 2013 read with the rules framed thereunder or the Accounting Standards issued by ICAI, as applicable, and other generally accepted accounting principles.

Regulation 30 of the LODR Regulations requires a listed entity to provide disclosures of events or information which, in the opinion of the Board of Directors of the listed entity, are material. While providing such disclosures, listed entities should also consider providing disclosures in accordance with the provisions of Part A of Schedule III¹⁹ of the LODR Regulations (Schedule III-A).

However, SEBI received various representations from the stakeholders regarding inadequate and delayed information being reported by the listed entities, while providing such disclosures. In this regard, on 12 November 2022, SEBI issued a consultation paper, ‘Consultation Paper on Review of disclosure requirements for material events or information’, with an aim to streamline the disclosure requirements for material events or information by a listed entity. Some of the key recommendations provided by the consultation paper include:

• Materiality threshold for disclosure: The existing regulation, rationale for change and proposed regulation have been discussed hereunder:

Materiality policy: The existing regulation, rationale for change and proposed regulation have been discussed hereunder:

• Timeline for disclosure: The existing regulation, rationale for change and proposed regulation have been discussed hereunder:

• Verification of market rumours: The existing regulation, rationale for change and proposed regulation have been discussed hereunder:

• Disclosure of cyber security incidents or breaches and loss of data/documents: It has been provided that the listed entities should provide disclosures in relation to ‘cyber security incident’²² or ‘cyber security breaches’ or loss of data/documents in the quarterly corporate governance report in the format as prescribed by SEBI
• Addition and modification of events: The consultation paper has proposed certain additions and modifications to events specified under Para A and Para B of Schedule III-A²³.

The consultation paper is open for comments up to 12 December 2022²⁴

---

To access the text of the consultation paper, please click here

To access the text of the circular extending the timeline for issuing the comment period, please click here

19. Schedule III Part A: Disclosures of events or information: Specified securities. Para A of Schedule III Part A are deemed to be material events and listed entities should make disclosures of such events. Para B of Schedule III Part A and other events, which may be disclosed by listed entities based on application of the guidelines for materiality. The guidelines for determining materiality of an event have been prescribed in Regulation 30(4) of the LODR Regulations.
20. Annexure II to the consultation paper has provided the proposed timelines for disclosure of events/information prescribed in Schedule III-A of the LODR Regulations.
21. The top 250 listed entities should be determined on the basis of market capitalisation, as at the end of the immediate previous financial year.
22. As defined in Information Technology (The Indian Computer Emergency Response Team and Manner of Performing Function and Duties) Rules, 2013
23. Some of the key additions to para A of Schedule III-A of the LODR Regulations include:
    1. Details of the regulatory actions taken against listed entity, its directors, KMP, senior management, promoter, or subsidiary;
    2. Delay or default in payment of fines, penalties, dues, etc. to any regulatory, statutory, enforcement or judicial authority;
    3. Details regarding voluntary revision of financial statements or the report of the Board of Directors of the listed entity;
    4. The letter of resignation along with detailed reasons in case of resignation of a KMP, a senior management, or a director other than independent director, to the stock exchange(s) by the listed entities within seven days from the date of resignation etc.
24. As per the consultation paper, the last date for comments was 27 November 2022. This has been extended upto 12 December 2022 vide a circular issued by SEBI on 1 December 2022.

On 16 November 2022, SEBI issued a consultation paper on ‘Review of SEBI (Buyback of Securities) Regulations, 2018’ (the consultation paper). The consultation paper has proposed certain amendments to regulations pertaining to buyback of specified securities, buyback through tender offer as well as from open market through stock exchange mechanism, etc²⁵.

Some of the key changes proposed by the consultation paper are as follows:

• Open market buy backs through stock exchanges
  1. In view of certain drawbacks associated with buyback under the stock exchange mechanism, SEBI has proposed a glide path for reduction in the maximum limit and time period for completion of buyback offer under the stock exchange mechanism. The glide path is given hereunder:

• A minimum of 75 per cent of the amount earmarked for buy-back (as specified in the resolution of the Board of Directors or the special resolution, as the case may be) should be utilised for buying back shares or other specified securities (currently, this limit is 50 per cent). Additionally, 40 per cent of the amount earmarked for buy back should be utilized within half of the duration specified as per the glide path specified above
• Buy-back through stock exchanges should only be undertaken in respect of frequently traded shares
• Restrictions on volume and price and quantum of buyback has also been proposed.
• Companies should create an escrow account towards security for performance of its obligations within two working days of the public announcement (currently, no timeline for creation of an escrow account has been prescribed) .

• Buy-backs through tender offers: Some of the recommendations proposed with respect to buy-backs that are undertaken through the tender offer process are as follows:
  1. It has been proposed that the Board of Directors should be allowed the flexibility to revise the buy-back price prior to the opening of the buy-back offer (currently, the maximum buy-back price is not permitted to be revised once it has been approved by the Board of Directors or shareholders) .
  2. In order to simplify the process and reduce the timelines for buy-back, it has been proposed that merchant bankers should be allowed to directly disseminate the Letter of Offer (LOF) to the shareholders, thereby removing the current requirement for SEBI to review the Draft LOF (DLOF) prior to the LOF being released by the merchant bankers.
  3. Companies should create an escrow account towards security for performance of its obligations within two working days of the public announcement (currently, no timeline for creation of an escrow account has been prescribed).

• Framework for effecting open market buy-backs through the book building process While the framework for effecting open market buy-backs through the book-building process has been provided under the SEBI (Buy-back of Securities) Regulations, 2018, it has been rarely used. Accordingly, the SEBI through the consultation paper has proposed a revised mechanism for effecting open market buy-backs through the book building process.
• Other matters: The SEBI has also prescribed total limits to buy-backs, cooling off periods between buy-backs and post buy-back compliances.

The comment period on the consultation paper closed on 1 December 2022.

---

To access the text of the consultation paper, please click here

25. These recommendations are basis the sub-group on the SEBI (Buy-back of Securities Regulations), 2018 issued in October 2022.

Recently, SEBI, vide a notification dated 21 November 2022 issued amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations)²⁶. Some of the key amendments issued include:

Pre-filing of draft offer document

In May 2022, SEBI had issued a consultation paper²⁷ proposing that issuers of securities be permitted to pre-file offer documents when contemplating an Initial Public Offer (IPO).

The ICDR Amendment Regulations have incorporated the proposals by inserting a new chapter, ‘Chapter IIA, Initial Public Offer on Main Board through pre-filing of draft offer document’ in the ICDR Regulations. Chapter IIA gives details of the steps to be followed while prefiling an offer document. The key guidelines prescribed by the ICDR Amendment Regulations are given below:

Step 1: Pre-filing of draft offer document with SEBI and the stock exchanges Prior to an IPO, following documents will be filed with SEBI and the stock exchanges:

* All public announcements will be undertaken in one English newspaper, one Hindi newspaper and one regional language newspaper at the place where the registered office of the issuer is situated. All three newspapers should have a wide circulation.

It is to be noted that pre-filed DOD will not be made available to the public.

Step 2: Changes and observations by SEBI SEBI will recommend changes or issue observations on the pre-filed DOD within a prescribed time period.

Step 3: Updated Draft Red Herring Prospectus I (UDRHP I)

A. Submission of UDRHP I to SEBI

Changes suggested by SEBI will be processed by the issuer and LM on the pre-filed DOD, and a UDRHP I will be submitted to SEBI²⁸ along with:

1. a statement certifying that all changes, suggestions and observations made by SEBI have been incorporated in the offer document
2. a due diligence certificate issued by the LM in a prescribed format at the time of filing of the offer document.

B. Making UDRHP I public The UDRHP I will be made public for comments for a period of at least 21 days from the date of filing. It will be hosted on the websites of SEBI, the stock exchange(s) and of the LM.

Step 4: UDRHP II

After expiry of the public comment period, the issuer and the LM will submit the following documents to SEBI:

• Comments received by them from the public on the UDRHP I and consequential changes required to be processed to the same
• UDRHP-II – (i.e., document issued after changes have been processed upon UDRHP I).

Step 5: Filing offer document

A. Before filing offer document Before filing the offer document with the Registrar of Companies (ROC), the LM will submit the following documents to SEBI:

1. a statement certifying that all changes, suggestions and observations made by SEBI have been incorporated in the offer document;
2. a due diligence certificate issued by the LM, in prescribed format, at the time of filing of the offer document;
3. a copy of the resolution passed by the Board of Directors of the issuer for allotting specified securities to promoter(s) towards amount received against promoters’ contribution, before opening of the issue;
4. a certificate from a statutory auditor, before opening of the issue, certifying that promoters’ contribution has been received in accordance with the ICDR Regulations, along with stipulated details of the promoters and amounts received from them;
5. a due diligence certificate issued by the LM, in a prescribed format, in the event the issuer has made a disclosure of any material development by issuing a public notice pursuant to para 4 of Schedule IX of the ICDR Regulations²⁹.

B. Filing offer document The offer document will be filed with ROC, and post that with SEBI and the stock exchanges. It will also be hosted on the websites. The subsequent procedures with respect to price band advertisement/issue opening would remain same as prescribed in Chapter II.

Interaction with the Qualified Institutional Buyers (QIBs): The ICDR Amendment Regulations specify that the interaction with QIBs would be permitted, provided such interaction is only limited to the extent of the information contained in the pre-filed draft offer document. Further, it has been provided that the issuer must prepare a list of the QIBs who have participated in such interaction and obtain a confirmation of interaction from the QIBs, to be submitted to SEBI.

Appointment of monitoring agency

Requirement of monitoring agency: Chapters V and VI of the ICDR Regulations lay down the principles governing preferential issue and Qualified Institutions Placement (QIP) respectively. The ICDR Amendment Regulations have introduced the requirement to have the use of the proceeds of the preferential issues and QIPs monitored by a credit rating agency registered with SEBI (acting as a monitoring agency) in certain cases. Following principles have been specified in this regard:

1. Applicability: Where the issue size of the preferential issue or QIP exceeds INR100 crore³⁰, the issuer must appoint a monitoring agency to monitor the use of proceeds of the issue. However, this requirement would not apply to an issue of specified securities made by a bank or public financial institution or an insurance company.
2. Submission of report by the monitoring agency: The monitoring agency would submit its report to the issuer in the specified format, on a quarterly basis, till 100 per cent of the proceeds of the issue have been utilised. Post this, the Board of Directors and management of the issuer must provide their comments on the findings of the monitoring agency.
3. Submission of report to the stock exchange(s) and upload on website: The issuer should, within 45 days from the end of each quarter, upload the report of the monitoring agency on its website and also submit it to the stock exchange(s) on which its equity shares are listed.
4. Preferential issue of shares of companies having stressed assets: The ICDR Amendment Regulations have specified that in case of preferential issue of shares of companies having stressed assets, the issuer should make arrangements for monitoring the use of proceeds of the issue by a credit rating agency registered with SEBI (earlier public financial institution or by a scheduled commercial bank, which is not a related party to the issuer) . Also, the monitoring agency should submit its report to the issuer on a quarterly basis till 100 per cent (earlier until at least 95 per cent) of the proceeds of the issue have been utilised.

Other amendments Other amendments introduced by the ICDR Regulations include:

• Amendments to Schedule VI of the ICDR Regulations: Part A of Schedule VI of the ICDR Regulations (Schedule VI-A) deals with disclosures required in the offer document/letter of offer. The ICDR Amendment Regulations have introduced certain additional requirements in Schedule VI-A of the ICDR Regulations, with regard to the Key Performance Indicators (KPIs) disclosed by the issuer in the offer document. These include:

• Approval by an audit committee: KPIs disclosed in the offer document must be approved by the audit committee of the issuer company
• Certification: KPIs disclosed in the offer document should be certified by the statutory auditor(s), Chartered Accountants, or firm of Chartered Accountants, holding a valid certificate issued by the Peer Review Board of the ICAI or by Cost Accountants, holding a valid certificate issued by the Peer Review Board of the Institute of Cost Accountants of India. The certificate issued in this regard must be included in the list of material documents for inspection.
• Explanation of KPIs: KPIs disclosed in the offer document should be comprehensive along with an explanation stating how they have been used by the management historically to analyse, track or monitor the operational and/or financial performance of the issuer company. Further, the issuer company should also explain the comparison of KPIs over time, based on additions or dispositions to the business, if any.
• Disclosures under ‘Basis for Issue Price’ section: The issuer company is required to make certain disclosures under ‘Basis for Issue Price’ section. Some of the key disclosures required to be made are as follows:

1. Disclosure of all the KPIs that have been disclosed by the issuer to its investors at any point of time during the three years preceding the date of filing of the DRHP or Red Herring Prospectus (RHP),
2. Confirmation by the audit committee stating that the verified and audited details for all the KPIs that have been disclosed to the earlier investors at any point of time during the three years, prior to the date of filing of the DRHP/RHP are disclosed under ‘Basis for Issue Price’ section of the offer document,
3. Comparison of the KPIs disclosed with Indian listed peer companies and/or global listed peer companies, as the case may be.

Effective date³¹: The amendments are effective from the date of publication in the Official Gazette, i.e., 21 November 2022.

---

To access the text of the ICDR Amendment Regulations, please click here

26. The amendments have been issued by the SEBI (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2022 (ICDR Amendment Regulations).
27. https://www.sebi.gov.in/reports-and-statistics/reports/may-2022/consultation-paper-on-pre-filing-of-offer-document-in-case-of-initial-public-offerings_58875.html
28. There has to be a minimum prescribed time gap between the date of intimation to SEBI about the completion of interaction with the qualified institutional buyers and the date of filing the UDRHP I.
29. Schedule IX of the ICDR Regulations deals with public communications and publicity materials.
30. In case of a QIP issue, the threshold of INR100 crore would exclude the size of offer for sale by selling shareholders.
31. The amendments to Schedule VI of the ICDR Regulations would be applicable for all issues where RHP is filed with the Registrars of Companies on or after the date of publication of these amendments in the Official Gazette i.e., 21 November 2022.

Regulation 53 of the SEBI (Mutual Funds) Regulations, 1996 (Mutual Fund Regulations) explains the procedure for dispatch of dividend warrants and redemption/repurchase proceeds to the unitholders.

On 15 November 2022, SEBI issued the SEBI (Mutual Funds) (Third Amendment) Regulations, 2022 (MF Amendment Regulations) to introduce new provisions on the transfer of dividend to unitholders and redemption of proceeds, thereby replacing the erstwhile Regulation 53. Also, on 25 November 2022, SEBI issued a circular stipulating the timelines for transfer of such dividend and redemption of proceeds to the unitholders.

The key guidelines issued in the revised Regulations are discussed below:

• Payment of dividend: The record date for payment of dividend should be two working days from the issue of public notice and dividend would be transferred to the unitholders within seven working days from the record date (before amendment, dividend was required to be dispatched to unitholders within 15 days from record date) .
• Redemption or repurchase: The proceeds should be transferred to the unitholders within three working days from the date of redemption or repurchase³² (before amendment, the redemption or repurchase was required to be dispatched within 10 working days from the date of redemption or repurchase).
• Delay in transfer of dividend, proceeds on redemption, or repurchase: The interest would be payable to unitholders at the rate of 15 per cent per annum. The details of such interest payments must be sent to SEBI as per the specified format and investors should be informed about the rate of interest and the amount of interest.

Effective date: The amendment would come into effect from 15 January 2023³³.

---

To access the text of the MF Amendment Regulations, please click here

To access the text of the circular dated 25 November 2022,please click here

32. In case of mutual fund schemes wherein 80 per cent of total assets are invested in permissible overseas investments, the timeline for transfer is within five working days from the date of redemption or repurchase.
33. On the sixtieth day from the date of publication of the MF Amendment Regulations in the Official Gazette.

Regulation 38 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) specifies that an issuer, before the opening of subscription list, must deposit with the stock exchange, one per cent of the issue size available for subscription to the public. This amount of one per cent would be released to the issuer after obtaining the No Objection Certificate (NOC) from SEBI. The application for NOC has to be filed by the Post Issue Lead Merchant Banker (PILMB) on the letterhead of the listed entity in a prescribed format. This application will be made after the expiry of two months from the date of listing on the stock exchange, and after all issue related complaints have been resolved.

In this regard, SEBI issued a master circular dated 7 November 2022 on issuance of NOC for release of one per cent of the issue amount and prescribed the relevant instructions and procedure to obtain the NOC from SEBI. It has also provided the formats for making applications under the various processes.

---

To access the text of the master circular, please click here

The Securities and Exchange Board of India (SEBI) in its board meeting dated 20 December 2022 took some key decisions pertaining to the following:

1. Amendment to SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations) to facilitate sustainable finance while safeguarding against greenwashing⁶

With an increasing emphasis towards sustainable finance in India as well as around the globe, SEBI undertook a review of the regulatory framework for Green Debt Securities (GDS)⁷. The review is aimed to align it with the updated Green Bond Principles (GBP)⁸ recognised by the International Organisation of Securities Commission (IOSCO). Based on the review, SEBI has decided to make the following amendments to the NCS Regulations:

• Enhance the scope of the definition of GDS by including new modes of sustainable finance with respect to pollution prevention and control, eco-efficient products, etc.
• Introduce the concept of blue bonds (related to water management and marine sector)⁹, yellow bonds (related to solar energy) and transition bonds¹⁰ as sub categories of GDS. Additionally, in order to mitigate and address the concerns around green washing, SEBI would also prescribe certain basic dos and don’ts with respect to GDS

• Amendment to NCS Regulations to streamline appointment of nominee director and specify public issue timelines

SEBI approved the following amendments with a view to improve the regulatory mechanism of the corporate bond market:

• Appointment of a nominee director: SEBI in its board meeting decided that the issuers of listed debt securities must incorporate suitable provisions in their Articles of Association (AoA) regarding the obligation of the Board of Directors of the issuer to appoint the person nominated by its debenture trustee as a director in the event of default. Corresponding amendments are required to be made in the debenture trust deed. The existing listed debt issuers are required to ensure compliance with the same by 30 September 2023.
• Public issue timelines: Currently, there are no stipulations regarding the duration for which a public issue of debt securities or Non-Convertible Redeemable Preference Shares (NCRPS) should be kept open. In this regard, SEBI decided that public issue of debt securities and NCRPS must be kept open for subscription for a minimum period of three working days and a maximum period of 10 working days. The timelines are aligned with timelines provided for specified securities¹¹ under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).

• Amendments regarding applicability of corporate governance norms, tenure of an auditor, computation of leverage and other provisions for REITs and InvITs

SEBI is its board meeting has specified that the corporate governance norms applicable for listed companies would also be applicable to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), irrespective of whether any debt security is issued by them. However, certain provisions of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (LODR Regulations) which are not directly applicable or are already specified for REIT/InvIT under respective Regulations would be carved out.

Further, in order to streamline the tenure of an auditor, computation of leverage, unclaimed/unpaid distribution, etc., SEBI has decided to introduce the following amendments to the SEBI (REIT) Regulations, 2014 and SEBI (InvIT) Regulations, 2014:

• Tenure of an auditor will be till the conclusion of the fifth annual general meeting of the unit holders
• Statutory auditor of REITs/ InvITs must undertake limited review of audit of all the entities or companies whose accounts are to be consolidated
• Investment in overnight fund would need to be considered as cash and cash equivalent, for the purpose of computation of leverage, and
• Unclaimed/unpaid distributions for REITs/InvITs must be transferred to the Investor Protection and Education Fund.

• Other amendments: Some other key amendments introduced by SEBI include:

• Strengthening focus and governance mechanisms in MIIs: Market Infrastructure Institutions (MIIS) are key pillars of a security market. Amendments have been made to their governance structure to strengthen focus and governance of MIIs, thus enhance stakeholder trust in the market.
• Amendment to SEBI (Buy-back of Securities) Regulations, 2018: In November 2022, SEBI had issued a public consultation with respect to buy-back of shares. Based on suggestions received from stakeholders, SEBI has issued certain amendments pertaining to buyback through stock exchange route and through tender offer route.
• Foreign Portfolio Investors (FPIs): SEBI has approved certain procedural requirements to streamline the onboarding process. This is likely to facilitate ease of doing business and reduce the time taken for registration of FPIs (such as acceptance of digital signatures, etc.).
• Alternative Investment Funds (AIFs) in credit default swaps: SEBI has permitted AIFs to participate in Credit Default Swaps (CDS) as protection buyers and sellers, subject to certain conditions.

---

To access the text of the minutes of the SEBI board meeting, please click here

6. Greenwashing is a term used for describing a false, misleading or untrue action or set of claims made by an organisation regarding the positive impact that a company, product or service has on the environment.
7. The NCS Regulations define GDS as “a debt security issued for raising funds that are to be utilised for project(s) and/or asset(s) falling under any of the following categories, subject to the conditions as may be specified by SEBI from time to time”:
   1. Renewable and sustainable energy including wind, solar, bioenergy, other sources of energy which use clean technology,
   2. Clean transportation including mass/public transportation,
   3. Sustainable water management including clean and/or drinking water, water recycling,
   4. Climate change adaptation,
   5. Energy efficiency including efficient and green buildings,
   6. . Sustainable waste management including recycling, waste to energy, efficient disposal of wastage,
   7. Sustainable land use including sustainable forestry and agriculture, afforestation,
   8. Biodiversity conservation, or
   9. A category as may be specified by SEBI, from time to time.
8. The GBP issued by the International Capital Market Association (ICMA) are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond. The four core components for alignment with the GBP are – Use of proceeds, Process for project evaluation and selection, Management of proceeds and Reporting
9. The Government of India has announced an initiative to develop country’s blue economy by rolling out the road map of project Sagarmala. According to the World Bank, blue economy refers to the “sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem”. In this regard, deployment of blue bonds can emerge as an important source of finance for various aspects of the blue economy.
10. Transition bonds and transition financing are emerging concepts wherein the proceeds of issue would be utilised to fund a firm’s transition towards a reduced environmental impact and/or reduce the carbon emissions. Climate transition finance is most relevant and required by those industries with high greenhouse gas emissions which face the most complex climate-related transition challenges.
11. Specified securities refer to the equity shares and convertible securities

Regulation 102 of the LODR Regulations empowers SEBI to exempt certain entities from the strict enforcement of the requirement(s) of the LODR Regulations under certain circumstances, which include:

1. Any provision of Act(s), Rule(s), Regulation(s) under which a listed entity is established or is governed by, or is required to be given precedence to
2. The requirement may cause undue hardship to investors
3. The disclosure requirement is not relevant for a particular industry or class of listed entities
4. The requirement is technical in nature
5. The non-compliance is caused due to factors affecting a class of entities but being beyond the control of the entities.

Recently, SEBI, vide a notification dated 5 December 2022 issued certain amendments¹² to Regulation 102 of the LODR Regulations (the amendments). The amendments have inserted an additional criterion to the above specified circumstances and provide that SEBI may, after taking into consideration the interest of investors and securities market, relax the strict enforcement of the requirement(s) of the LODR Regulations, if an application is made by the Central Government with respect to its strategic disinvestment in a listed entity.

Effective date: The amendments are effective from the date of publication in the Official Gazette, i.e., 5 December 2022.

---

12. The amendment has been issued vide the SEBI LODR (Seventh Amendment) Regulations, 2022 (LODR Amendment Regulations).

To access the text of the notification, please click here

Regulation 36(1)(b)²⁰Applicable to issuers of specified securities of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (LODR Regulations) requires companies to send the hard copy of their annual report containing salient features of all the documents prescribed in Section 136 of the Companies Act, 2013²¹ As per Section 136 of the Companies Act, 2013, a copy of the financial statement, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company , to every trustee for the debenture-holder of any debenture issued by the company, and to all persons other than such member or trustee, being the person so entitled, not less than twenty-one days before the date of the meeting. to the shareholders who have not registered their email addresses with the company. Additionally, Regulation 58(1)(b)²²Applicable to issuers of non-convertible securities of the LODR Regulations requires companies with listed Non-Convertible Securities (NCS) to send the hard copy of their annual report to the holders of NCS who have not registered their email addresses with the company.

MCA, vide circular dated 28 December 2022 had extended the relaxations from dispatching of physical copies of financial statements for the Annual General Meetings (AGMs) conducted till 30 September 2023. In view of the same, SEBI also received multiple representations from the listed companies, seeking dispensation from the requirements of sending hard copy of the annual reports to their shareholders as well as holders of NCS. Accordingly, SEBI, vide two circulars, both dated 5 January 2023 has decided to extend the relaxation from complying with Regulation 36(1)(b) and Regulation 58(1)(b) of the LODR Regulations up to 30 September 2023 (earlier this exemption was available till 31 December 2022).

However, it has been clarified that the notice of the AGM published by an advertisement in terms of Regulation 47 of the LODR Regulations, should contain a link to the annual report, so as to enable shareholders to have access to the full annual report. It has been emphasized that in terms of Regulation 36(1)(c) of the LODR Regulations, listed entities would be required to send a hard copy of full annual report to those shareholders who request for the same.

Effective date: The circular would come into effect on an immediate basis.

---

To access the text of the SEBI circulars, please click 1 and 2

On 17 January 2023, SEBI issued the SEBI (LODR) Amendment Regulations, 2023 (the amendment). The key amendments introduced are with regard to the following:

These amendments are further explained in the below paragraphs.

• Amendment in the definition of ‘senior management’: Regulation 16(1)(d) of the LODR Regulations defines ‘senior management’ as: “officers/personnel of the listed entity who are members of its core management team excluding board of directors and normally this shall comprise all members of management one level below the chief executive officer/managing director/whole time director/manager (including chief executive officer/manager, in case they are not part of the board) and shall specifically include company secretary and chief financial officer” In addition to the persons specifically mentioned in the definition above, the amendment has now also included the functional heads of a company within the definition of senior management.
• Shareholder approvals for re-appointment of directors or managers: Regulation 17(1C) of the LODR Regulations states that a listed entity should obtain an approval of the shareholders for appointing a person on the Board of Directors or as a manager at the next general meeting or within a period of three months from the date of appointment, whichever is earlier. It is to be noted that this provision was applicable only for appointment and not re-appointment of a person. The amendments have now made the requirement to obtain shareholder approval within the stipulated timeline applicable even in case of re-appointment of a person on the Board of Directors or as a manager. Further, the amendment has clarified that in case of a public sector company, the approval of the shareholders for appointment or re-appointment of a person on the Board of Directors or as a manager should be taken in the next general meeting (i.e., the three months’ time period criteria has now been omitted for the appointment or reappointment in case of a public sector company).
• Additional disclosures of subsidiaries in corporate governance reports: Part C of Schedule V of the LODR Regulations prescribes the disclosures that are required to be made by a company in the corporate governance report of the company. In addition to the existing disclosure requirements, companies should now disclose details of its material subsidiaries, including the date and place of incorporation and the name and date of appointment of the statutory auditors of such subsidiaries²³ This disclosure is required to be provided in the ‘Other Disclosures’ section of the corporate governance report which is prescribed by Part C(10) of Schedule V of the LODR Regulations . This disclosure requirement would be applicable for the annual reports filed for the FY 2022-23 and thereafter.
• REITs and InvITs to comply with the governance norms prescribed in their regulations: Explanation 4 to Regulation 15 of the LODR Regulations provides that in case of a High Value Debt Listed Entity (HVDLE)²⁴HVDLEs are the entities that have listed non-convertible debt securities and have an outstanding value of listed nonconvertible debt securities of INR500 crore and above. which is a Real Estate Investment Trust (REIT) or an Infrastructure Investment Trust (InvIT), the Board of the manager or the investment manager of the REIT and InvIT respectively, should comply with the corporate governance provisions, as specified in the LODR Regulations. The amendment has now removed this requirement and states that the corporate governance norms for REITs and InvITs should be aligned with the corresponding provisions of the SEBI (REIT) Regulations, 2014 and SEBI (InvIT) Regulations, 2014 respectively. The amendment would be applicable w.e.f. 1 April 2023.

---

To access the text of the amendments, please click here

On 17 January 2023, SEBI notified the SEBI (Change in Control in Intermediaries) (Amendment) Regulations, 2023 (the amendment). The amendment has substituted the definition of “change in control” in the following Regulations:

• SEBI (Stock Brokers) Regulations, 1992
• SEBI (Merchant Bankers) Regulations, 1992
• SEBI (Debenture Trustees) Regulations, 1993
• SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993
• SEBI (Bankers to an Issue) Regulations, 1994
• SEBI (Custodian) Regulations, 1996
• SEBI (Credit Rating Agencies) Regulations, 1999
• SEBI (KYC (Know Your Client) Registration Agency) Regulations, 2011
• SEBI (Alternative Investment Funds) Regulations, 2012
• SEBI (Investment Advisers) Regulations, 2013
• SEBI (Research Analysts) Regulations, 2014
• SEBI (Depositories and Participants) Regulations, 2018
• SEBI (Portfolio Managers) Regulations, 2020
• SEBI (Vault Managers) Regulations, 2021

As per the revised definition, “change in control” refers to:

1. in case of a body corporate –
   1. if its shares are listed on any recognised stock exchange, shall be construed with reference to the definition of control in terms of Regulations framed under Clause (h) of Sub-Section (2) of Section 11 of the Act²⁵The Act refers to the SEBI Act,1992,
   2. if its shares are not listed on any recognised stock exchange, shall be construed with reference to the definition of control as provided in Sub-Section (27) of Section 2 of the Companies Act, 2013 (18 of 2013),
2. in a case other than that of a body corporate, shall be construed as any change in its legal formation or ownership or change in controlling interest

Explanation – For the purpose of Sub-Clause (ii), the expression “controlling interest” means an interest, direct or indirect, to the extent of not less than 50 per cent of voting rights or interest.

Effective date: The amendment is effective from the date of its publication in the Official Gazette, i.e., 17 January 2023.

---

To access the text of the notification, please click here

SEBI, vide notifications dated 14 February 2023 issued certain amendments to the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations) and SEBI (Real Estate Investment Trusts) Regulations, 2014 (REIT Regulations) (amendments). Some of the key changes introduced include.

• Amendment in the definition of ‘change in control’
• Definition of ‘independent director’ and ‘senior management’
• Rules pertaining to the appointment of an auditor
• Rules pertaining to the appointment of an auditor
• Insertion of Chapter VIB ‘Obligations of the investment managers/manager’ in the InvIT Regulations and REIT Regulations respectively

These are further explained below.

• Revised definition of ‘change in control’: The amendment has substituted the definition of “change in control” in InvIT Regulations and REIT Regulations respectively. As per the revised definition, ‘change in control’ refers to:

• Definition of ‘independent director’ and ‘senior management’: The amendment has inserted the definition of Independent Director (ID)⁴ The definition of independent director is in line with the LODR Regulations- i.e., the independent director should be a person of integrity and possess relevant expertise and experience, should not be a promoter of the InvIT or REIT or its group, should not hold any pecuniary relationship, etc. and senior management⁵ Senior management would include the following:
  •  Members of the core management team (excluding the board of directors)
  •  Members of management one level below the CEO, MD, whole-time director, manager
  •  Specifically include compliance officer and chief financial officer in the REIT and InvIT Regulations. The definitions introduced are in line with the requirements specified in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), in this regard.

• Appointment of an auditor: The amendment has specified certain clarifications relating to the reappointment of auditor. As per the amendments, the investment manager of the InvIT/manager of the REIT should appoint an individual or a firm as the auditor, who would hold office from the date of conclusion of the annual meeting in which he/she has been appointed till the date of conclusion of the sixth annual meeting of the unitholders. Further, it has been stated that an InvIT/REIT should not appoint or reappoint:

1. An individual as auditor for more than one term of five consecutive years, and
2. An audit firm as auditor for more than two terms of five consecutive years.

The cooling off period for re-appointment for the auditor is five years from the date of completion of the term.

• Limited review: The amendments specify that the auditor must undertake a limited review of the audit of all the entities or companies whose accounts are to be consolidated with the accounts of the InvIT/REIT as per the applicable Ind AS, and any addendum thereto as defined in Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS Rules).

• Obligation of the investment manager/manager: The amendment has inserted a new chapter stipulating the obligations of the investment manager/manager, thereby making certain corporate governance provisions prescribed in the LODR Regulations applicable to InvITs and REITs. It further states that:

1. The board of directors should consist of a minimum of six directors and have at least one woman ID
2. Quorum must be one-third of its total strength or three directors, whichever is higher, including at least one ID
3. Board of directors should review compliance reports every quarter⁶ The compliance reports would be submitted by the chief executive officer, chief financial officer and the compliance officer along with supporting documents. SEBI has, accordingly, added a new schedule on governance norms in both, the InvIT Regulations and REIT Regulations. Part A of the new schedule prescribes the minimum information to be placed before the board of directors of the investment manager/manager and Part B of the new schedule stipulates what a compliance certificate should include. pertaining to all the applicable laws and initiate steps to rectify instances of non-compliances, if any.

• Vigil Mechanism:The investment manager/manager should formulate a vigil mechanism, including a whistle blower policy for directors and employees to report genuine concern(s). In this regard, an independent service provider may be engaged for providing or operating the vigil mechanism who should report to the audit committee. Further, the audit committee must review the functioning of the vigil mechanism.

• Submission of reports: The investment manager/manager should submit the following:

• Secretarial compliance report: The secretarial compliance report, as provided by a practicing company secretary would be annexed to the annual report of the InvIT/REIT and submitted to the stock exchange within 60 days from the end of each financial year.
• Quarterly compliance report: The quarterly compliance report on governance in the specified format, signed either by the compliance officer or the chief executive officer of the investment manager/manager should be submitted to the stock exchange within 21 days from the end of each quarter.

Effective date: The amendments are effective from 1 April 2023, except for the one relating to limited review, which is effective from the date of publication in the Official Gazette, i.e., 14 February 2023.

---

To access the text of the amendments introduced to the InvIT Regulations, please click here

To access the text of the amendments introduced to the REIT Regulations, please click here

The LODR Regulations requires companies to comply with the minimum public shareholding requirements as prescribed in the Securities Contracts (Regulation) Rules, 1957 (SCRR)⁷ MPS requirements are mandated under Rule 19(2)(b) and 19A of the SCRR read with Regulation 38 of the LODR Regulations in the manner prescribed by SEBI. As per Rule 19A of SCRR, every listed company should maintain a minimum public shareholding of at least 25 per cent. Further, as per Rule 19(2)(b) of SCRR, a prescribed percentage of each class or kind of equity shares or debentures convertible into equity shares should be offered and allotted to public in terms of an offer document.

In February 2018, SEBI had specified different methods that can be used to achieve compliance with the Minimum Public Shareholding (MPS) requirements. However, based on various representations for providing relaxation from the conditions specified in the existing methods and instead permit certain other methods to achieve the MPS compliance, on 3 February 2023, SEBI issued a circular, thereby rationalising the existing methods and introduced two additional methods for MPS compliance.

Thus, a listed entity may adopt any of the following methods in order to achieve compliance with the MPS requirements:

1. Issuance of shares to public through prospectus
2. Offer for sale of shares held by promoter(s)/promoter group to the public through a prospectus
3. Offer for sale of shares held by promoter(s)/promoter group through the stock exchange mechanism i.e., the secondary market
4. Sale of shares held by promoter(s)/promoter group in the open market in the manner as prescribed in the circular and subject to stipulated conditions
5. Rights issue to public shareholders, provided the promoter(s)/promoter group shareholders forgo their entitlement to equity shares that may arise from such issue
6. Bonus issue to public shareholders, provided the promoter(s)/promoter group shareholders forgo their entitlement to equity shares that may arise from such an issue
7. Allotment of equity shares under Qualified Institutions Placement (QIP) in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations)
8. Increase in public holding in accordance with the exercise of options and allotment of shares under an Employee Stock Option (ESOP) scheme, subject to a maximum of two per cent of the paid-up equity share capital of the listed entity. However, the ESOP scheme should comply with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the promoter(s)/promoter group must not be allotted any shares
9. Transfer of shares held by promoter(s)/promoter group to an Exchange Traded Fund (ETF) managed by a SEBI registered mutual fund, subject to a maximum of five per cent of the paid-up equity share capital of the listed entity. The listed entity is also required to comply with certain conditions stipulated in the circular with respect to this method.
10. Any other method as may be approved by SEBI on a caseto-case basis.

Further, the stock exchange(s) would monitor the methods adopted by the listed entities to increase their public holding and comply with the MPS requirements, as specified in this regard.

---

To access the text of the circular dated 3 February 2023, please click here

To access the text of the circular dated 22 February 2018, please click here

SEBI had constituted a sub-group for reviewing the existing rules prescribed in the SEBI (Buy-back of Securities) Regulations, 2018 (buy-back regulations), and to recommend the manner of streamlining the overall buy-back process.

Based on the report of the sub-group, in November 2022, SEBI had issued a consultation paper which proposed:

1. Amendments to certain existing regulations, and
2. New requirements.

On 7 February 2023, SEBI reviewed the comments received on its consultation paper and issued certain amendments to the buy-back regulations (amendments). The key amendments are discussed below:

• Conditions for buy-back: Certain amendments have been made to the basis of computation of the limit of buy-back and the ratio of the debts to paid-up capital and free reserves post buy-back. Earlier, the limits for buy-back were computed based on both the standalone and consolidated financial statements of the company, however, it will now be computed on the basis of the standalone or consolidated financial statements of the company, whichever sets out a lower amount⁸ Accordingly, the revised basis for computation of maximum limit of buy-back is:
  i. The maximum number of equity shares that can be bought back in any financial year should be 25 per cent or less of the aggregate of paid-up capital and free reserves of the company based on the standalone or consolidated financial statements of the company, whichever is lower
  ii. The ratio of the aggregate of secured and unsecured debts owed by the company to the paid-up capital and free reserves after buy-back should be less than or equal to 2:1, based on either of the following:
  ‑ Standalone or consolidated financial statements of the company, whichever sets out a lower amount. However, if a higher ratio of the debt to capital and free reserves has been notified under the Companies Act, 2013, then such higher ratio would prevail, or
  ‑ Standalone or consolidated financial statements of the company, whichever sets out a lower amount, after excluding financial statements of all subsidiaries that are Non-Banking Finance Companies (NBFCs) and Housing Finance Companies (HFCs) regulated by the RBI or National Housing Bank, as the case may be.
  However, buy-back of securities should be permitted only if all such excluded subsidiaries have their ratio of aggregate of secured and unsecured debts to the paid-up capital and free reserves of not more than 6:1 on a standalone basis.
  [Emphasis laid on amendments made] .

• Authorisation for buy-backs: Currently, every buy-back needs to be authorised by the articles of association of the company and most buy-back arrangements need to be approved by the shareholders by way of a special resolution. The amendments now require companies to also obtain a prior consent of their lenders in case of a breach of a covenant with such lenders. Such a consent should be included in the letter of offer prepared by the company.

• Buy-back from open market: Buy-back from open market:

1. Minimum amount to be utilised: The limit for minimum amount to be utilised for buy-back has been increased from 50 per cent to 75 per cent of the amount earmarked for buy-back, and a minimum of 40 per cent of the amount earmarked for the buyback should be utilised within half the duration specified in the buy-back regulations.
2. Frequently traded shares⁹ ‘Frequently traded shares’ shall have the same meaning as assigned to them under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. : Only frequently traded shares should be bought back, and such buyback is subject to restrictions on placement of bids, price and volume as specified by SEBI.

• Buy-back from the open market through stock exchanges: Following amendments for buy-backs from the open market (through the stock exchange route) have been made:

• Phasing out of buy-back: For open market buy-backs under the stock exchange route, there is a possibility of one shareholder’s entire trade getting matched with the purchase order placed by the company, and thus depriving other shareholders to avail the benefit of buy-back. This runs contrary to the underlying principle of equitable treatment which forms the basis of all corporate actions. Accordingly, buy-back from open market mechanism through stock exchange will be phased out in the following manner:

Further, with effect from 1 April 2025, the buy-back from the open market through the stock exchange would not be allowed.

• Separate window for buy-back: Since shares are bought back at prevailing market price, acceptance of shares under buyback is matter of chance for most shareholders and thus there is no clarity as to whether shares are accepted under buyback or sold in the open market and thus shareholders are unable to claim the benefits arising out of buybacks. In order to remove this ambiguity, the amendments have now created a separate window on the stock exchange for undertaking buyback through this route.
• Other requirements: Requirements pertaining to public announcement, escrow account, timelines for extinguishment of securities and issuance of certificates by the company to SEBI will be similar to the requirements prescribed for buy-back through tender offer.

• Buy-back through tender offer: The following amendments have been recommended under the regulations for buy-back through tender offer.

• Revision in buy-back price: : Currently, the buy-back regulations do not allow companies to revise the maximum buy-back price once approved by the board of directors or shareholders, as applicable. The amendments now permit the Board of Directors of a company, to increase the maximum buy-back price till one working day prior to the record date. The Board of Directors may decrease the number of securities proposed to be bought back, such that there is no change in the aggregate size of the buy-back¹⁰ The rationale for this change is that there may be a substantial delay between the time when the buy-back is approved by the Board of Directors or shareholders and the time when the offer is actually opened to the public, the amendments now permit such revision in the buy-back price. .
• Public announcement of buy-back: While making a public announcement for buy-back in newspapers, a company would also file a public announcement in electronic mode with SEBI and stock exchanges on which its shares are listed and also on the websites of stock exchanges, merchant bankers, and the company.
• Draft letter of offer concept omitted: The buy-back regulations require a Draft Letter of Offer (DLOF) to be submitted to SEBI for review. A window is provided to SEBI to submit its comments on the DLOF. The merchant banker is then required to submit a Letter of Offer (LOF) incorporating the SEBI’s comments. To simplify the process and reduce timelines, the amendments have removed the concept of DLOF. Merchant bankers¹¹ Such merchant bankers should not be an associate of the company. will be allowed to directly disseminate the LOF to the shareholders within two working days of the record date. Merchant bankers will be required to certify compliance with the buy-back regulations in the LOF and to the SEBI prior to the opening of an offer.
• Time period of offer: As per the current regulations, the tender offer would open within five days from the date of dispatch of the letter of offer and remain open for 10 working days. These timelines have been amended and now the tender offer would open within four working days from the record date and remain open for five working days.
• Escrow account: For buy-backs through the tender offer route, the buy-back regulations require the escrow account to be opened before the opening of the offer but do not specify an exact date. The amendment now requires the escrow account to be opened within two working days from the date of the public announcement. SEBI has also now permitted additional methods of escrow deposit. These are:
  1. Cash including bank deposits with any scheduled commercial bank
  2. Deposit of frequently traded and freely transferable securities
  3. Government securities
  4. Units of mutual funds invested in gilt funds and overnight schemes, or
  5. A combination of foregoing¹²Where part of the escrow account is in a form other than cash, the amendments require the company to deposit with a scheduled commercial bank, in cash, a sum of not less than two and half per cent of the total amount earmarked for buyback..

• Timelines for closure and payment to security holders and extinguishment of certificates Post closure of the offer, a company should verify the offers received, make payment of consideration to those holders of securities whose offer has been accepted and return the remaining shares or other specified securities to the security holders within five working days (earlier, this requirement was seven days) of the closure of the offer. The company should extinguish and physically destroy the security certificates so bought back in the presence of a registrar to an issue or the Merchant Banker and the secretarial auditor (earlier, this was to be done in the presence of a statutory auditor) within 15 days of the date of acceptance of the shares or other specified securities. The company will also furnish a certificate to SEBI certifying compliance with the extinguishment of security timelines as prescribed in the buy -back regulations. Such certificate will be duly verified by:
  1. Registrar (or a merchant banker, where there is no registrar)
  2. Two directors of the company (one of which is a managing director)
  3. Secretarial auditor (earlier, a statutory auditor

• Buy-back through book building process: Buy-back mechanism under the book-building process has been revised. The amendment lays down the revised provisions for disclosure requirements, timelines for public announcement, offer procedure, methodology for acceptance of bids etc. for buy-back under the book building process.

• Elimination of odd-lot buy backs: The amendments have eliminated odd-lot buy-backs.

• Methodology to be adopted prior to opening of an offer: The amendments have inserted a Schedule VI, which stipulates the methodology to be adopted prior to opening of an offer.

Effective date: The amendments would come into force from the thirtieth day from the date of publication in the Official Gazette (i.e., on 9 March 2023).

---

To access the text of the amendments, please click here

To access the text of the amendments, please click here

On 2 February 2023 SEBI issued certain amendments to the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations). Some of the key amendments introduced are discussed below:

• Revised definition of ‘Green Debt Security’ (GDS): The amendment to the definition of GDS expands the scope of the existing definition and now includes:

1. Projects/activities under pollution prevention and control sectors (including reduction of air emissions, greenhouse gas control, soil remediation, waste prevention, waste reduction, waste recycling and energy efficient or emission efficient waste to energy) and sectors mentioned under the India Cooling Action Plan launched by the Ministry of Environment, Forest and Climate Change
2. Circular economy adapted products, production technologies and processes
3. Blue bonds¹³ Funds raised for sustainable water management, including clean water and water recycling, and sustainable maritime sector including sustainable shipping, sustainable fishing, fully traceable sustainable seafood, ocean energy and ocean mapping. , yellow bonds¹⁴Funds raised for solar energy generation and the upstream and downstreamindustries associated with it. and transition bonds¹⁵Funds raised for transitioning to a more sustainable form of operations, in line with India’s Intended Nationally Determined Contributions (INDCs)..

Additionally, SEBI issued a circular on 3 February 2023, in order to address the concerns of market participants with respect to greenwashing¹⁶ Greenwashing refers to the practice of making false, misleading, unsubstantiated, or otherwise incomplete claims about the sustainability of a product, service, or business operation by an issuer of GDS. . The circular specifies the dos and don’ts that an issuer of GDS should ensure for avoiding greenwashing.

• Recall or redemption prior to maturity: An issuer of NCS has the right to recall or redeem the securities prior to the maturity date, subject to the conditions specified. In this regard, the provisions with respect to the dissemination of information for recall or redemption of securities prior to the maturity date have been amended. As per the amendment introduced, issuers are now required to send a notice for recall or redemption prior to maturity of NCS to all the eligible holders and debenture trustees at least 21 days prior to the date on which such a right is exercisable.

• Appointment of a director: The Articles of Association (AoA) as well as the trust deed should include a provision that the debenture trustee(s) should nominate a person as a director on the board of directors of the issuer. However, an issuer whose debt securities are already listed should ensure compliance with this provision by 30 September 2023 by amending the AoA and trust deed. Further, in case the issuer has defaulted in the payment of interest or repayment of principal amount, then such a director should be appointed within one month from the date of receipt of nomination from the debenture trustee(s) or the date of publication of the amendments in the Official Gazette, whichever is later.

• Period of subscription: The NCS public issue should be kept open for a minimum period of three working days and a maximum of 10 working days. In case of revision in the price band or yield, the issuer should extend the bidding issue period disclosed in the offer document for a minimum period of three working days subject to a maximum cap of 10 working days.

• Regulatory fee: The amendments introduced also prescribe the regulatory fee required to be paid at the time of filing the draft offer document.

Effective date: The amendments are applicable from the date of publication in the Official Gazette (i.e., 2 February 2023).

---

To access the text of the amendments, please click here

To access the text of the circular on dos and don’ts relating to GDS to avoid occurrences of green washing, please click here

The Legal Entity Identifier (LEI) is a unique 20-character code — like a bar code — used across markets and jurisdictions to uniquely identify a legally distinct entity that engages in a financial transaction.

On 3 May 2023, the Securities and Exchange Board of India (SEBI) issued a circular, introducing the Legal Entity Identifier (LEI) system for issuers that have listed or are planning to list non-convertible securities, securitised debt instruments and security receipts.

Presently, the Reserve Bank of India (RBI) directions mandate non-individual borrowers having aggregate exposure of above INR25 crore, to obtain an LEI code. SEBI has stated the following timelines for the issuers to obtain and report LEI code:

Further, the requirement of LEI for issuers proposing to list or that have outstanding municipal debt securities will be specified in future. Entities can obtain the LEI code from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF).

Effective date: The requirements are effective immediately.

---

To access the text of the circular, please click here

In February 2023, certain amendments had been issued to the provisions of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations), w.r.t. widening the definition of ‘Green Debt Security’ (GDS), thereby encompassing ‘transition bonds’ as one of the sub-categories of GDS. According to the NCS Regulations, ‘transition bonds’ comprise of ‘funds raised for transitioning to a more sustainable form of operations, in line with India’s Intended Nationally Determined Contributions.’

Further, on 6 February 2023, SEBI had issued the revised disclosure requirements for such issuances. In this regard, with a view to facilitate transparency and informed decision-making among the investors and to ensure that the funds raised through transition bonds are allocated towards the purpose for which they are raised, SEBI vide a circular dated 4 May 2023 prescribed certain additional disclosure requirements for the issuance and listing of transition bonds. These include:

• GB-T denotation: For differentiating transition bonds from other categories of GDS, an issuer should disclose the denotation GB-T in the offer documents on cover page as well as in the type of instrument field in term sheet. The same should also be disclosed in the centralised database for corporate bonds/debentures
• Transition plans: Details of transition plans such as interim targets, project implementation strategy, usage of technology and overseeing mechanism must be disclosed in the offer document
• Revision in the transition plan: Revised transition plan accompanied by an explanation for each revision should be disclosed to the stock exchanges
• Disclosure in annual report: Details of transition plan along with a brief on the progress of its implementation should be disclosed in the annual report.

Effective Date: The provisions of this circular have come into effect from 4 May 2023.

---

To access the text of the circular, please click here

Over the years, the Securities and Exchange Board of India (SEBI) has introduced various amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), with a view to keep the business practices in line with the evolving regulatory and technological landscape. Recently, as a part of these measures, SEBI notified certain amendments to the LODR Regulations⁴The amendments have been issued vide the SEBI (LODR) (Second Amendment) Regulations, 2023 .
The diagram below explains the key amendments issued in this regard:

Key amendments in the LODR Regulations

---

To access the text of the notification, please click here

Recently, SEBI issued certain amendments¹⁴ Amendments have been issued vide the SEBI (AIF) (Second Amendment) Regulations, 2023. to the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). The key amendments issued include:

• Specified AIF notified: Regulation 3(4) of the AIF Regulations provides guidance w.r.t. registration of Alternative Investment Funds (AIFs). Under the existing guidelines, three categories of AIFs had been specified:

• Category I AIFs
• Category II AIFs, and
• Category III AIFs

In this regard, SEBI has notified a new registration entity, known as the specified AIFs

• Issue of units in dematerialised form: A new clause has been inserted in Regulation 10(a) of the AIF Regulations, which states that every AIF seeking to invest, must issue its units in dematerialised form only. The amendment would help in reducing operational and fraud risks¹⁵ Such as fake certificates, delays, bad deliveries, missing certificate, mutilation or theft. and help in enhancing transparency and monitoring activities.

• Approval of unitholders required for buying/selling investment from certain persons: Regulation 15 of the AIF Regulations prescribes guidance on the general investment conditions. SEBI has now amended the erstwhile requirements. The amended norms prescribe that the approval of 75 per cent of the investors by value of their investment in the scheme would be required to buy or sell investments, from or to:

• Associates, or
• Schemes of AIF managed or sponsored by its manager, sponsor or associates of its manager or sponsor, or
• An investor who has committed to invest at least 50 per cent of the corpus of the scheme of AIF¹⁶ While obtaining approval of the investors, those investors who have committed to invest at le .

• Requirement of compliance officer: Regulation 20 of the AIF Regulations specifies provisions regarding general obligations and responsibilities and transparency. Basis the amendment introduced, every AIF should now have a compliance officer. Such compliance officer would be responsible for monitoring compliance with the provisions and guidelines prescribed by SEBI from time to time. Additionally, it would be his/her duty to immediately and independently report to SEBI about any non-compliance observed by him/her. Such non-compliance should be reported not later than seven working days from the date of observing such non-compliance.

• Modification to the valuation procedure and methodology for valuing assets: Regulation 23 of the AIF Regulations provides guidance to AIFs regarding the valuation of its investments. In this regard, SEBI issued certain amendments to the valuation procedure and methodology for valuing assets.

Consequently, on 21 June 2023, SEBI issued a circular on the standardised approach to valuation of investment portfolio of AIFs (the circular)¹⁷ The manager of the AIF should submit a report on compliance with the provisions of this circular on SEBI Intermediary Portal (www.siportal.sebi.gov.in) in the format as specified therein. The trustee/sponsor of AIF, as the case may be, shall ensure that the 'Compliance Test Report' prepared by the manager in terms of SEBI Circular No. CIR/IMD/DF/14/2014dated June 19, 2014, includes compliance with the provisions of this circular. . Some of the key aspects discussed in the circular include.

The key amendments to Regulation 23 of the AIF Regulations and the key clarifications issued by the circular include the following:

• Valuation of securities: Currently, Regulation 23(1) of the AIF Regulations require the AIF to provide their investors with a description of their valuation procedure and of the methodology for valuing assets. Regulation 23(1) has now been amended and requires AIFs to carry out the valuation of its investments in the manner specified by SEBI from time to time and provide its investors with a description of its valuation procedure and of the methodology for valuing assets. Further Regulation 23(5) has been inserted in the AIF Regulations, which requires the manager and the Key Managerial Personnel (KMP) of the manager of the AIF to ensure that an independent valuer computes and carries out valuation of the investments of the scheme of the Alternative Investment Fund in the manner specified by SEBI from time to time.

• Responsibility of the manager of the AIF: The amendments have inserted Regulation 23(6) of the AIF Regulations to state that the manager of the AIF would be responsible for true and fair valuation of the investments of the schemes of the AIF. Provisos to Regulation 23(6) of the AIF Regulations have also been inserted which state that if the established policies and procedures of valuation do not result in fair and appropriate valuation, the manager would deviate from the established policies and procedures in order to value the assets or securities at a fair value and document the rationale for such deviation. Such deviation and its rationale would be reported to the trustee or the trustee company or the board of directors or designated partners of the AIF and investors of the AIF.

• Appointment of independent valuer: The amendment has inserted Regulation 23(4) of the AIF Regulations, which requires the manager of the AIF to appoint an independent valuer who satisfies the criteria specified by SEBI from time to time.

• Reporting of valuation of investments to performance benchmarking agencies: To ensure timely and appropriate reporting of valuation of investment portfolio to performance benchmarking agencies, the circular provides that the manager must ensure that a specific timeframe for providing audited accounts by the investee company to the AIF is included as one of the terms in the subscription/investment agreement with the investee company. This is required so as to enable the AIFs to report valuation based on audited data of investee companies as on 31 March within the prescribed period of six months. Further, the valuation based on audited data of the investee company must be reported to the performance benchmarking agencies, only after the audit of books of accounts of the AIF has been completed.

Effective Date: The provisions of the circular would come into force w.e.f. 1 November 2023. All the other amendments specified above came into force from the date of publication in the Official Gazette, i.e., 15 June 2023.

---

To access the text of the circular, please click here

To access the text of the other amendments issued by SEBI, please click here

The SEBI (Credit Rating Agencies) Regulations, 1999 (the CRA Regulations) requires every CRA to carry out periodic reviews of all published ratings during the lifetime of securities, unless the rating is withdrawn. However, in case a company does not cooperate with the CRA, the CRA is required to carry out the review on the basis of the best available information or in the manner specified by SEBI.

SEBI observed that over time, the number of issuers that are non-cooperative with the CRAs have increased significantly, with a vast majority of such issuers being unlisted and small entities. In this regard, in order to provide enhanced transparency and information regarding non-cooperative issuers, on 27 June 2023, SEBI issued a circular specifying the disclosure of information on Issuers Not Cooperating (INC) with CRAs. The circular provides:

• CRAs should disclose two lists of issuers who are non-cooperative with the CRA, separately for:
  • Securities that are listed, or proposed to be listed, on a recognised stock exchange, and
  • Other ratings
• Format for disclosure of such lists
• The disclosure is required to be updated on a daily basis.

Effective Date: The circular came into force w.e.f. 15 July 2023 and CRAs should report on compliance with the circular (subject to ratification by their respective board of directors) to SEBI within one quarter from the date of applicability of this circular.

---

To access the text of the circular, please click here

Over the years, there has been a growing emphasis towards Environmental Social Governance (ESG) practices by companies. The stakeholders today give due consideration to non-financial information aspects, alongside financial information and disclosures while making investment and other key decisions. In this regard, regulators around the globe are coming out with various regulations and guidelines to address different aspects and challenges in the ESG space.

On 20 July 2023, SEBI issued a circular for mutual funds, implementing some key measures to facilitate green financing with a thrust on enhanced disclosures and mitigation of green washing risk (the circular). The key developments made in the circular are explained in the below diagram:

An overview of the key updates has been discussed below:

Regulation 23(6) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations) states that an issuer which is a company under the Companies Act, 2013 (the 2013 Act) must ensure that its Articles of Association (AoA) require the Board of Directors to appoint as director, a person nominated by the debenture trustee(s).

However, based on the representations received from various stakeholders, the Securities and Exchange Board of India (SEBI) observed that while the aforementioned obligation exists for the issuers which are companies under the 2013 Act, there was no similar obligation for the issuers that are not companies.

Entities that are incorporated under a different statute, would face challenges in executing similar amendments as the composition of their board of directors is governed by certain statutes which do not provide for appointment of a nominee director. Further, there are similarities in roles and responsibilities of directors and nominee directors.

Considering these factors, SEBI issued a circular on 4 July 2023 that requires entities that are incorporated under a different statute to submit an undertaking to their Debenture Trustees that in case of events as mentioned in Regulation 15(1)(e) of SEBI (Debenture Trustees) Regulations, 1993¹⁴ Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993 requires every debenture trustee to appoint a nominee director on the Board of the company in the event of: i. Two consecutive defaults in payment of interest to the debenture holders; or ii. Default in creation of security for debentures; or iii. Default in redemption of debentures. , a non-executive /independent director / trustee / member of its governing body shall be designated as nominee director for the purposes of Regulation 23(6) of NCS Regulations, in consultation with the Debenture Trustee, or, in case of multiple Debenture Trustees, in consultation with all the Debenture Trustees.

Effective Date: The provisions of the circular are applicable with immediate effect, i.e., 4 July 2023.

---

To access the text of the circular, please click here

On 7 July 2023, SEBI issued a circular regarding the roles and responsibilities of trustees and board of directors of Asset Management Companies (AMCs) of mutual funds. The circular prescribes the core responsibilities for the trustees of a mutual fund. Some of these are discussed below:

• Due diligence: The circular specifies certain matters where the trustees should exercise due diligence. These include:

• Fairness of the fees and expenses charged by the AMCs
• Review of the performance of AMC’s schemes against the performance of peers or the relevant benchmarks
• No undue or unfair advantage is given by the AMCs to any of the associates/group entities
• AMC has put in place adequate systems to prevent misconduct by the employees, AMC or the connected entities of the AMCs, etc.

• Evaluation of compliance by AMCs: The circular states that the trustees and their resource persons must independently evaluate the extent of compliance by AMCs w.r.t. the identified key areas and not just rely on the external assurances.
• KYC updation: The trustees should periodically review the steps taken by the AMCs for folios which do not contain all the Know Your Client (KYC) attributes and ensure that remedial steps are taken for updating the same.

Further, the circular specified following additional requirements:

• Third party assurances: In order to focus on the aforementioned core responsibilities, the trustees may rely on professionals, such as – audit firms, legal firms, merchant bankers, etc. for carrying out due diligence on behalf of the trustees
• Appointment of the trustee company: In cases where a company is appointed as the trustee of a mutual fund, the chairperson of the board of directors of the company must be an independent director. In this regard, the existing trustee companies must ensure compliance with this requirement within a period of six months from the date of the circular coming into force, i.e., 1 January 2024
• Meetings between the trustee company and AMC: The circular provides that the board of directors of the AMCs and the trustee company should meet at least once in a year to discuss the issues concerning the mutual fund, if any.

Effective Date: The circular would come into force w.e.f. 1 January 2024.

---

To access the text of the circular, please click here

A listed entity may choose to voluntarily delist¹ Delisting means the permanent removal of securities of an entity from the trading platform of a recognised stock exchange, either voluntarily or compulsorily. Once such securities are delisted, no trading is permitted in such securities on the trading platform of stock exchanges. Delisting assumes significance as it is considered as a permanent loss of investment or divestment opportunity for the investors in such securities. its Non-Convertible Securities² Non-convertible securities for the purpose of this amendment would include non-convertible debt securities and non-convertible redeemable preference shares (NCS) for various reasons, such as for restructuring the NCS due to financial distress, less number of holders of such instruments, in case of a merger – especially, where the acquiring entity is not listed, etc.

Currently, the Securities and Exchange Board of India (SEBI) (Delisting of Equity Shares) Regulations, 2021 provide for voluntary as well as compulsory delisting of specified securities³ Specified securities includes equity shares and convertible securities. in certain cases. However, neither the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations), nor the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) provide a framework for delisting of NCS.

On 23 August 2023, SEBI issued amendments to the LODR Regulations, thereby inserting a new chapter – Chapter VIA: Framework for voluntary delisting of non-convertible debt securities or non-convertible redeemable preference shares and obligations of the listed entity on such delisting (the amendments).

Applicability

The amendments would be applicable to voluntary delisting of all listed NCS from all or any stock exchanges where such NCS are listed. However, there are certain exceptions, which include:

• NCS that are issued by way of public issue
• Where more than 200 persons (excluding qualified institutional buyers) have invested in that security (ISIN)
• Where NCS have been delisted due to any penalty, redemption or due to any resolution plan under the Insolvency and Bankruptcy Code.

Procedure for obtaining approval The amendments have prescribed detailed procedures when making an application for delisting of NCS from all or some of the stock exchanges⁴ It is to be noted, that the process for delisting the NCS completely from all stock exchanges is different as compared to the process adopted for delisting of the NCS from some of the stock exchanges. .

The issuers of the NCS would need to obtain the following approvals within the timelines prescribed in the amendments:

• Approval of the board of directorsApproval of the board of directors
• Approval of ALL holders of the NCS
• Approval of the debenture trustee (only in case of non-convertible debt securities)
• Approval from the stock exchange (including the in-principle approval and final approval).

Disclosure of material events Regulation 51 of the LODR Regulations, requires issuers of NCS to promptly inform the stock exchange and disclose on the website all information having bearing on the performance/operation of the listed entity or which is price sensitive.

The amendments have prescribed that all the events in respect of the proposal of delisting of the NCS, beginning with placing of the agenda for delisting before the board of directors till the delisting is complete would be disclosed as material information under Regulation 51 of the LODR Regulations. The amendments have also prescribed certain information that needs to be disclosed on the website of the issuer of NCS such as:

• The objects and reasons for delisting
• The name of the stock exchange from which the NCS are sought to be delistedThe name of the stock exchange from which the NCS are sought to be delisted
• The cut-off date specified for determining the name of the holders of the NCS to whom notice of delisting has to be sent (and approval of delisting needs to be taken)
• NCS held by related parties or on behalf of the issuer or the related parties and who would not be eligible to vote on the proposal
• Details of compliance officer
• Statements/undertakings by the following:Statements/undertakings by the following:

1. Board of directors confirming that complete disclosures have been made to the stock exchange, that the entity is compliant with applicable provisions of the security laws and that delisting is in the interest of the holders of NCS
2. Debenture trustee on adequacy of security cover in case of secured non-convertible debt security
3. Issuer that they have not paid any incentive to investors or entered into any side agreements with investors with regard to the delistingIssuer that they have not paid any incentive to investors or entered into any side agreements with investors with regard to the delisting

Effective date: The amendment came into force from the date of its publication in the Official Gazette, i.e., 23 August 2023.

---

To access the text of the amendment, please click here

Recently, SEBI, vide a circular dated 9 August 2023 reduced the timelines for listing of specified securities in a public issue. As per the circular, the specified securities should be listed after the closure of public issue within three working days (T+3 days) (earlier it was within six working days (T+6 days)) . Accordingly, the timelines for various activities involved in the public issue process have also been revised.

The timelines for submission of application, allotment of securities, unblocking of application money and listing should be prominent in the pre-issue, issue opening and issue closing advertisements issued by the issuer for public issues in terms of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).

Effective Date: The provisions of the circular would be applicable as follows:

• On a voluntary basis for public issues opening on or after 1 September 2023, and
• Mandatory for public issues opening on or after 1 December 2023.

---

To access the text of the circular, please click here

Regulation 2(1)(a) of the Securities and Exchange Board of India (SEBI) (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations) defines ‘abridged prospectus’ as:

A memorandum accompanying the application form for a public issue containing such salient features of a prospectus, as specified by SEBI.

The NCS Regulations prescribe the rules and compliances for the issuance and/or listing of non-convertible securities¹ Non-convertible securities includes non-convertible debentures and non-convertible preference shares . Regulation 32 of the NCS Regulations inter alia require the issuer and lead manager of the issue to ensure that the abridged prospectus and the application form is in the format as prescribed by SEBI.

However, currently, the NCS Regulations do not stipulate a format for the abridged prospectus² It is to be noted that prior to the SEBI (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2023 (Second Amendment regulations), issued in July 2023, Part B of Schedule I of the NCS Regulations provided a format for the abridged prospectus. However, the Second mendment regulations replaced Schedule I with common disclosures required to be made for the public as well as private issue of non-convertible securities. Accordingly, post this amendment, there is no format for the abridged prospectus in the NCS Regulations . Accordingly, in order to maintain consistency in the disclosures across documents and provide important information in the abridged prospectus, on 4 September 2023, SEBI issued a circular (the circular), thereby prescribing the format for disclosures in the abridged prospectus for public issues of non-convertible securities.

The circular also prescribes the following:

• Format of the abridged prospectus: Annexure- I of the circular provides the format of the abridged prospectus. Also, Annexure-II includes the instructions that should be provided to investors for the completion of the application form. Issuers/merchant bankers/syndicate members like brokers who are involved in the public issue should disclose the same on their websites during the period a public issue is kept open
• Availability of the abridged prospectus: A copy of the abridged prospectus should be made available on the website of the issuer, merchant bankers, registrar to the issuer and a link for downloading the abridged prospectus must be provided in the issue advertisement for public issue
• Requirement for QR Code: Issuers/merchant bankers would be required to insert a Quick Response (QR) code in the following places. The scan of such QR code would lead to the prospectus:

• The last page of the abridged prospectus
• The front page of the documents such as front outside cover page, advertisement, etc. as deemed fit by them.

• Accurate information: The issuer/merchant banker should ensure that the disclosures in the abridged prospectus are adequate, accurate and do not contain any misleading information or misstatement
• Qualitative and quantitative disclosures: The issuer/merchant bankers must ensure that the qualitative statements in the abridged prospectus are substantiated with quantitative factors as well. Further, qualitative statements should not be made which cannot be substantiated with quantitative factors.

Effective date: The circular would be applicable for all public issues opening on or after 1 October 2023.

---

To access the text of the circular, please click here

Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) precludes an entity having listed specified securities from issuing further specified securities without listing them.

However, there are no similar regulations in this regard in the LODR Regulations for issuers of Non-Convertible Debt Securities (NCDS). Hence, presently, there exist entities which have simultaneously outstanding unlisted NCDS as well as listed NCDS.

This created various issues, such as information asymmetry, lack of liquidity to investors, no recourse to the established grievance redress mechanism of SEBI for private investors, differential interest rates for similar securities, possibility of mis-selling, etc..

Accordingly, to overcome these challenges, on 19 September 2023, SEBI amended the LODR Regulations through the issuance of the SEBI (LODR) (Fourth Amendment) Regulations, 2023 (the amendments). SEBI has now inserted a new regulation – Regulation 62A: Listing of subsequent issuances of non-convertible debt securities.

As per the new regulation:

• A listed entity whose NCDS are listed, must list all NCDS, proposed to be issued on or after 1 January 2024, on the stock exchange(s).
• A listed entity whose subsequent issues of unlisted NCDS made on or before 31 December 2023 are outstanding on the said date, may voluntarily list such securities on the stock exchange(s), and
• A listed entity that proposes to list its NCDS on the stock exchange(s) on or after 1 January 2024, should list all outstanding unlisted NCDs, previously issued on or after 1 January 2024 on the stock exchange(s), within three months from the date of listing of the NCDS proposed to be listed. (For example, if tranche A was issued on 1 February 2024 as an unlisted tranche of NCDS, and tranche B is being issued on 1 January 2025 as a listed tranche of NCDS, then tranche A needs to be listed within three months from 1 January 2025.)

Further, the regulation states that a listed entity would not be required to list the following securities³ A listed entity proposing to issue these securities must disclose to the stock exchange(s) on which its NCDS are listed – all the key terms of such securities, including embedded options, security offered, interest rates, charges, commissions, premium, period of maturity and such other details as may be prescribed. (exempt securities):

• Bonds issued under Section 54EC⁴ Deduction on Long Term Capital Gains (LTCG) through capital gain bonds of the Income Tax Act, 1961
• NCDS issued pursuant to an agreement entered into between the listed entity and multilateral institutions⁵ Provided that these securities are locked-in and held till maturity by the investors and are unencumbered. , and
• NCDS issued pursuant to an order of any court or tribunal, or regulatory requirement as stipulated by a financial sector regulator.

A listed entity proposing to issue the exempt securities should disclose all the key terms of such securities to the stock exchanges on which its NCDS are listed.

Effective date: The amendment has come into force from the date of its publication in the Official Gazette, i.e., 19 September 2023 and would apply to those NCDs that are proposed to be issued on or after 1 January 2024, on the stock exchange(s)

---

To access the text of the amendment, please click here

SEBI approved the following proposals in its board meeting dated 21 September 2023:

• Flexibility in the framework for Large Corporates (LCs) for meeting incremental financing needs through issuance of debt securities: SEBI approved the proposal to provide flexibility in the framework for LCs for meeting their financing needs from debt market through the following measures:

• As per the existing requirement, threshold for the criteria of outstanding long-term borrowings is INR100 crore or above. SEBI has now approved a higher monetary threshold limit in this regard
• The current provisions state that in case of a shortfall in the requisite borrowing, a monetary penalty/fine of 0.2 per cent of the shortfall in the borrowed amount is levied and payable. SEBI has now decided to dispense off this requirement
• SEBI has clarified that LCs are required to ensure that the provisions of the framework are met over a contiguous block of three years, and
• SEBI has further introduced certain important incentives and moderated disincentives for the LCs.

• Streamlining the framework for credit of unclaimed amounts of investors to the Investor Protection and Education Fund (IPEF) in listed entities other than companies, REITs and InvITs: SEBI had previously, in its board meeting dated 30 September 2022 approved the proposal for transfer of unclaimed amounts lying in the escrow account for more than seven years, to the IPEF for debt listed entities (other than companies) under the LODR Regulations. Consequently, the proposal to transfer unclaimed or unpaid amounts to investors in REITs and InvITs to IPEF was approved in the meeting held on 20 December 2022. With a view to further streamline the credit of unclaimed amounts and provide for claim of such amounts, SEBI has now approved amendments to the SEBI (Investor Protection and Education Fund) Regulations, 2009 (IPEF Regulations), LODR Regulations, SEBI (Real Estate Investment Trusts) Regulations, 2014 (REIT Regulations) and SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations), thereby creating a regulatory framework for segregation of unclaimed amounts of investors in the IPEF, to facilitate utilisation and processing of such amounts in the prescribed manner.
• Extension of timeline for compliance with enhanced qualification and experience requirements for investment advisers: SEBI requires individual investment advisers, principal officers of non-individual investment advisers and persons who are with investment advisers and associated with investment advice to comply with certain enhanced qualification and experience requirements by 30 September 2023. Based on the representations received from various stakeholders, SEBI has now decided to allow an extension up to 30 September 2025 , to comply with these requirements.

---

To access the text of the proposals approved in the SEBI board meeting, please click here

Regulation 30(11) of the LODR Regulations requires mandatory confirmation, denial or clarification of any reported event or information in the mainstream media (which is not general in nature), and which indicates that rumours of an impending specific material event or information are circulating amongst the investing public. These requirements are applicable to top 100 listed entities by market capitalisation* w.e.f. 1 October 2023 and top 250 listed entities w.e.f. 1 April 2024.

Recently, SEBI issued a circular, thereby extending the effective date of the implementation of the aforementioned rule. The requirement would now be applicable in the following manner:

*As per market capitalisation as at the end of the immediately preceding financial year

---

To access the text of the circular, please click here

In September 2023, MCA had extended the timelines for:

1. Holding Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) through audio visual means up to 30 September 2024, and
2. From dispatching of physical copies of the financial statements (including board’s report, auditor’s report and other documents required to be attached therewith) up to 30 September 2024.

Pursuant to this, the Securities and Exchange Board of India (SEBI) received representations from various stakeholders for similar exemptions.

Accordingly, it has issued two circulars that provide the following relaxations to listed entities:

Issuers of Non-Convertible Securities (NCS) Regulation 58(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) provides that a listed entity must send a hard copy of the prescribed statements⁴ The statement, containing the salient features of all the documents specified in Section 136 of the Act. to those holders of non-convertible securities who have not registered their e-mail addresses with the listed entities or depositories⁵ The email addresses are required to be registered in order to receive soft copies of the requisite statements. .

SEBI has now extended the applicability of this provision up to 30 September 2024.

Issuers of specified securities SEBI, vide master circular dated 11 July 2023 had relaxed the applicability of Regulation 36(1)(b)⁶Hard copy of documents and information to be shared with shareholders of the LODR Regulations for Annual General Meetings (AGMs) and Regulation 44(4)⁷ Facility for e-voting provided to shareholders of the LODR Regulations for general meetings (in electronic mode) held till 30 September 2023.

SEBI has now decided to extend these relaxations up to 30 September 2024.

Effective date: The circulars are applicable with immediate effect.

---

To access the text of the circulars, please click 1 and 2

Regulation 50B of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (the NCS Regulations), lays down the criteria for a listed company to be considered as a Large Corporate (LC). Chapter XII of the master circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper (NCS Master Circular)⁸Chapter XII of the NCS Master Circular deals with Fund raising by issuance of debt securities by large corporates stipulates the criteria of a LC and mandates the LCs to raise a minimum 25 per cent of their incremental borrowings in a Financial Year (F.Y.) through issuance of debt securities over a contiguous block of three years from F.Y. 2022 onwards.

However, SEBI, vide a circular dated 19 October 2023 (the revised framework) has revised the framework for fund raising by issuance of debt securities by the LCs. Some of the key aspects of the revised framework include:

• Applicability: The revised framework would be applicable w.e.f. 1 April 2024 for LCs following April to March as their F.Y. For LCs which follow January to December as their F.Y., the revised framework would be applicable w.e.f. 1 January 2024.
• Revised definition of a LC⁹ The older definition of an LC is: all listed entities (except for Scheduled Commercial Banks), which as on the last day of the F.Y.:
  a)have their specified securities or debt securities or non-convertible redeemable preference shares, listed on a recognised stock exchange(s) in terms of SEBI LODR Regulations, 2015; and
  b)have an outstanding long-term borrowing of Rs. 100 crore or above, where outstanding long-term borrowings shall mean any outstanding borrowing with original maturity of more than one year and shall exclude external commercial borrowings and inter-corporate borrowings between a parent and subsidiary(ies);and
  c)have a credit rating of "AA and above", where credit rating shall be of the unsupported bank borrowing or plain vanilla bonds of an entity, which have no structuring/support built in; and in case, where an issuer has multiple ratings from multiple rating agencies, the highest of such ratings shall be considered. : All listed entities (except scheduled commercial banks), which as on the last day of the F.Y.:

• Have their specified securities or debt securities or non-convertible redeemable preference shares listed on a recognised stock exchange(s) in terms of the LODR Regulations, and
• Have outstanding long-term borrowings of INR1000 crore or above, and
• Have a credit rating of “AA”/”AA+”/”AAA”, wherein the credit rating pertains to the unsupported bank borrowing or plain vanilla bonds of an entity, with no structuring/support built in.

• Qualified borrowings: The LC should raise not less than 25 per cent of its qualified borrowings¹⁰ It refers to the incremental borrowing between two balance sheet dates having original maturity of more than one year, but excludes:
  - External commercial borrowings;
  - Inter-corporate borrowings involving its holding company and/or subsidiary and/or associate companies;
  - Grants, deposits or any other funds received as per the guidelines or directions of the Government of India;
  - Borrowings arising on account of interest capitalisation; and
  - Borrowings for the purpose of schemes of arrangement involving mergers, acquisitions and takeovers by way of issuance of debt securities in the F.Y.s subsequent to the F.Y. in which it has been identified as an LC. The revised framework provides that:

• From F.Y. 2025¹¹ FY 2025 shall mean 1 April 2024 – 31 March 2025 or 1 January 2024 – 31 December 2024, as the case may be. onwards, the requirement of mandatory qualified borrowing in a F.Y. should be met over a contiguous block of three years. Accordingly, a listed entity would be identified as a LC, as on the last day of 31 March, FY "T-1" or 31 December, FY "T-1", and must fulfil the requirement of qualified borrowing for FY "T", over FY "T", "T+1" and "T+2"
• If at the end of three years, i.e., last day of FY "T+2", there is a surplus in the requisite borrowings (i.e., the actual borrowings through debt securities is more than 25 per cent of the qualified borrowings for FY "T"), in such case, the framework has prescribed certain incentives for the LC. On the other hand, if there is a shortfall in the requisite borrowings, then the framework has provided for some dis-incentives as well.

• Transitional requirements¹² All listed entities (except for scheduled commercial banks), which as on last day of the F.Y.:
  a. Have their specified securities or debt securities or non-convertible redeemable preference shares, listed on a recognised stock exchange(s) in terms of the LODR Regulations, and
  b. Have an outstanding long-term borrowing of INR100 crore or above, and
  c. Have a credit rating of "AA and above", wherein the credit rating must be of the unsupported bank borrowing or plain vanilla bonds of an entity, which have no structuring/support built in. : The revised framework states that such LCs must comply with the requirement of raising 25 per cent of their incremental borrowings done during F.Y. 2022, F.Y. 2023 and F.Y. 2024 respectively by way of issuance of debt securities till 31 March 2024, failing which, such LCs must provide a one-time explanation in their annual report for F.Y. 2024 (on a comply-or-explain basis).

---

To access the text of the circular, please click here

The Securities and Exchange Board of India (SEBI), in its board meeting dated 25 November 2023 discussed the following key matters:

Regulation 61A(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) provides that where interest/dividend/redemption amount has not been claimed within 30 days from the due date, a listed entity should within seven days from the date of expiry of the said period of 30 days, transfer the amount to an escrow account to be opened by the listed entity with a scheduled bank.

Further, Regulation 61A(3) of the LODR Regulations provides that any amount transferred to the escrow account and remaining unclaimed for a period of seven years should be transferred to:

• In case of listed entities which are companies: To the Investor Education and Protection Fund (IEPF), and
• In case of listed entities which are not companies: To the Investor Protection and Education Fund (IPEF).

In this regard, SEBI vide a circular dated 8 November 2023 has prescribed a framework for standardising the process of transfer of such unclaimed amounts and claim thereof by an investor. The circular provides the following:

• Framework for transfer of unclaimed amounts by listed entities to escrow accounts and claim thereof by investors (Annex-A), and
• Framework for transfer of unclaimed amounts from the escrow account of listed entity which is not a company to IPEF and claim thereof by the investors (Annex-B).

Effective Date: The circular would come into effect from 1 March 2024.

Interest on unclaimed amounts: Listed entities having unclaimed amounts in the escrow account for less than seven years, as on 29 February 2024 should start computing interest, as per the stipulated regulations from 1 March 2024.

Transfer to IPEF: For listed entities which are not companies and have unclaimed amounts in the escrow account for more than seven years, as on 29 February 2024, should transfer the same to IPEF, on or before 31 March 2024.

---

To access the text of the circular, please click here

On 19 September 2022, SEBI had notified the detailed framework on Social Stock Exchange (SSE)¹ The framework on SSE included the following:
- Minimum requirements to be met by a Not-for-Profit Organization (NPO) for registration with SSE
- Minimum Initial Disclosure Requirement for NPOs that are raising funds through the issuance of Zero Coupon Zero Principal (ZCZP) instruments
- Annual disclosure by NPOs that are either registered on or raise funds through the SSE
- Disclosure of Annual Impact Report (AIR) by all social enterprises which have registered or raised funds using SSE
- Requirement to issue a statement of utilisation of funds . Based on the feedback received from various stakeholders, on 28 December 2023, SEBI issued certain modifications/additions to this framework. The key amendments include:

• Disclosure of details of past social impact: As part of the minimum initial disclosure requirements for Not-for-Profit Organisations (NPOs) raising funds through the issuance of Zero Coupon Zero Principal (ZCZP) instruments, details of past social impact carried out should be provided. In this regard, SEBI has now clarified that the past social impact should highlight trends in key metrics/parameters relevant to the NPO for which it seeks to raise funds on SSE, number of beneficiaries, cost per beneficiary and administrative overheads.
• Procedure for public issuance of ZCZP instruments: SEBI has now prescribed the procedure for public issuance of ZCZP instruments by NPOs and states that:

• NPOs need to file the draft fund-raising document with the SSE, where it is registered, and an application seeking in-principle approval for listing of its ZCZP instruments on the SSE
• The draft fund raising document should be made available on the website of the SSE and the NPO for a period of at least 21 days for public comments
• The SSE should provide its observation on the draft fund raising document within a time period of 30 days from the date of filing of the draft fund raising document or receipt of clarification, if any, sought by the SSE, whichever is later
• The NPO must incorporate the observations of the SSE in the draft fund raising document and file the final fund raising document, prior to opening the issue
• SEBI would prescribe the disclosures to be included in the draft and final fund raising documents. The SSE could mandate additional disclosures in this regard.

• Other conditions relating to issuance of ZCZP instruments: SEBI has laid down certain other conditions w.r.t. the issuance of ZCZP instruments. Some of these include:

• ZCZP instruments would be issued in dematerialised form only
• They would not be transferable from the original subscriber/holder till the expiry of the tenure of the said instrument
• The minimum issue size would be INR50 lakhs (earlier INR1 crore)
• The minimum application size would be INR10 thousand (earlier INR2 lakh)
• The minimum subscription required would be 75 per cent of the funds proposed to be raised through issuance of ZCZP instruments. In case of undersubscription of the funds, stipulated details would need to be provided in the final fund-raising document.

Effective date: The provisions of the circular are effective immediately, i.e., 28 December 2023.

---

To access the text of the circular, please click here

In July 2023, SEBI had issued the Master Circular for ESG Rating Providers (ERPs) (the master circular). The master circular specified the procedural/disclosure requirements and obligations with respect to ERPs. SEBI has now issued certain Frequently Asked Questions (FAQs) on the registration as an ERP. Some of these relate to:

• Meaning and scope of ESG rating
• Eligibility criteria for becoming an ERP
• Requirement for registration of ERP before functioning in India
• Meaning of Indian and global asset classes in the context of ESG ratings
• Meaning and requirements of Core ESG rating
• Specific transparency and disclosure requirements for ERPs with respect to publishing ESG ratings, etc.

---

To access the text of the FAQs, please click here

Schedule VI⁹ Schedule VI of the ICDR Regulations: Disclosures in the Offer Document, Abridged Prospectus and Abridged Letter of Offer of the Securities and Exchange Board of India (SEBI) (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) prescribes the information that needs to be disclosed in the draft/final offer document or letter of offer.

SEBI observed that, at times, the draft offer documents/draft letter of offer filed for public issue/rights issue of securities are not compliant with the instructions provided under Schedule VI of the ICDR Regulations. As a result, such documents require revisions/changes and thus, lead to a longer processing time.

In this regard, recently SEBI issued the ‘Guidelines for returning of draft offer document and its resubmission’ (the circular).

As per the circular, the draft offer documents submitted to SEBI would be scrutinised in accordance with the broad guidelines prescribed in the circular. The documents which are not compliant with the circular and Schedule VI of the ICDR Regulations would be returned to the issuer.

The guidelines for returning of the draft offer document and its resubmission to SEBI are provided in Annexure A of the circular.

Effective Date: The circular came into force with effect from 6 February 2024.

---

To access the text of the circular, please click here

SEBI held its Board Meeting on 15 March 2024. Some of the key proposals which got approved are discussed below:

• Facilitating ease of doing business for companies desirous of raising funds/IPO: SEBI approved following amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (the ICDR Regulations):

• Doing away with the requirement of one per cent security deposit in public/rights issue of equity shares
• Promoter group entities and non-individual shareholders holding more than five per cent of the post-offer equity share capital to be permitted to contribute towards Minimum Promoters’ Contribution (MPC), without being identified as a promoter
• Equity shares from the conversion of compulsorily convertible securities held for a year before filing the Draft Red Herring Prospectus (DRHP), to be considered for meeting the MPC requirement
• The increase or decrease in the size of Offer For Sale (OFS) requiring fresh filing should be based on only one of the criteria, i.e., either issue size in rupees or number of shares, as disclosed in the draft offer document
• Flexibility in extending the bid/offer closing date on account of force majeure events by minimum one day instead of the present requirement of minimum three days.

• Proposals for on-going compliance requirements for listed companies: SEBI approved certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the LODR Regulations) with respect to:

• Market capitalisation-based compliance requirements for listed entities should be determined on the basis of average market capitalisation of six months ending 31 December, instead of single day’s (31 March) market capitalisation. Further, a sunset clause of three years for cessation of applicability of market capitalisation-based provisions has also been approved
• The timeline for filing up vacancies of Key Managerial Personnel (KMP) (requiring approval of statutory authorities) to be extended from three months to six months.
• Timeline for prior intimation of Board Meetings to be reduced to two working days.
• The maximum permitted time gap between two consecutive meetings of the Risk Management Committee to be increased from 180 days to 210 days, so as to provide flexibility to listed entities to schedule the meetings.

• Uniform approach to verification of market rumours by equity listed entities: SEBI approved the following approach for verification of market rumours by equity listed entities:

• Specifying an objective and uniformly assessed criteria for rumour verification in terms of material price movement of equity shares of the listed entity
• Considering unaffected price for transactions, wherever pricing norms have been prescribed under the SEBI Regulations (provided that the rumour pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement)
• Promoters, directors, KMP and senior management to provide timely response to the listed entity for verifying market rumour
• Unverified event or information reported in print or electronic media not to be considered as ‘generally available information’ under the SEBI (Prohibition of Insider Trading) Regulations, 2015.

• Extension of timeline for mandatory applicability of listing norms for High Value Debt Listed Entities (HVDLEs): SEBI approved the proposal to extend the timeline for mandatory applicability of listing norms (i.e., Regulation 16 to 27 of the LODR Regulations) for HVDLEs till 31 March 2025.

• Ease of business for Foreign Portfolio Investors (FPIs): The following proposals have been approved by SEBI for ease of business for FPIs:

• Additional disclosure requirements exempted for certain FPIs: In August 2023, SEBI vide a circular had mandated FPIs fulfilling certain criteria to disclose on a granular basis details of all entities holding any ownership, economic interest, or exercising control in the FPI, on a full look through basis, up to the level of all natural persons, without any threshold. However, for ease of doing business, SEBI in its board meeting has now approved a proposal to exempt additional disclosure requirements for FPIs having:

• More than 50 per cent of their India equity Asset Under Management (AUM) in a single corporate group, after excluding its holding in the parent company with no identified promoter, and
• The composite holding of all such FPIs (that hold greater than the 50 per cent concentration criteria and are not exempted) in the company with no identified promoter, is less than three per cent of its total equity share capital.

• Relaxed timelines for disclosures of material changes: Earlier (prior to this change), FPIs were required to disclose any material change in its structure or ownership or control or investor group within seven working days . However, SEBI, in its board meeting now requires FPIs to notify changes in two buckets:

• Flexibility in dealing with securities post expiry of registration: SEBI has approved flexibility measures for FPIs in dealing with the securities post expiry of their registration, which includes providing timeline for reactivating registration within 30 days of expiry if it is due to non-payment of registration fee and providing for additional time period for disposal of securities.

• Amendments for ease of doing business for Alternative Investment Funds (AIFs): SEBI has accepted the following proposals for ease of doing business for AIFs:

• Encumbrance on equity of investee companies in the infrastructure sector: SEBI approved the proposal to allow Category I and Category II AIFs to create an encumbrance on the equity of its investee companies in the infrastructure sector³ Companies in the infrastructure sector are such companies which are engaged in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure sub-sectors, as issued by the Government of India. , in order to facilitate raising of debt/loan by such investee companies.
• Due diligence process: SEBI also approved a proposal to require AIFs, their managers and KMPs, carry out specific due diligence of their investors and investments. This has been done to ensure that the verifiable compliance with such due-diligence requirements provide the regulatory comfort necessary for the introduction of other ease of doing business proposals relating to AIFs.
• Guidelines for unliquidated investments: AIFs have now been allowed to deal with unliquidated investments (which are not sold due to lack of liquidity during the winding up process), by continuing to hold such investments in the same scheme of the AIF and entering into a dissolution period The new facility of entering into dissolution period has been introduced in place of the existing option of launching a new scheme, i.e., the liquidation scheme.

---

To access the text of the proposals approved, please click here

A Private Placement Memorandum (PPM) is a primary document that entails all the necessary information about an AIF- this information is imperative for the investors in the AIF.

The Securities and Exchange Board of India (SEBI) vide the SEBI (Alternative Investment Fund) Regulations, 2012 (AIF Regulations) read with the Master Circular for AIFs¹SEBI Master Circular No. SEBI/HO/AFD/PoD1/P/CIR/2023/130 dated 31 July 2023. has prescribed certain compliances with the PPM, which inter alia include annual compliance audit with the PPM and communication of changes in terms of PPM. With an aim to facilitate ease of doing business, rationalizing cost and promoting uniform compliance standards, the SEBI has issued certain amendments pertaining to PPM. These changes are given below:

Changes in the terms of private placement memorandum of AIFs

As per the SEBI Master Circular for AIFs, any change to the terms of a PPM is required to be submitted to SEBI through a merchant banker along with a due diligence certificate from the merchant banker in the format specified by SEBI. With a view to ease compliances for AIFs, SEBI issued a circular dated 29 April 2024, prescribing a list of changes to the terms of the PPM²The changes in terms of the PPM that may directly be communicated by the AIFs to SEBI are given in Annexure A to this circular., which can be filed directly with SEBI without the involvement of a merchant banker.

Exemption from filing all changes through a merchant banker applicable to Large Value Fund for Accredited Investors (LVFs): LVFs are exempted from the requirement of intimating any changes in the terms of PPM through a merchant banker. LVFs can directly file any changes in the terms of PPM with SEBI, along with a duly signed and stamped undertaking by Chief Executive Officer (CEO) of the Manager of the AIF (or person holding equivalent role or position depending on the legal structure of Manager) and Compliance Officer of Manager of the AIF, in a format as specified at Annexure B of the circular.

To access the text of the circular issued, please click here

Standardisation of Private Placement Memorandum (PPM) audit report

As per the existing regulations³ Regulation 28 of SEBI (AIF) Regulations, 2012 and Clause 2.4 of SEBI Master Circular SEBI/HO/AFD/PoD1/P/CIR/2023/130 dated 31 July 2023 (Master Circular) , AIFs are required to ensure that they get an annual audit of compliance with the terms of the PPM done for the AIFs and submit the audit report to certain stakeholders⁴ Stakeholders include:
- The trustee or board of directors or designated partners of the AIF,
- Board of directors or designated partners of the Manager and
- SEBI within six months from the end of the financial year.

In order to achieve uniform compliance reporting, on 18 April 2024, SEBI has issued a circular stating that a standard reporting format for PPM audit report applicable to various categories of AIFs has been prepared in consultation with the Standard Setting Forum for AIFs (SFA). The AIF Associations that form a part of the SFA would host the format of the revised PPM audit report on their websites within two working days of issuance of this circular.

The reporting requirements are applicable for PPM audit reports to be filed for the financial year ending 31 March 2024 and onwards.

---

To access the text of the circular issued, please click here

On 25 April 2024, SEBI notified the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2024 (AIF Amendment Regulations) that aims to enhance the regulatory framework and revises the operational standards for AIFs.

Some of the key amendments are as follows:

Additional definitions – The terms ‘Dissolution Period’ and ‘Encumbrance’ have been defined in regulation 2(1) of the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations)⁵ dissolution period” means the period following the expiry of the liquidation period of the scheme for the purpose of liquidating the unliquidated investments of the scheme of the Alternative Investment Fund. “encumbrance” shall have the same meaning as assigned to it under Chapter V of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. . The definition of dissolution period and other guidance on dissolution would enable a regulated and transparent winding up process for AIFs.

Encumbrance on equity - Category I and II of AIFs are now permitted to create encumbrances on the equity of investee companies only for the purpose of borrowing by such investee company under specified conditions, providing them with greater leverage options. SEBI has issued a detailed circular⁶SEBI circular no. SEBI/HO/AFD/PoD1/CIR/2024/027 dated 26 April 2024 in this regard dated 26 April 2024, to access the text of this circular,To access the text of the 2024 Rules, please click here.

Unliquidated investments AIFs are provided with more flexibility in dealing with unliquidated investments during the liquidation period, including the distribution of these investments to investors. SEBI has issued detailed circular⁷SEBI circular no. SEBI/HO/AFD/PoD1/CIR/2024/026 dated 26 April 2024. in this regard dated 26 April 2024, to access the text of this circular, To access the text of the circular issued, please click here.

---

To access the text of the AIF Amendment Regulations, please click here

On 17 May 2024, the Securities and Exchange Board of India (SEBI) issued the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2024 (Amendment Regulations), notifying the following amendments:

• Verification of market rumours (Regulation 30(11)) (effective 17 May 2024),
• Basis of determining market capitalisation of companies for applicability of various regulations (Regulation 3) (effective 31 December 2024), and
• Other key matters (Mainly pertaining to:

• Deferring mandatory compliance of corporate governance requirements applicable to High Value Debt Listed Entities (HVDLEs) (Regulation 15) (effective 17 May 2024),
• Timelines for holding meetings of Risk Management Committee (RMC) (Regulation 21) (effective 17 May 2024),
• Filling vacancy of Key Managerial Personnel (KMP) and the Chief Financial Officer (CFO) (Regulation 26A) (effective 17 May 2024), and
• Prior intimation of board meeting (Regulation 29) (effective 17 May 2024).)

These updates have been discussed in the sections below:

Verification of market rumours (Regulation 30(11))

(SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) require listed entities to confirm, deny or clarify market rumours which are reported in the mainstream media. The rumour verification requirement is applicable to the top 100 listed entities with effect from 1 June 2024 and to top 250 listed entities with effect from 1 December 2024.

The Amendment Regulations have revised certain facets pertaining to regulations governing market rumours verification, thereby facilitating a uniform approach for verification of market rumours by equity listed entities. The amendments mainly cover the following aspects:

Subsequently, SEBI issued the following circulars on 21 May 2024:

• Industry standards on verification of market rumours: The Industry Standards Forum (ISF)¹ The ISF comprises of representatives from three industry associations, viz. ASSOCHAM, CII and FICCI, under the aegis of the Stock Exchanges. has formulated an industry standards note, in consultation with SEBI for effective implementation of the requirement to verify market rumours. This note would be published on the websites of the members of the ISF. The Industry Standards Note is further discussed below. To access this circular, please click here.
• Framework for considering unaffected price for transactions upon confirmation of market rumour: This circular provides a framework for considering the unaffected price for certain transactions upon confirmation of market rumour within 24 hours. To access this circular, please click here.

Rumour verification requirement linked to material price movement (first proviso to Regulation 30(11)):

Prior to the Amendment Regulations, listed entities were required to verify market rumours only pertaining to ‘material’ events or information.

However, the Amendment Regulations have now replaced these requirements. Accordingly, market rumours would require verification only if there is a material impact on the stock price, i.e. a material price movement of the securities of the concerned listed entity.

Consideration of unaffected price for transactions upon confirmation of market rumour (Third Proviso to Regulation 30(11)):

The Amendment Regulations have inserted the requirement that where market rumours have been confirmed within 24 hours from the trigger of the material price movement, the unaffected price of the shares would be considered for transactions on which pricing norms are specified by SEBI regulations or the stock exchanges (corporate action)³ Corporate actions include transactions such as buyback through book building and stock exchange, qualified institutional placement, preferential allotment, takeovers, effect on share price due to material price movement and confirmation of reported event or information. .

Regulation 30(11) lists down following SEBI Regulations and provisions, where pricing norms have been prescribed:

• Chapter V or Chapter VI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018
• Regulation 8 or Regulation 9 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
• Regulation 19 or Regulation 22B of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018
• Any other pricing norms specified by the Board or the stock exchanges.

For the purpose of computing the unaffected price, the impact of the following should be excluded from the price of the equity shares:

• Impact of the material price movement, and
• Impact of confirmation of the reported event or information The ‘Framework for considering the unaffected price’ as prescribed by SEBI provides the manner of computing the unaffected price.

Consequential amendments

SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2018, SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and SEBI (Buy-Back of Securities) Regulations, 2018.

Greater onus on promoters, directors, KMP and senior management:

The Amendment Regulations has inserted Regulation 30(11A), thereby laying greater onus on promoters, directors, KMP and senior management to provide timely and accurate response to queries raised or explanation sought from listed entities and ensure compliance with Regulation 30(11).

To access the text of the amendment, please click here

Classification of unverified information:

On 17 May 2024, SEBI amended the definition of 'generally available information' under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations). The amended definition specifically excludes unverified event or information reported in print or electronic media from the ambit of generally available information. Therefore, such information should be treated as Unpublished Price Sensitive Information (UPSI) and not ‘generally available’ information.

To access the text of the amendment, please click here

Basis of determining market capitalisation of companies for applicability of various regulations (Regulation 3)

Currently, the applicability of certain provisions of the LODR regulations is determined based on market capitalization of a listed entity as on 31 March i.e. based on a single day’s market capitalisation.

The Amendment Regulations has introduced the requirement to compute average market capitalisation of a listed entity. The details pertaining to these requirements are given below:

• Market capitalisation-based requirement should be determined on the basis of average market capitalisation from 1 July to 31 December, instead of single day’s (i.e 31 March) market capitalisation. Every stock exchange on 31 December of every year would prepare the ranking of listed entities basis the average market capitalisation.
• Consequently, the relevant provisions would be applicable to listed entities from 1 April or from the beginning of the immediate next financial year, whichever is later.
• With respect to reporting of Business Responsibility and Sustainability Reporting (BRSR) (or assurance under BRSR Core), a listed entity should put in place systems and processes to capture the data to be reported within a period of three months from 31 December and thereafter a glide path of one year is provided for BRSR reporting (or assurance under BRSR Core) in the annual report.
• Sunset clause of three years for cessation of applicability of market capitalisation-based provisions has been introduced.

This amendment is effective from 31 December 2024.

Other key amendments

• Timeline for mandatory applicability of corporate governance regulations to High Value Debt Listed Entities (HVDLEs) (Regulation 15): The timeline for mandatory applicability of corporate governance provisions of the LODR Regulations⁴Regulation 16 to 27 of SEBI LODR Regulations to HVDLEs has been extended till 31 March 2025 (earlier 31 March 2024). This amendment is effective from 17 May 2024. Till 31 March 2025, the HVDLEs would need to adhere to the corporate governance norms on a comply or explain basis.

• Gap between meetings of the Risk Management Committee (RMC) (Regulation 21): The maximum permitted time gap between two consecutive meetings of the RMC has increased from 180 days to 210 days. This amendment is effective from 17 May 2024.

• Vacancies of Key Managerial Personnel (KMP) (Regulation 26A): The timeline for filling up vacancy in the office of a KMP⁵KMP for this regulation includes Chief Executive Officer, Managing Director, Whole Time Director or Manager. and in office of Chief Financial Officer (CFO) wherein approval of statutory authorities is required, has been extended from three months to six months.

This amendment is effective from 17 May 2024.

• Timeline for prior intimation of board meetings (Regulation 29): The timeline for prior intimation of board meetings has been reduced to two working days (as per previous requirement, timeline for giving prior intimation varied from two working days to a maximum of eleven working days) . The amendment further states that prior intimation is not required for determination of issue price for fund raising done through qualified institutions placement as per ICDR Regulations. Additionally, it has been notified that prior intimation would be required only for fund-raising proposals that involve issue of securities.

This amendment is effective from 17 May 2024.

---

To access the text of the Amendment Regulations, please click here

On 17 May 2024, SEBI issued the SEBI (Issue of Capital and Disclosure Requirement) (Amendment) Regulations, 2024 (ICDR Amendment Regulations), thereby notifying amendments pertaining to the following regulations. These amendments are applicable from 18 May 2024:

• Contribution towards Minimum Promoters’ Contribution (MPC) (Regulation 14, 236, 238, 292): Currently for determination of MPC, promoters of a company should hold at least 20 per cent of the post-offer paid-up equity share capital on a fully diluted basis. In case of any shortfall, certain class of investors⁶ Alternative investment funds, foreign venture capital investors, scheduled commercial banks, public financial institutions or insurance companies registered with Insurance Regulatory and Development Authority of India (IRDAI) are permitted. (MPC investors) are permitted to contribute equity shares to meet the shortfall subject to a maximum of 10 per cent, without being identified as a promoter. The ICDR Amendment Regulations now permit any non-individual shareholders holding at least five per cent of the post-offer equity share capital or any entity (individual or non-individual) forming part of promoter group other than the promoter(s) to contribute towards MPC without being identified as a promoter (i.e. be considered as an MPC investor).

• Inclusions for computation of MPC (Regulation 15(1)(b), 237): Regulation 15 prescribes the securities to be considered/not considered while computing the MPC. The ICDR Amendment Regulations has now added a clause which stipulates that equity shares held by MPC investors which arise from the conversion of fully paid-up compulsorily convertible securities held for at least one year before filing the draft offer document should be included for determination of MPC. It also provides that that the compulsorily convertible securities should be converted into equity shares prior to the filing of the offer document, also terms of conversion should be mentioned in the draft offer document.

• Omission of requirement to create security deposit (Regulation 38, 80, 135, 197, 259): Prior to the ICDR Amendment Regulations, the ICDR Regulations required issuers to deposit an amount calculated at the rate of one percent of the issue size available for subscription to the public with the designated stock exchange. This was required for resolution of investor complaints relating to refund of application monies, allotment of securities and dispatch of certificates. However, since the existing frameworks issued by SEBI⁷Such as Application Supported by Blocked Amount (‘ASBA’) application, Unified Payment Interface (‘UPI’) mode of payment, mandatory allotment in demat, etc have reduced the post issuer investor complaints, SEBI, vide the ICDR Amendment Regulations has deleted the requirement of one per cent security deposit to reduce the cost on the part of issuers in the primary market.

• Extension of the bid/offer closing date (Regulation 46(3), 142(3), 203(3), 266(3)): Prior to the ICDR Amendment Regulations, in case of force majeure, issuer companies could extend the bidding period disclosed in the offer document by a minimum period of three working days. Considering that there would be no change in price band in such cases, the ICDR Amendment Regulations has now reduced the minimum period for extension of the bidding period to one working day.

• Fresh filing for Offer For Sale (OFS): The ICDR Amendment Regulations have clarified that with respect to increase or decrease in OFS, the requirement of fresh filing should be based on one of the criteria i.e. either issue size in INR or the number of shares, whichever is disclosed in the draft offer document and not on both the criteria.

---

To access the text of the ICDR Amendment Regulations, please click here

A Social Stock Exchange (SSE) is a segment of the stock exchange that provides a platform to social enterprises to raise funds from the public. SEs are entities that get listed on the SSE. In September 2022, SEBI had issued a detailed framework prescribing the minimum requirements for an entity to be registered as a SE on the SSE. Some of the key considerations of the framework are listed below:

• Minimum requirements for registration of a Not for Profit Organisation (NPO) with the SSE
• Minimum initial disclosure requirements for Zero Coupon Zero Principal (ZCZP) instruments
• Timeline and details of annual disclosures by a Non-Profit Organisation (NPO)
• Requirement and timeline of an Annual Impact Report (AIR)
• Timeline to submit a statement of utilization of funds.

SEBI, through a circular dated 27 May 2024, revised the disclosure timelines laid down in the framework under point (c) and (d) above for FY 2023-24:

Annual disclosure requirement for NPOs registered on an SSE – As per the LODR Regulations, an NPO registered on the SSE is required to provide annual disclosures to the SSE on matters specified by SEBI by 31 October 2024 for FY 2023- 24 (earlier 60 days from the end of the financial year).

Submission of AIR –The LODR Regulations require an SE, which is registered with or has raised funds through an SSE, to submit an AIR to the SSE in the format specified by SEBI. The revised timeline for submission is 31 October 2024 for FY 2023-24 (earlier 90 days from the end of the financial year).

---

To access the text of the circular, please click here

In order to enable investors better comprehend the important aspects of an offer document, SEBI issued a circular on 24 May 2024, introducing Audio-Visual (AV) representation of salient disclosures made by companies in their (draft) offer documents for public issues

Some of the key considerations of the prescribed AV format are listed below:

• The content of the AV should comply with the specified provisions⁸ Provisions regarding ‘Public communications and publicity materials’ prescribed under Schedule IX of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).
• The AV should be prepared and placed in the public domain for all main board public issues.
• It should be in bilingual format (English and Hindi) with the duration of each bilingual version of the AV being approximately 10 minutes. The duration of the AV should be equitably distributed to cover material disclosures⁹ Material disclosures include disclosures about the company, risk factors, capital structure, objects of the offer, business of the issuer, promoters, management, summary of financial information, litigations, material developments and terms of the offer etc. made under various sections of the Draft Red Herring Prospectus (DRHP) and Red Herring Prospects (RHP).
• The content of the AV should be factual, non-repetitive, nonpromotional and should not mislead in any manner.
• The AV is required to be uploaded on the website of the issuer and the Association of Investment Bankers of India (AIBI) within five working days of filing of DRHP with SEBI. Further it should be made available on the digital/social media platforms of the issuer and AIBI.
• The issuer and all the lead managers are responsible for the content and information made available in the AV.

Applicability - The provisions of this circular shall be made applicable to all DRHP filed with SEBI-

• On a voluntary basis on or after 1 July 2024
• On a mandatory basis from 1 October 2024.

---

To access the text of the circular, please click here

As per the ICDR Regulations, a Social Impact Assessor means an individual registered with Self-Regulatory Organization (SROs) under the Institute of Chartered Accountants of India or such other agency, as may be specified by SEBI.

On 27 May 2024, SEBI has specified that in addition to the SROs registered with ICAI, following agencies would be specified as self-regulatory organisations for social impact assessors in the context of Social Stock Exchange:

• ICMAI Social Auditors Organisation (ICMAI SAO) under the Institute of Cost Accountants of India
• ICSI Institute of Social Auditors (ICSI ISA) under the Institute of Cost Accountants of India.

---

To access the text of the circular, please click here

As per Regulation 2(1)(g) of SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT regulations), an ‘insider’ means any person who is a connected person or in possession of or has access to unpublished price-sensitive information (UPSI). Insider trading refers to the process of buying and selling of securities by the insiders of a listed entity who are in possession of confidential information about the entity, such as the employees, promoters, directors and executives. Regulation 5 of the PIT regulations inter alia permit an insider to be entitled to formulate a trading plan and present it to the compliance officer for approval and public disclosure. Trades may be executed on behalf of the insider in accordance with such trading plan.

On 25 June 2024, SEBI issued the Prohibition of Insider Trading (Second Amendment) Regulations, 2024 (the amendment) thereby amending Regulation 5 of the PIT regulations. These amendments would be applicable from 24 September 2024.

• Shorter cooling-off period: Under Regulation 5(2), a cool-off period¹This means that trading cannot commence earlier than 120 days from the public disclosure of the plan. of 120 days has been introduced (earlier, it was six months). The period of 120 days is also considered reasonable for unpublished price sensitive information that an insider is in possession of when formulating the trading plan, to become generally available.

• Removal of mandatory black out period: The amendments have omitted clause (ii) of Regulation 5(2) of the PIT regulations, which specified the period during which insiders could not trade² Regulation 5(2)(ii) prohibited trading by the insider between the twentieth trading day prior to the last day of any financial period for which results are required to be announced by the issuer of the securities and the second trading day after the disclosure of such financial results..

• Omission of minimum period of trading plan: The PIT regulations currently require a trading plan to cover the trading for a minimum period of 12 months. However, this requirement has now been removed.

• Trading within limited duration: The amendments require an insider to set certain parameters such as, inter alia, a specific date or duration not exceeding five consecutive trading days during which their trades should be executed. This is because the outer limit on the duration of the time period would allow the insiders to split their trades across different dates, however the duration should not be so long that it is prone to misuse.

• Deviations from trading plan: Regulation 5(4) of PIT regulations currently state that once a trading plan is approved, insiders should implement it without any deviation. The amendment has added exceptions to this regulation allowing insiders to strictly follow their trading plans, except in cases of permanent incapacity, bankruptcy or operation of law.

• Price limits for trade: The amendment provides an insider with an option to set an upper price limit for a buy trade and a lower price limit for a sell trade. The range for a buy trade can be up to 20 per cent higher than the closing price and for a sell trade can be up to 20 per cent lower than the closing price. This is to protect the insider from unexpected price movements.

• Time period for approval of trading plan: Currently, Regulation 5 of the PIT regulations does not prescribe a minimum time period within which the trading plan needs to be approved by the compliance officer. The amendment now requires the compliance officer to approve the trading plan within two trading days of receipt of the trading plan and notify the plan to the stock exchanges on the date of approval.

• Removal of contra trade restriction: The amendment has removed the contra trade³ Contra trade means a buy cannot be executed if a sell trade has been executed in the last six months. restrictions pursuant to a trading plan submitted by an insider.

---

To access the text of the notification, please click click here

On 25 July 2024 , the Securities and Exchange Board of India (SEBI) vide a notification (the notification) appointed 1 November 2024 On 25 July 2024 , the Securities and Exchange Board of India (SEBI) vide a notification (the notification) appointed 1 November 2024 as the due date for applicability of SEBI (Prohibition for Insider Trading) (Amendment) Regulations, 2022 (2022 PIT amendment regulations).

The 2022 PIT amendment regulations inter alia inserted Chapter II A in the SEBI (Prohibition for Insider Trading) Regulations, 2015, which stipulates restrictions on communication in relation to and trading by insiders in the units of mutual funds. The key regulations prescribed in the 2022 PIT amendment regulations are:

• Insiders are prohibited from trading in mutual fund units while in possession of Unpublished Price Sensitive Information (UPSI)
• Insiders cannot share UPSI except for legitimate purposes, duties or legal obligations. The board of directors of the Asset Management Company (AMC) are required to define what would be considered a ‘legitimate purpose’.
• A digital database should be maintained that records all instances of UPSI communication, ensuring transparency and traceability.
• AMCs are required to make specific disclosures as required by SEBI.
• The CEO/MD of the AMC is required to put in place an effective system of internal controls which cover various aspects of PIT regulations.
• Audit Committees of AMCs are required to ensure compliance with PIT regulations, which includes determining whether systems for internal control are adequate and operating effectively.
• The AMC is required to develop whistle blower policies that enable employees to report instances of leak of UPSI.

---

To access the text of the notification, please click here

Currently, the regulatory framework for AMCs includes rules relating to code of conduct for AMCs, fund managers and dealers and various other disclosures and reporting requirements. However, there is no specific regulatory provision that casts responsibility on the AMC or its senior management to put in place a system for deterrence, detection or reporting of market abuse or fraudulent transactions.

Accordingly, based on a consultation with stakeholders¹³ Click here to access - Consultation paper on Institutional Mechanism for Asset Management Companies for deterrence of possible market abuse and fraudulent transactions. , SEBI issued the SEBI (Mutual Funds) (Second Amendment) Regulations, 2024 (MF amendment regulations) on 1 August 2024 and a circular on 5 August 2024 (the circular), which require AMCs to put in place an institutional mechanism for identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities (institutional mechanism). Such an institutional mechanism should be able to identify, monitor and address specific types of misconduct, including front running, insider trading, misuse of sensitive information, etc.

The key requirements of the MF amendment regulations and the circular are

• Accountability: The Chief Executive Officer (CEO) or the Managing Director (MD) or a person of equivalent rank and the Chief Compliance Officer (CCO) of the AMC would be responsible for implementation of such an institutional mechanism.
• Enhanced surveillance mechanism: Systems and procedures should be developed and implemented to generate and process timely alerts on possible instances of misconduct¹⁴ . Such systems may include process system driven alerts in conjunction with soft alerts such as lifestyle checks, recording of communication (such as recorded emails, chats), CCTV footage etc. . Suspicious alerts would be adequately investigated and processed by referring to certain data points¹⁵ For processing of alerts, AMCs are required to consider and review all recorded communications including chats, emails, access logs of dealing room and CCTV footage (if available). AMCs should also maintain monitor entry logs to the AMC’s premises. including trade related information from stock exchanges and depositories.
• Suitable action would be taken in case of instances of potential market abuse by employees or brokers/dealers, including suspension or termination of such persons/entities.
• Internal control procedures: AMCs should formulate board approved written policies and procedures for conducting examination and taking action in case of potential market abuse. Such procedures and systems should be reviewed and updated on a periodic basis.
• Reporting and escalation processes: AMCs should have an escalation process to keep the following entities informed:

• Board of directors and trustees- Regarding instances of potential market abuse and results of examination conducted by AMCs.
• SEBI Report all examined alerts to SEBI with action taken in Compliance Test Report (CTR) and Half-yearly Trustee Report (HYTR) in a prescribed format.

• Whistle blower policy: AMCs should have a documented whistle-blower policy in lines with the SEBI (Mutual Funds) Regulations, 1996¹⁶ Such a policy should (a) provide for a confidential channel for employees, directors, trustees, and other stakeholders to raise concerns about suspected fraudulent, unfair or unethical practices, violations of regulatory or legal requirements or governance vulnerability, and(b) establish procedures to ensure adequate protection of the whistle blowers.

SEBI in its circular mentioned that AMFI will come up with relevant guidelines and communicate the same to AMCs.

Such a policy should (a) provide for a confidential channel for employees, directors, trustees, and other stakeholders to raise concerns about suspected fraudulent, unfair or unethical practices, violations of regulatory or legal requirements or governance vulnerability, and(b) establish procedures to ensure adequate protection of the whistle blowers.

Effective date: The standards should be implemented by AMCs in a phased approach based on the asset class and the Asset Under Management (AUM) of the AMC, as given below:

---

Currently, the Master circular for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) (together referred to as the master circulars) permit eligible unitholders of InvITs and REITs to nominate one unitholder nominee director. However, where such a unitholder is a shareholder in or lender to the investment manager of such InvIT or REIT (manager), and in lieu of that is entitled to nominate one or more directors on the board of the manager, then it is restricted from exercising its right to nominate a unitholder nominee director (as the unitholder of the InvIT or REIT).

With an aim to promote ease of doing business, SEBI vide circulars dated 6 August 2024 has clarified that the restriction to nominate a unitholder nominee director would not be applicable if the unitholder has the right to appoint a nominee director in terms of Regulation 15(1)(e) of the SEBI (Debenture Trustees) Regulations, 1993²¹ Regulation 15(1)(e) states that it would be the duty of every debenture trustee to appoint a nominee director on the Board of the company in the event of:
i. two consecutive defaults in payment of interest to the debenture holders; or
ii. default in creation of security for debentures; or
iii. default in redemption of debentures.
.

The key requirements of the MF amendment regulations and the circular are

---

To access the text of the circular issued for InvITs, please click here

To access the text of the circular issued for REITs, please click here

With the objective of investor protection and risk reduction in Alternative Investment Funds (AIFs), and considering the need for ease of doing business and operational flexibility, on 5 August 2024 SEBI issued the SEBI (AIF) (Fourth Amendment) Regulations, 2024 (AIF amendments). Subsequently on 19 August 2024, SEBI has issued detailed guidelines (the guidelines) on the matters pertaining to the AIF amendments, these clarifications are given below:

Cap on extension of timeline for Large Value Funds (LVF)

Currently, Regulation 13 of the SEBI (AIF) Regulations, 2012 (AIF regulations) inter alia permit closed ended AIFs²² Category I and Category II AIFs are closed ended. Category III AIFs have an option- they may be open ended or close ended to extend their tenure up to two years (after completion of their original tenure) subject to approvals of two-thirds of unitholders by value of their investment (approval of unitholders). Prior to the AIF amendments, LVFs (which are closed ended funds) were permitted to extend their tenure beyond two years (with no cap to such extension) to provide LVFs with appropriate time to liquidate investments.

SEBI recently enabled a framework to allow AIFs to deal with unliquidated investments by entering into a dissolution period. This flexibility is over and above the flexibility to extend the tenure of the schemes. Accordingly, since LVFs had appropriate time to liquidate their investments, it was felt appropriate to cap the extension of tenure of LVFs up to five years subject to approval of unitholders.

The following clarifications have been provided for the existing LVF schemes:

• Realignment of original tenure: Existing LVF schemes have the flexibility to revise their original tenure subject to consent of investors. An undertaking to that effect should be submitted to SEBI by 18 November 2024.
• Transition to revision: Existing LVF schemes should align with the period of extension permitted under the AIF amendments within three months. The revised extension period should be disclosed in the Private Placement Memorandum (PPM)²³ This would be the requirement, even when a definite extension period was not mentioned in the PPM . This revised period should be communicated to SEBI in the LVF’s quarterly report to SEBI for quarter ending 31 December 2024.

Restrictions on borrowings

Currently Regulations 16 and 17 of the AIF regulations inter alia permit Category I and Category II AIFs to borrow funds for meeting temporary funding requirements and specifically for Category II AIFs to meet day to day operational requirements.

There was an ambiguity in the market regarding the purpose for which AIFs could borrow funds. SEBI, vide the AIF amendments has clarified the following:

• Category I and II AIFs should not borrow funds directly or indirectly or engage in leverage for making investments to avoid asset-liability mismatch
• However, Category I and II AIFs may borrow funds for meeting the temporary shortfall in amount called from investors for making investments and to meet day-to-day operational requirements, subject to the following conditions:

• The AIF’s intention to borrow in order to meet temporary shortfall amount should be disclosed in the PPM
• Such borrowing should be done only in case of emergency, as a last recourse when there has been a delay by the investor in payment of the drawdown amount
• The amount borrowed should not exceed 20 per cent of the proposed investment or 10 per cent of the investable funds of the scheme or the commitment pending to be drawn down from investors other than the investor who failed to make such payment.
• Cost of such borrowing should be charged only to investor(s) who failed to provide the drawdown
• The flexibility of borrowing to meet shortfall in drawdown amounts should not be used as a means to provide different drawdown timelines to investors
• Details with respect to amount borrowed, terms of borrowing and repayment to all the investors of the AIF/scheme, should be disclosed by the manager of the scheme on a periodic basis.
• AIFs should maintain 30 days cooling off period between two periods of borrowing.²⁴ 30 days would be computed from the date of repayment of previous borrowing

Effective date: These amendments are applicable from 7 August 2024

---

To access the text of the AIF amendments, please click here

To access the text of the guidelines, please click here

In July 2024, SEBI, vide the SEBI (AIF) (Third Amendment) Regulations, 2024 had permitted Venture Capital Funds (VCFs) registered under the SEBI (Venture Capital Funds) Regulations, 1996 (VCF regulations) to migrate under the AIF regulations within a prescribed timeline.

In August 2024, SEBI has issued a circular which stipulates the modalities to be complied with by VCFs that intend to migrate from the VCF regulations to the AIF regulations.

Effective date: : This circular is effective immediately (i.e. 19 August 2024).

---

To access the text of the circular, please click here

In August 2024, SEBI issued the CSCRF for all REs²⁵ REs include the following: Stock exchanges, depositories, clearing corporations, stock brokers, Asset Management Companies (AMCs)/Mutual Funds, KYC Registration Agencies (KRAs), Qualified Registrars to an issue/Share Transfer Agents, AIFs, Custodians, Depository Participants, Designated Depository Participants, Investment Advisors/Research Analysts, Merchant Bankers, Venture Capital Funds, Portfolio Managers, Debenture Trustees. . The CSCRF aims to provide standards and guidelines for strengthening cyber resilience and maintaining robust cybersecurity. The framework provides a standardised approach to implement various cybersecurity and cyber resilience methodologies. The framework would supersede existing cybersecurity circulars, guidelines, advisories or letters issued by SEBI. The key objective of CSCRF is to

The CSCRF also sets out standard formats for reporting by REs

The key consideration for CSCRF is as below:

• Cybersecurity Policy: A comprehensive cybersecurity policy should be established by entities that defines the roles and responsibilities of various stakeholders. The cybersecurity framework of the entity should provide the scope and objectives of cybersecurity including governance and oversight mechanisms, risk management processes , the awareness and training programs, information protection processes and procedures, incident response and recovery plans and the audit and review procedures.
• Cybersecurity mechanism: CSCRF mandates that all REs are required to establish appropriate security monitoring mechanisms through Security Operation Centre (SOC). The onboarding of SOC can be done through RE’s own or group SOC or market SOC or any other third-party managed SOC for continuous monitoring of security events and timely detection of anomalous activities.
• Cybersecurity Reporting: The entities should report any cyber incidents and breaches to the SEBI-CERT within 24 hours of detection. The report should include the details of the incident, the impact and severity, the actions taken, and the remedial measures. The entities should also submit periodic reports on the status of their cybersecurity and cyber resilience to the SEBI-CERT as per the prescribed format and frequency.
• Cybersecurity Audit: The entities should conduct an independent external audit of their cybersecurity on a half-yearly (for certain REs) and yearly (for certain REs) by an auditor empaneled by SEBI. The audit should cover the adequacy and effectiveness of the cybersecurity policy, architecture, operations, and reporting. Further such audit report should be submitted to the SEBI-CERT within one month of completion.

Effective date: The circular has defined the below timelines for demonstrating compliance to the CSCRF requirements

Applicability	Timeline
For the entities which already have regulator prescribed cybersecurity and resilience structures	1 January 2025
For other REs where CSCRF is being issued for the first time	1 April 2025

---

To access the text of the CSCRF circular, please click here

On 26 August 2024, SEBI issued the SEBI (Intermediaries) (Amendment) Regulations, 2024 (the amendment), thereby restricting persons regulated by SEBI or their agents from having association with persons who directly or indirectly provide advise or recommendation or a security or make an express or implied claim on the performance of a security unless permitted by SEBI (except through a specified digital platform). The amendment has been further explained vide the illustration below:

Effective date: The amendments are effective from the date they are published on the official gazette (i.e. 29 August 2024).

---

To access the text of the amendments, please click here

The Securities and Exchange Board of India (SEBI) in its board meeting held on 30 September 2024 approved the following key amendments:

Amendments to SEBI (Listing Obligations and Disclosure Requirement Regulations), 2015 (LODR Regulations)

• Single filing system: A system that automatically disseminates the filing done on one stock exchange to the other stock exchanges using an Application Programming Interface (API)-based integration was introduced.
• Integration of periodic filings: To minimise the number of periodic filings by a listed entity, a merger of the periodic filings under the LODR Regulations into the following two broad categories was approved:

• Integrated filing (Governance) comprising of corporate governance report and the statement on redressal on investor grievance.
• Integrated filing (Financial) comprising of financial results, statement of deviation in use of proceeds, related party transactions etc.

• System driven disclosures of certain filings: An automated process of disclosure of shareholding pattern and new or revised credit ratings was introduced. Automation for these disclosures would ease the compliance procedures and reduce the burden of disclosures for listed entities.
• Newspaper advertisements: The requirement of publishing detailed advertisements in newspapers for financial results was approved to be made optional for listed entities.
• Vacancies in board committees: In order to provide adequate time to listed entities, a timeline of three months to fill up vacancies in Board Committees was approved.
• Disclosure of material events:

• Additional timeline has been prescribed for disclosure of events in some cases:
• For the disclosure of outcome of the board meeting that concludes after close of trading hours, an increased timeline of 3 hours instead of 30 minutes has been approved.
• In case of litigations or disputes wherein claims are made against the listed entity, an increased timeline for disclosure to 72 hours has been approved from the existing 24 hours
• Disclosure of tax litigations and disputes: A listed entity should disclose tax litigations/disputes including tax penalties based on application of criteria for materiality.

Amendments to the SEBI (Issue of Capital and Disclosure Requirement) Regulations, 2018 (ICDR Regulations)

• Faster Rights Issue with flexibility of allotment to specific investors under ICDR Regulations

• Introduced faster rights issue process with completion in 23 working days.
• Discontinuation of the current requirement of filing draft letter of offer with SEBI for issuance of its observation, instead it would be filed with stock exchanges for its in-principle approval
• Permitting promoters to renounce their rights entitlements to any specific investor(s) and allowing the issuer to allot under-subscribed portion of rights issue to any specific investor(s).

• Combining ‘pre-issue advertisement’ and ‘price band advertisement’ as a single advertisement and mandating disclosure of certain information through a QR code link.
• Permitting issuers to voluntarily disclose proforma financials for acquisition or divestment already undertaken or proposed to be undertaken from issue proceeds in case of public issue, rights issue and Qualified Institutional Placements (QIPs).

Amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations)

The SEBI observed that certain categories of persons who are not covered in the scope of the definition of ‘connected persons’ as per existing regulations, may also be in a position to have access to Unpublished Price Sensitive Information (UPSI) from ‘connected persons’ to a company, by virtue of their close relationship with such ‘connected persons’. Such deemed connected persons, owing to their proximity and close relationship with the connected persons, are considered to be in such a position where they can potentially indulge in insider trading. Accordingly, the definition of connected persons was approved to be widened under the PIT Regulations as follows:

Connected person: The definition of ‘connected person’ under PIT Regulations has been amended to include

• A firm or its partner or its employee in which a ‘connected person’ is also a partner; and
• A person sharing household or residence with a ‘connected person.

Relative: The definition of ‘relative’ under PIT Regulations has been amended based on the definition of ‘relative’ under the Income Tax Act, 1961. It now includes

• Spouse of the person
• Parent of the person and parent of its spouse
• Sibling of the person and sibling of its spouse
• Child of the person and child of its spouse;
• Spouse of the person listed at (iii) and
• Spouse of the person listed at (iv).

Immediate relative: In order to ensure that there is no increased compliance requirements, the definition of ‘immediate relative’ is proposed to be retained under the PIT Regulations. However, provision relating to person deemed as connected person are applicable to ‘relative’ instead of ‘immediate relative’

Amendments to SEBI (Mutual Fund) Regulations, 1996 (MF Regulations)

• SEBI has introduced a new investment product under the existing mutual fund framework with minimum INR10 lakh investment. This new product would be referred to as ‘investment strategies’. This new category is intended to remain distinct from traditional mutual funds.
• Introduction of liberalised Mutual Funds Lite (MF Lite) framework for passively managed schemes of mutual funds. This framework introduces relaxed eligibility requirements for sponsors, including modifications to net worth, track record, and profitability criteria. This shift is designed to promote ease of entry into the mutual fund sector, encouraging new players while reducing compliance burdens.

Amendments to regulations relating to Non-Convertible Securities

The Securities and Exchange Board of India (SEBI) vide the SEBI (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2024 (NCS amendments) has prescribed the following key amendments with respect to the filing and content of offer documents:

• Timeline for making public the draft offer document (Regulation 27): The draft offer document filed with the stock exchange(s) should be made public by posting the same on the website of the stock exchange(s) for a period of 5 working days from the date of filing the draft offer document with stock exchange. For issuers whose specified securities are listed on a recognized stock exchange, the offer document should be made public for one day immediately after filing the draft offer document (earlier the time period was 7 working days).
• Advertisement for public issue (Regulation 30): Issuers of NCS may advertise regarding the public issue through electronic modes such as online newspapers or website of the issuer or of the stock exchange (earlier, advertisements could only be made in the newspapers). Further, issuers that opt to advertise through electronic modes are required to publish a notice in the specified newspapers, exhibiting the QR code and link to the online advertisement.
• Period of subscription (Regulation 33A): The minimum period for which the public issue of debt securities or non-convertible preference shares would be open has been reduced to one working day (earlier it was three working days). The maximum period (of 10 working days) remains unchanged.
• Content of offer document: The following changes have been made to the content of the offer document:

• The time period for which the key operational and financial parameters are required to be disclosed has been clarified.
• The personal address and Permanent Account Number of promoters is not required to be disclosed
• Details of branches and units of the issuer will be given by way of a QR code and web link
• Details of proposed used of proceeds will be required to be disclosed instead of ‘project cost and means of financing’.
• Flexibility has been provided in the signatories for the purpose of providing attestation in the offer document.

Effective date:The amendments would come into force on the date of their publication in the Official Gazette.

---

To access the text of the NCS amendments, please click here

As a part of the continuing endeavor to streamline the process of bonus issue of equity shares to protect the interests of investors and to promote the development of the securities market, SEBI vide its circular dated 16 September 2024, has issued directions to reduce the time taken for credit of bonus shares and enable trading of such shares within T+2 days, where T is the record date (earlier, no timelines were prescribed for this, and practically, trading took two to seven working days from the record date).

The circular further details the procedure to implement the above decision.

Penal consequences have been prescribed in case of delay in compliance with the aforementioned timelines.

Effective date: The circular would come into effective for all bonus issues announced on or after 1 October 2024.

---

To access the circular, please click here

With an aim to provide clarifications on certain aspects of the valuation framework for AIFs, SEBI issued a circular (SEBI circular) dated 19 September 2024, modifying the framework for valuation of investment portfolios of AIFs. The SEBI circular specifies the following:

• Valuation norms: Securities, other than unlisted, non-traded, or thinly-traded securities, would be valued in line with mutual fund rules (earlier even unlisted and non-traded/thinly traded securities were required to be valued as per mutual fund rules). Such unlisted, non-traded or thinly traded securities would be valued in accordance with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines for valuation of investment portfolio of AIFs⁶ SEBI has mentioned that with respect to thinly traded and non-traded securities, it is envisaged to harmonize the valuation norms across entities within SEBI’s regulatory purview in a time bound manner so as to facilitate applicability of the same for valuation of investment portfolios of AIFs on or after 31 March 2025. .

SEBI has mentioned that with respect to thinly traded and non-traded securities, it is envisaged to harmonize the valuation norms across entities within SEBI’s regulatory purview in a time bound manner so as to facilitate applicability of the same for valuation of investment portfolios of AIFs on or after 31 March 2025.

• Material Changes: Any change in the valuation methodology or approach in order to comply with Clause 22.1 of the Master Circular for AIFs⁷ Clause 22.1 of the Master Circular for AIFs deals with the valuation of different types of securities. would not be considered a material change. However, valuation of investment based on both the old and new methodologies should be disclosed to investors to ensure transparency. (Earlier, changes in the methodology and approach for valuation of investments of schemes of AIF, were considered as material changes that would significantly influence the decision of the investor. In such cases an exit option had to be provided to investors who did not want to continue to invest in the AIF post such a change.)
• Independent valuer: The SEBI circular has prescribed the eligibility criteria for an independent valuer which is either a partnership entity or a company as:

• Such an entity or company should be registered as a valuer with the Insolvency and Bankruptcy Board of India (IBBI) and
• The deputed/authorized person who undertakes the valuation should be a member of the Institute of Chartered Accountants of India (ICAI) or the Institute of Company Secretaries of India (ICSI) or the Institute of Cost Accountants of India (ICMAI) or the CFA Institute.

• Reporting timelines: The timeline for AIFs to report their valuations to performance benchmarking agencies based on audited investee data has been extended from six months to seven months.

Effective date: The circular would come into force with immediate effect (i.e. from 19 September 2024).

---

To access the circular, please click here

With a view to align the listing timelines in case of public issue of debt securities and NCRPS with that of non-convertible securities issued on private placement basis and specified securities, SEBI vide its circular dated 26 September 2024 (the circular) has reduced the timeline for listing of debt securities and NCRPS to T+3 working days from the existing T + 6 working days.

Effective date and transition: The listing timeline of T+3 working days has been introduced as an option for issuers, which would be available to public issues of debt securities and NCRPS opening on or after 1 November 2024. This option would be available for one year. During the said voluntary period (from 1 November 2024 to 31 October 2025), if an issuer opts for T+3 working days timeline but fails to meet the timeline, Regulation 37(2) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021(NCS Regulations) which requires issuers to refund the application moneys in an event of failure to list such securities within specified timelines will become applicable only after T+6 working days.

The listing timeline of T+3 working days would become mandatory for all public issues of debt securities and NCRPS opening on or after 1 November 2025.

Further, the listing timeline of T+3 working days should be appropriately disclosed in the Offer Documents of public issue.

The revised timelines for the various activities involved in the public issue process have been prescribed in the circular.

---

To access the text of the circular, please click here

Currently, Regulation 57 of the LODR Regulations require issuers of Non-Convertible Securities (NCS) to report the status of their payment obligations⁸ Payment of interest or dividend or repayment or redemption of principal withing one working day of their payment becoming due. However, Paragraph 8.4 of Chapter XVII of the Master Circular⁹ Master Circular for issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper. requires issuers of listed commercial paper to submit a certificate confirming the fulfilment of their payment obligations within two days of the payment becoming due.

In order to align the timeline of intimating stock exchanges regarding status of payment obligations for listed NCS and listed commercial paper, paragraph 8.4 of Chapter XVII of the Master Circular, has been amended vide a circular dated 6 September 2024 (the circular) to require issuers of commercial paper to issue a certificate confirming fulfilment of its payment obligations, within one working day of payment becoming due.

---

To access the text of the circular, please click here

In November 2022, the Securities and Exchange Board of India (SEBI) had amended the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) to include trading in mutual fund (MF) units within the ambit of PIT Regulations effective 1 November 2024. In order to streamline the implementation of the amendments to the PIT Regulations, SEBI issued a circular dated 22 October 2024 (the circular) which provides the following clarifications:

To facilitate the implementation of the circular the following requirements have been put in place:

• Disclosure of holdings: As per the PIT Regulations⁵ Regulation 5(E)(1) of PIT Regulations , an Asset Management Company (AMC) is required to disclose on the stock exchange, on a specified date as prescribed by SEBI and on a quarterly basis thereafter, details of holdings in the units of its mutual fund schemes, on an aggregated basis, held by the Designated Persons of the AMC, trustees and their immediate relatives (together referred to as relevant persons). The circular clarified that AMCs should provide an initial disclosure of the holdings of the relevant persons as at 31 October 2024. This disclosure should be made by 15 November 2024. Subsequent disclosures of holdings of relevant persons should be done on a quarterly basis starting from 1 November 2024. These disclosures should be made within 10 calendar days from the end of the quarter.
• Threshold based disclosure of transactions: As per the PIT Regulations⁶ Regulation 5(E)(1) of PIT Regulatio, all the transactions executed by relevant persons in the units of an AMC’s own mutual funds, above specified thresholds (threshold limit) should be reported to the compliance officer of the AMC. The circular has clarified that the threshold limit is INR15 Lakh per quarter across all schemes. Further, matters should be reported to the compliance officer within 2 business days from the date of the transaction.
• Formats: SEBI has specified the formats in which various disclosures are to be made.

Effective date: The circular would come into effect from 1 November 2024.

---

To access the circular, please click here

SEBI in its circular dated 27 May 2024 had prescribed that for FY2023-24 social enterprises are required to submit the annual disclosures and annual impact report under section 91C(1) and 91E(1) respectively of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) by 31 October 2024.

SEBI has now partially amended the aforementioned circular wherein it has extended the timelines for the above mentioned filings for FY 2023-24 to 31 January 2025.

---

To access the circular, please click here

With an aim to provide liquidity to investors in the corporate bond market, SEBI on 16 October 2024 introduced an optional feature of ‘liquidity window facility’ (the facility) in debt securities⁷ Regulation 2(k) of the NCS Regulations defines ‘debt securities’ as: debt securities’ means non-convertible debt securities with a fixed maturity period which create or acknowledge indebtedness and includes debentures, bonds or any other security whether constituting a charge on the assets/ properties or not, but excludes security receipts, securitized debt instruments, money market instruments regulated by the Reserve Bank of India, and bonds issued by the Government or such other bodies as may be specified by the Board .The framework for liquidity window facility can be utilised by investors through the use of put options which are exercisable on pre-specified dates or intervals.

This option allows investors to sell their bonds back to the issuer before the maturity date, enhancing the liquidity and flexibility of corporate bonds.

Key features of this facility are:

1. Optional facility: The issuer of debt security may at its discretion provide this facility to the investor. However, this facility would be provided only after the expiry of one year from the date of issuance of the debt securities. Also, this facility gives the issuer an option to determine the eligibility of investors to whom the facility is to be offered, i.e. to all investors or only to retail investors⁸ retail investor” shall have the same meaning as mentioned under Regulation 15 of the NCS Regulations. Currently it reads as: “retail investor” shall mean the holder of non-convertible securities having the aggregate face value not more than rupees two lakh .
2. Prior approvals: The investor should ensure that the liquidity window facility has the prior approval of the board of directors and is monitored by the relevant authority.
3. Aggregate limit: Issuers are required to establish a maximum limit for the total amount of debt securities that can be redeemed through the liquidity window, and this shall be 10% or more of the total issue size of such debt securities⁹ Such limits should be disclosed in the offer document at the time of issuance of such debt securities. . Furthermore, issuers may set sub-limits for each liquidity window session over the tenor of the facility to effectively manage redemption flows.
4. Period of liquidity window: The liquidity window should be kept open for three working days. The liquidity window may be operated a monthly/quarterly basis at the discretion of the issuer¹⁰ This schedule of liquidity window/s should be disclosed upfront in the offer document .
5. Valuation and payment: Debt securities should be valued on ‘T-1’ day where T is the first day of the liquidity window. Such valuation should be displayed throughout the period of liquidity window, on the issuer and stock exchanges’ website. Amounts would be payable to the investor within one working day from the closure of the liquidity window to the bank account linked with demat account of the eligible investor.
6. Disclosure requirements: Various disclosure requirements along with timelines have been prescribed for the issuer .

Effective date: This circular would be applicable from 1 November 2024.

---

To access the text of the circular click here

SEBI, through circular dated 5 April 2023, and the Master Circular for Research Analysts dated 21 May 2024, outlined the advertisement code provisions that Research Analysts must follow in their advertisements.

To protect the investor’s interest and promote the development and regulation of securities markets, SEBI has issued a circular dates 24 October 2024 with respect to the advertisement code for RAs, wherein it has clarified that research reports and research recommendations are not considered advertisements unless they promote the products of services offered by the RA.

Further in another circular issued on 25 October 2024, SEBI under the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 (“RA Regulations”) has mandated RAs to furnish certain reports and information to SEBI as may be specified from time to time and has also specified that all the provisions of Chapter II, III, IV, V and VI of the RA regulations would apply mutatis mutandis to the proxy advisers (PAs).

SEBI also recognised BSE Limited as Research Analyst Administration and Supervisory Body (“RAASB”) for the purpose of administration and supervision of RAs under regulation 14 of the RA Regulations, and prescribed certain reporting requirements of RAs and Pas.

---

To access the circular, please click 24 October 2024 and 24 October 2024

Paragraph 12.19.2.10 of the Master Circular for Mutual Funds permits Indian mutual funds to inter-alia invest in units/securities issued by overseas Mutual Funds (MFs) or Unit Trusts (UTs) (together referred to as ‘overseas funds’) registered with overseas regulators. These overseas funds should meet certain investment criteria.

The Securities and Exchange Board of India (SEBI) issued a circular on 4 November 2024, to facilitate investments by Indian mutual funds in overseas funds that have exposure to Indian securities. It has provided the following:

Investment guidelines:

• Indian mutual fund schemes can invest in overseas funds that have exposure to Indian securities, provided this exposure does not exceed 25 per cent of their assets.
• All investor contributions to the overseas funds must be pooled into a single investment vehicle, with no segregated portfolios.
• The overseas funds must maintain a common portfolio, ensuring all investors have equal rights and receive returns proportional to their contributions.
• An independent investment manager must manage the overseas fund to ensure unbiased investment decisions.
• The overseas funds must disclose their portfolios at least quarterly.
• There should be no advisory agreements between Indian mutual funds and the overseas funds as this wll prevent conflicts of interest.

Breach of the 25 per cent limit:

• If the exposure to Indian securities exceeds 25per cent, Indian mutual funds have a 6-month observance period to monitor portfolio rebalancing by the overseas fund.
• During this period, no fresh investments can be made in the overseas fund.
• If the exposure of overseas funds to Indian securities remains above 25 per cent after the observance period, Indian mutual funds must liquidate their investments in the next 6 months unless the exposure falls below 25 per cent.

Non-compliance consequences:

If there has been a breach of the 25 per cent limit and if the Indian mutual funds do not liquidate their investments, then the Indian mutual fund/Asset Management Company cannot accept new subscriptions, launch new schemes, or levy exit loads on investors exiting the scheme. This circular aims to enhance transparency and ensure that Indian mutual funds can diversify their investments while maintaining regulatory compliance.

---

Please click here

The Securities and Exchange Board of India (SEBI) recently conducted an extensive study on royalty payments made by listed companies to their related parties over a decade (FY 2013-14 to 2022-23). The study, which analysed data from 233 companies across various sectors, uncovered several significant findings which are as follows:

Over the last decade, royalty payments by listed companies to their Related Parties (RPs) more than doubled in magnitude.

• While the royalty payments grew substantially until FY 2018-19, such payments tempered briefly post FY 2018-19, when these payments were brought under regulatory ambit by requiring majority of minority shareholders’ approval for royalty exceeding 5 per cent of consolidated turnover of the listed entities.
• When measured with turnover metric, these royalty payments do not look concerning. However, when viewed through profitability lens, the data offers a contrasting picture.
• When comparing royalty with net profit, it can be observed that, with increasing ‘royalty to RPs as per centage of Net Profit (NP)’, percentage of instances where such royalty payments exceeded total dividend went up significantly. Accordingly, as ‘royalty to RPs as per centage of NP’ increases, such royalty payments may erode the profitability of a company, eventually affecting interests of minority shareholders.

Disclosure of royalty

• Companies are not providing details with respect to the rationale and rate of royalty paid.
• Classification of royalty payment made towards the purposes of brand usage, technology know-how, etc. is not being disclosed.

Approval of RPTs

• Further, companies seeking approval of shareholders with respect to royalty payments, are not disclosing period or tenure of approval of such transactions. This is suggestive of the company seeking a perpetual approval for transactions.
• Any such transaction would require approval of shareholders, only if there is any upward revision in rate of such royalty or if there is a prospective regulation prescribing periodicity of such an approval.

Observations of proxy advisors

• Royalty payments had little correlation to profits or revenue over the years.
• Significant royalty is being paid to parent companies by listed companies, despite the listed company themselves spending significantly on adding value to the parent brand (like advertisements, brand promotion, etc.).
• Cash outflows to RPs can take many forms, other than royalty or brand payments- like management fees, technology fees, etc. which are not within the ambit of royalty from regulatory perspective and quantum of such payments can be uncomfortably large.
• Shareholders don’t have information on royalty rates applicable to fellow subsidiaries in other geographies for the purpose of comparison.
• Some royalty-paying companies pay less than 5 per cent to more than one RP without requiring shareholders’ approval, while the cumulative payment to all RPs together is much in excess of the regulatory threshold.

Matters that require policy discussion

• Should policy on materiality of royalty payments be reviewed by linking it to a profitability threshold?
• Should definition of payments to related parties be more standardized and encompassing, to include both royalty and other payments?
• Whether stipulating separate thresholds for each component of royalty payment enables shareholder to develop an informed opinion on the royalty payable?
• Should the regulation be amended so that the threshold applies to cumulative royalty pay-out to multiple RPs?
• Should there be any additional regulatory requirements for loss-making royalty payers?
• Should companies that skip dividend payments but pay royalty, or pay more royalty than dividends be subject to enhanced scrutiny from shareholders?
• Whether the resolution seeking shareholders’ approval for royalty payments should have a validity period?
• Should the royalty agreements between the royalty-paying company and its parent company or concerned RP contain relevant sunset provisions, reflecting the principle that such payments are not meant to be perpetual?
• Should royalty agreements also factor in the spends done by the royalty-paying company towards brand promotion, R&D expenditure, etc. for due offsets?
• Should there be a change in approval of royalty payments?
• Streamlining Disclosures with respect to royalty and brand payments?

---

To access the press release please click here

The SEBI (Buy-Back of Securities) (Second Amendment) Regulations, 2024, effective from 20 November 2024, introduced several significant changes to the existing buy-back regulations² Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018
• 3. Schedule II: Requires disclosure of relevant details and the potential impact of subsisting obligations.
• Schedule III:
• Schedule IV: :

1. Computation of entitlement ratio: If any member of the promoter or promoter group declares their intention not to participate in the buy-back, their shares will not be considered when calculating the entitlement ratio.
2. Terminology adjustments: The word record date under Regulation 17(ii) of the buyback regulations is substituted by the word as date of public announcement, accordingly buy-back offer would open not later than four working days from the date of public announcement.
3. Subsisting obligations: The regulations previously barred companies from issuing any shares or securities until the expiry of the buy-back period. The amendment allows companies to discharge existing obligations through the conversion of warrants, stock options, sweat equity, or preference shares into equity shares within this period. These obligations and their potential impact must be disclosed in the public announcement.
4. Disclosure requirements: Corresponding amendments have been made in schedules II, III and IV ³ • 3. Schedule II: Requires disclosure of relevant details and the potential impact of subsisting obligations.
   • Schedule III: : The cover page of the Letter of Offer should include the entitlement ratio for small and general shareholders and provide a web link for shareholders to check their entitlement
   • Schedule IV: Adds a requirement to disclose the relevant details and potential impact of subsisting obligations .

---

To access the amendment please click here

The SEBI issued a circular on 26 November 2024, introducing changes to the valuation methodology for repurchase (repo) transactions by mutual funds. This circular aims to standardise the valuation methodology for all money market and debt instruments to prevent regulatory arbitrage. Previously, repo transactions with a tenor of up to 30 days were valued on a cost-plus-accrual basis.

The new regulation mandates that repo transactions, including tri-party repos (TREPS) with a tenor of upto 30 days would be valued on a mark-to-market basis.

Further, valuation of all repo transactions (except for overnight repos) and all money market and debt securities (not just those with residual maturity of over 30 days) would be obtained from valuation agencies⁴ If security level prices given by valuation agencies are not available for a new security, it may be valued at the purchase yield/price on the date of allotment/purchase. .

Amendments have been made in the Master Circular for Mutual Funds.

The provisions of this circular would come into effect from 1 January 2025.

---

Please click here to access this notification