SEBI’s Listing Regulations 2015: The road ahead

Introduction

On September 02, 2015, SEBI notified and brought the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) into effect.SEBI’s provisions for listed entities have now been aligned with the provisions of the Companies Act, 2013. The Listing Regulations finalised after consultations, will consolidate and streamline the provisions of existing listing agreements for different segments of the capital market.

Date of applicability of Listing Regulations:

The Listing Regulations shall come into force on the ninetieth day from date of publication in the official gazette i.e. 1 December 2015. However, provisions with respect to passing of ‘ordinary resolution’ instead of ‘special resolution’ in case of all material Related Party Transactions, subject to related parties abstaining from voting on such resolutions and classification of promoters as public shareholders under various circumstances, have come into effect immediately.

Salient Features of the new Listing Regulations

The Listing Regulations have been divided into two parts. They are substantive provisions incorporated in the main body of regulations and procedural requirements in the form of schedules to the regulations. The Listing Regulations provides principles for disclosures by listed entities and also includes corporate governance principles.

These Regulations have been incorporated under different chapters for the ease of comprehension. Chapter II deals with periodic disclosures from listed entities and also lays emphasis on compliance to principles of corporate governance as laid down by the Organization for Economic Co-operation and Development (OECD). Chapter III deals with obligations in relation to filings on electronic platforms, general compliances of listed company and provisions with respect to appointment of Chief Compliance Officer. Chapter IV-IX has specific provisions with respect to different types of securities and the remaining chapters deal with the responsibilities and obligations of stock exchanges.

As per the Listing Regulations, listed entities are now under an obligation to prepare information in accordance with applicable standards of accounting and financial disclosure. Listed entities are required to ensure that the yearly statutory audit is conducted by an independent, competent and qualified Auditor. Further, there are provisions in the Listing Regulations with respect to protection of rights of shareholders and responsibility of directors of a company.

Company desirous of listing its securities are required to enter into a listing agreement with the stock exchange. Existing listed entities are required to execute a fresh listing agreement within 6 months from date of notification the Listing Regulations.

Definition of ‘related party’ and ‘related party transaction’ have been amended to provide an exception for units issued by mutual funds which are listed on a recognised stock exchange(s). Also previously, all material related party transactions required shareholders’ approval through special resolution and the related parties were required from voting on such resolutions. As per the Listing Regulations, ordinary resolution are now sufficient and the related party shall abstain from voting on such resolution, irrespective of the related party being a party to the transaction.

Conclusion:

The alignment of the Listing Regulations with the Companies Act 2013 is a step in the right direction by SEBI and will go a long way in removing the ambiguity and confusion with respect to the Listing Regulations. Further, consolidation of different provisions of the listing agreements with respect to different securities is also a positive step and will ensure ease for companies who intend to list themselves on various stock exchanges.