Regulatory updates

Regulatory updates

Updates from SEBI

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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

Action points for auditors

While companies have now been permitted to conduct annual and other meetings in the calendar year 2022 vide video conference or other audio-visual means, this does not imply any extension in timeline for conducting the meetings. Accordingly, provisions of SA 250, Consideration of Laws and Regulations in an Audit of Financial Statements should be considered by auditors, in case of any delay in holding such meetings.

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

Action points for auditors

The information submitted by listed entities under Regulation 31 of the LODR regulations to the stock exchanges would be relevant to auditors as they are required to verify the information pertaining to ‘distribution of shareholding’ disclosed under the corporate governance section of the annual report.

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