June 2023 – Vinod Kothari Consultants

Mandatory listing for further bond issues

June 30, 2023/0 Comments/in Bond Market, Corporate Laws, LODR, SEBI /by Vinita Nair Dedhia

“Listed once, always go for listing” to apply for new bond issues; optional for existing unlisted issuances

Vinita Nair | Vinod Kothari & Company | corplaw@vinodkothari.com

June 29, 2023 (updated on September 21, 2023)

Background

SEBI approved the proposal for mandatory listing of debentures/ NCDs, in its Board meeting held on June 28, 2023, for all listed entities having outstanding listed NCDs as on December 31, 2023. Effective Jan. 1, 2024, such listed entities will have to now mandatorily list each of its subsequent issuance of NCDs on the stock exchanges.

Aimed at better information flow and liquidity considerations, the move is said to be inspired by data analysis carried out by SEBI, as discussed in its Consultation Paper dated February 09, 2023, basis the information obtained from the depositories. Succinctly, the snapshot of unlisted bond issues by listed companies (it seems that the data of unlisted bond issuances by unlisted companies is not available), as on January 31, 2023, is as follows:

Figure 1: Snapshot of unlisted bonds issuance by listed entities

This would mean roughly 8% of all bond issuances by listed companies are outstanding, excluding bond issues by completely unlisted entities, which may be insignificant for the purpose of analysis.

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Proposals approved in SEBI Board Meeting held on June 28, 2023: Mandatory Listing of NCDs | Revised sponsor holding in REITs/InvITs and more…

June 29, 2023/0 Comments/in Corporate Laws, LODR, SEBI /by Kaushal Shah

Kaushal Shah, Executive | kaushal@vinodkothari.com

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SEBI’s standard approach, standardising valuation for AIFs

June 29, 2023/0 Comments/in Financial Services /by Staff

Dayita Kanodia | Executive, finserv@vinodkothari.com

So far, valuation of securities in terms of an Alternative Investment Fund (‘AIF’) was carried out in accordance with Regulation 23 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 (‘AIF Regulations’).

Regulation 23 provided AIFs with flexibility in adoption of valuation techniques or methodology for valuation of investment portfolios and the AIF managers were required to merely provide a description of the valuation procedure and of the methodology for valuing assets.. Also, the modalities relating to valuation of investment portfolio of the AIFs were not disclosed in the PPMs at the time of submission to SEBI and also were not reported to SEBI subsequently.

On January 06, 2023, SEBI issued a consultation paper on ‘S tandardised approach to valuation of investment portfolio of Alternative Investment Funds’ (‘Consultation Paper on Valuation by AIFs’) which discussed the need for a standardised approach to valuation methodology along with other issues. SEBI had also conducted a survey of 150 managers of different categories of AIFs to understand, inter alia, the present valuation practices being followed.

Subsequently, vide an amendment dated June 21, 2023 SEBI has provided for a standardised approach with respect to the valuation of investment portfolio of AIFs. This standardised approach not only provides for the manner of valuation of AIF investments but also states the responsibility of the manager of an AIF with regard to this valuation in line with the Consultation Paper on Valuation by AIFs.

This article discusses the recent amendment in detail, including the provisions which have been put in place in the event of any material change in the methodology and approach for valuation of investments of schemes of AIFs.

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CG norms for REITs and InvITs aligned with equity-listed entity

June 28, 2023/0 Comments/in Corporate Laws, SEBI, UPDATES /by Kaushal Shah

Kaushal Shah, Executive | kaushal@vinodkothari.com

SEBI prescribed format for reporting CG compliance

Background

In order to promote transparency and safeguard the interests of unitholders, SEBI recognizes the importance of streamlined governance practices for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). With the existence of 5 registered REITs and 21 InvITs, SEBI aims to establish effective mechanisms that ensure the flow of accurate information and provide protection to unitholders. This article explores the significance of streamlined governance practices in the REIT and InvIT sectors, highlighting SEBI’s efforts in fostering transparency and accountability.

Based on various representations received on the applicability of Corporate Governance (‘CG’) norms on ‘REITs and InvITs, SEBI in its Board meeting held on December 20, 2022, approved the introduction of CG-related provisions in SEBI (Real Estate Investment Trust) Regulations, 2014 (‘REITs Regulations’)^[1] and SEBI (Infrastructure Investment Trust) Regulations, 2014, (‘InvITs Regulations’)^[2] vide notification dated February 14, 2023. SEBI harmonized the requirements with SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, (‘LODR/ Listing regulations’) in relation to following areas, modified considering the structure of REITs and InvITs:

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Rise, Fall & Subsequent Legitimisation of Default Loss Guarantees

June 28, 2023/0 Comments/in digital lending, Financial Services, RBI /by Team Finserv

Anita Baid & Subhojit Shome | finserv@vinodkothari.com

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Extended disclosure u/r 30A w.r.t. Agreements

June 28, 2023/0 Comments/in Corporate Laws /by Anushka Vohra

-Anushka Vohra | corplaw@vinodkothari.com

Companies often enter into various agreements with third parties, which may / may not be in the normal course of business and for which approval of shareholders is not mandated by law. Likewise, the promoters, directors of companies may enter into various agreements with third parties, to which the company is not a party. Such agreements may have the impact on control / management of the company. This becomes crucial in case of companies where public interest is involved. SEBI has vide SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023 (‘Amendment’) inter-alia inserted Reg. 30A and clause 5A of Para A Part A to Sch. III (Amended Regulation) which requires disclosure of certain agreements to the stock exchange(s) and in the annual report of the listed entity, which may have an impact on the control / management of the listed entity or imposes restriction / creates any liability on the listed entity.

There is an existing requirement of disclosing agreements viz. shareholder agreements, JV agreements, family settlement agreements, which are not in the normal course of business and to the extent that they impact the management and control of the listed entity, to the stock exchange(s). With the insertion of the aforesaid regulations, the extent of disclosure has quite largely increased. Obligation has been cast on several people to disclose to the listed entity, agreements that they have entered into- either among themselves or with third parties, which may (i) impact the control and management of the listed entity; (ii) impose restriction / create any liability on the listed entity.

This brings us to several questions on what agreements are required to be disclosed? How will the agreements that otherwise warrant confidentiality, be disclosed to the stock exchange(s)? In this article, we shall be discussing about the extended scope of disclosure w.r.t. agreements.

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