Regulatory updates

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)¹The 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.

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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 investors⁶Alternative 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.

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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).

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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.

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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.

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To access the text of the circular, please click here