SEBI extends deadline for June quarter results amid COVID-19

Companies to manage the dual requirement of holding board meetings and submission of financial results

Shaifali Sharma
Vinod Kothari & Company

In the wake of the continuing impact of COVID-19 pandemic, SEBI vide circular[1] dated June 24, 2020, granted relaxation to listed entities and extended the timeline for submission of financial results for quarter / half year / financial year ended March 31, 2020 to July 31, 2020.

Since, now the first quarter of the FY 2020-21 has come to an end, companies are expected to finalize, approve and submit their financials to the respective stock exchange(s) within 45 days from the quarter ended June 30, 2020 as per Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) i.e. on or before August 14, 2020.

Considering the shortened time gap of 14 days between the two due dates stated above i.e. July 31 and August 14, SEBI vide its circular[2] dated July 29, 2020, has extended the deadline to submit financial results for the first quarter from August 14 to September 15, 2020 thereby allowing additional 32 days to the listed companies which will in turn provide extra time to companies and its auditors working on reporting the quarterly financial results.

It is pertinent to note here that the board of directors, as per Regulation 17(2) of the Listing Regulations, must meet at least four times a year, with a maximum time gap of 120 days between any two meetings. In this regard, the SEBI vide circular[3] date June 26, 2020 had exempted the listed entities from observing the stipulated time gap between two board meetings for the meetings held/proposed to be held between the period December 01, 2019 and July 31, 2020.

Considering no further extension has been granted by SEBI yet, the board meeting for approving the financial results should be scheduled keeping in mind the maximum time gap of 120 days prescribed under the Listing Regulations. For example, if we take a case of a listed company which held its last board meeting on May 02, 2020, the next board meeting shall be scheduled on or before August 31, 2020  instead of the extended due date of September 14, 2020.

As regards for unlisted companies, the maximum time gap for conducting board meetings had been relaxed vide MCA circular[4] dated March 24, 2020 to 180 days from present 120 days for the first two quarters of FY 2020-2021.





Other reading materials on the similar topic:

  1. ‘COVID-19 – Incorporated Responses | Regulatory measures in view of COVID-19’ can be viewed here
  2. ‘Resources on virtual AGMs’ can be viewed here
  3. Our other articles on various topics can be read at:

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Amendments in SEBI (PIT) Regulations, 2015: From April, 2019 to July, 2020

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Shareholder scrutiny for payout under Listing Regulations to directors

– Understanding the capping rationale

Pammy Jaiswal | Partner

Shaifali Sharma | Assistant Manager

Vinod Kothari and Company;


The remuneration payable to the directors of a public company is regulated by the provisions of Section 197 read with Schedule V of the Companies Act, 2013 (Act). It provides a ceiling on the maximum remuneration that can be paid to the directors both in aggregate as well categorically, including Whole-time Director, Managing Director and the Manager.

Any payment to such directors within the said limits has to be approved by the shareholders by way of an ordinary resolution. Payment of remuneration in excess of the limits requires approval of the shareholders by way of a special resolution.

There were no specific provisions prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) on maximum remuneration payable to directors of listed entities until SEBI, on the basis of recommendation of Kotak Committee on Corporate Governance, amended the Listing Regulations to put a ceiling on remuneration payable to executive promoter directors and non-executive directors.

This article tries to critically analyze the intent and deduce the interpretation of the aforesaid capping under the Listing Regulations.

Absolute versus relative limits- reading between the lines

Regulation 17 (6) (e) of the Listing Regulations reads as under:

“The fees or compensation payable to executive directors who are promoters or members of the promoter group, shall be subject to the approval of the shareholders by special resolution in general meeting, if-

(i) the annual remuneration payable to such executive director exceeds rupees 5 crore or 2.5 per cent of the net profits of the listed entity, whichever is higher; or

(ii) where there is more than one such director, the aggregate annual remuneration to such directors exceeds 5 per cent of the net profits of the listed entity:

Provided that the approval of the shareholders under this provision shall be valid only till the expiry of the term of such director.

Explanation: For the purposes of this clause, net profits shall be calculated as per section 198 of the Companies Act, 2013.

On the very first reading of Regulation 17 (6) (e), we understand that in case the listed company has one executive promoter director, it can pay upto 2.5% of the net profits or INR 5 crore, whichever is higher, without passing a special resolution.

In case of more than one such director in the company, the relative limit of 2.5% is doubled to 5% of the net profits, however, the absolute limit of INR 5 crore has not been mentioned under sub-clause (ii) of the said sub-regulation.

This makes it all the more important for us to read between the lines and interpret the meaning as intended by the law-makers. As mentioned, the first sub-clause provides both a relative and an absolute limit for the purpose of securing shareholder scrutiny. In fact, the said clause clearly mentions that higher of the relative or absolute limit has to be considered while determining the need to approach the shareholders.

Accordingly, it may seem to be an incorrect reading if companies consider only the relative limit for the second sub-clause. In such a scenario, companies may end up considering a far lower limit than INR 5 crores which the law makers have already fixed for one promoter executive director in the first sub clause.

Approval requirements under the Act viz-a-viz requirements under Listing Regulations


A. Payment of remuneration to executive promoter directors of a listed public company

As per the Report[1] of the Kotak Committee constituted by SEBI, several cases of disproportionate payments made to executive promoter directors as compared to other executive directors were noted and therefore, the Committee with the view to improve the standards on Corporate Governance, suggested that this issue should be subjected to greater shareholder scrutiny. Accordingly, the amendment carved a parallel way for obtaining shareholder’s approval if the total remuneration paid to executive promoter director exceeds the prescribed limits.

The above recommendation has already come into effect from April 01, 2019 and therefore the listed entities, in addition to the threshold limits prescribed u/s 197 of the Act, have to adhere to the ceiling laid down u/r 17(6)(e) of the Listing Regulations.

Below is the comparison of the threshold limits prescribed under Act and Listing Regulations for payment of remuneration to executive promoter director, in excess of which shareholders’ approval by special resolution shall be required:

Special Resolution required if: Under the Companies Act, 2013 Under SEBI Listing Regulations
Remuneration payable to a single executive director* Exceeds 5% of the net profits of the company Exceeds Rs. 5 crore (absolute limit) or 2.5% of the net profit (relative limit), whichever is higher
Remuneration payable to all executive director* Exceeds 10% of the net profits of the company Exceeds 5% of the net profits of the company

* Listing Regulations caps the limit for executive directors who are promoters or members of promoter group

From above, it is evident that the Act allows public listed companies to pay remuneration to its executive directors upto 5% or 10% of its net profits, as the case may be, (without passing special resolution) which is double the relative thresholds prescribed under Listing Regulations i.e. 2.5% or 5% of the net profits.


Illustration 1 –Payment within the limits laid down under the Act and also Listing Regulations

Type of shareholder approval required – Ordinary resolution under the Act

Illustration 2-Payment exceeds Listing Regulations limits but is within limits of the Act

Let us take a numerical example for this case:

Situation Permissible remuneration to a single executive promoter director Permissible aggregate remuneration to more than 1 executive promoter directors
Company has profits of 10 crore


·    5% of NP





0.5 crore

Higher of

·    2.5% of NP; or

·    5 crore


5 crores

·    10% of NP





1 crore

·    5% of NP





0.5 crore



In case of single executive promoter director: 

  • Permissible remuneration under Listing Regulations  (5 crore) is much higher than amount (0.5 crores) under the Act. In such cases, there is a clear cut conflict between the two legislations. On one hand where Listing Regulations  allows payment upto INR 5 crores to one such director (which in this case constitutes 50% of the NP), the company in question will be required to pass SR under the Act.
  • Accordingly, providing for a higher payout amongst the relative and absolute limit, in the first sub-clause does not seem to achieve the intent of SEBI to increase the Corporate Governance standards by scrutinizing disproportionate payments to this category.

In case of more than 1 executive promoter director:

  • As soon as we move to second situation, the amount available for payment of remuneration stands reduced drastically. The permissible remuneration under Listing Regulations will be INR 0.5 crore whereas, the Act allows payment upto INR 1 crore.

Illustration 3 – Payment exceeds the limits under the Act and automatically exceeds the limits under Listing Regulations (not considering the absolute limit)

Here the case is simple, SR is required to be passed.

Illustration 4 – Company has inadequate profits for the purpose of section 197 read with Schedule V of the Act

In case the minimum remuneration approved falls within the limits provided against the effective capital – OR is sufficient, however, for the purpose of Listing Regulations, SR will be required. In this case, Listing Regulations are stricter as it does not envisage inadequacy of profits and amounts that can be paid in case inadequacy.

However, if the minimum remuneration approved exceeds the limits provided against the effective capital, SR is required under the Act and such payment can be made only for three financial years with certain other disclosure requirements.

Having said that, it is important to note that once SR under the Act has been passed for payment of remuneration either in cases of adequate or inadequateprofits, there does not seem to be any need to pass another SR under Listing Regulations  for breach of the limits set therein.


B. Payment of remuneration to non-executive directors of a listed public company

The Kotak Committee on corporate governance further observed that certain non-executive directors (NEDs) (generally promoter directors) are receiving disproportionate remuneration from the total pool available for all other NEDs and recommended that if remuneration of a single NED exceeds 50% of the pool being distributed to the NEDs as a whole, shareholder approval should be required.

SEBI, in line with the above proposal and the requirement for special resolution for executive promoter directors, amended Listing Regulations and inserted following clause (ca) to Regulation 17(6):

“The approval of shareholders by special resolution shall be obtained every year, in which the annual remuneration payable to a single non-executive director exceeds fifty per cent of the total annual remuneration payable to all non-executive directors, giving details of the remuneration thereof”

The above amendment has also come into effect from April 01, 2019 and therefore, requires an action on the part of the listed entities to pass SR for such disproportionate payment to any one of its NED.

Some companies have already passed an SR in the AGM held for the financial year 2018-19 while other companies are preparing to pass the same in this year. The reason behind such two school of thoughts is based on the following reasons:

  1. Remuneration to a single NED for the FY 2018-19, which is basically profit linked commission, has been paid after 1st April, 2019. Some companies which have already taken the SR in the AGM held for the FY 2018-2019 have done so considering the payment being done post the advent of the aforesaid amendment.
  2. Remuneration to a single NED for the FY 2019- 2020 will be taken to the shareholders if it exceeds the limits. Here the companies which did not approach its shareholders in the AGM held for the FY 2018-2019 is based on the understanding that this amendment has come into force from 1st April, 2019 which means the same is to be complied with for the remuneration payable for FY 2019-2020. Therefore, according to the second school of thought, no SR is required for the disproportionate payment made in FY 2019-2020 for the FY 2018-2019[2].

Concluding Remarks

While the amendment of capping the limits for payout to executive promoter directors does not seem to meet the intent of the law makers, the amendment for passing SR for disproportionate payout to a single NED seems to be much more justified.

It was rightly mentioned in the Kotak Committee report that in future SEBI could review the status of the amendment relating to payout to executive promoter directors based on experience gained. As per the discussions above, it is imperative to draw attention firstly to the absence of the absolute limits in the second sub-clause of this sub-Regulation and even though the same is read with by inserting the same, it may seem to be futile for sole reason of SRs already passed by the companies under the Act. Further, clarity is needed for requirement to seek approval for payment of minimum remuneration in case of inadequacy of profits.

Since, MCA had already prescribed the limits and procedures under the Act for managerial remuneration, SEBI may relook at the capping scrutinylaid down for executive promoter directors and possible could align the same with the provisions of the Act. The intent is not to simply seek special resolution for every item of managerial remuneration as abundant caution.

Other reading materials on the similar topic:

  1. ‘FAQs on SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018’ can be viewed here
  2. Presentation on ‘Appointment & Remuneration of Managerial Personnel & KMPs’ can be viewed here
  3. ‘Managerial Remuneration: A five decades old control cedes’ can be viewed here
  4. ‘Remunerating NEDs and IDs in low-profit or no-profit years’ can be viewed here
  5. Our other articles on various topics can be read at:

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[2]Read our related article on the topic, here

Impleadment of company necessary element under section 138/141 of NI Act

CS Megha Saraf and Qasim Saif, Vinod Kothari and Company


A company is an artificial person acting through its management, specifically its board of directors. Also, a company is a separate legal entity that is to say, that a company has a separate legal standing and owns its assets and is liable for its debts. Though both these principles are well settled in corporate laws across the globe, from time to time there arises conflict on the matter that whether director should be held liable for the acts that he did as an office-holder in company or the company should be held solely liable. This conflict has been addressed in various cases and also under the Companies Act, 2013 (“Act, 2013).

In a recent ruling, Bhupendra Suryawanshi v/s Sai Traders[1], the Madhya Pradesh High Court held the company “vicariously liable” for the dishonour of cheque issued on behalf of company by its chairman as the foremost criteria for impleading a person signing on behalf of that company.

The article discusses the said judgment in light of the relevant provisions and other judicial precedents.

Brief facts of the case

In the instant case, the Petitioner (Chairman of Company X) had borrowed a particular sum from the Respondent. In order to make payment, the Petitioner had issued a cheque for the amount. Later, when the cheque was presented in the bank for clearance, the said cheque was dishonoured by the bank on account of “Stop Payment”.

The Respondent had filed a case in court of Judicial Magistrate of First Class, impleading only the Petitioner but not the Company, which was later on appealed in the High Court. The Petitioner had contended that as the Company is not impleaded, the case is liable to be quashed. Whereas, the Respondent was of the view that since, the Petitioner has borrowed the money from the Respondent for his own business purpose, there was no need to implead the Company as an accused.

Observations by the MP HC and other judicial pronouncements

On the perusal of facts, legal text and representation made by the parties, the HC observed as follows-

  • On reading of the provisions, it is apparent that Section 141 of NI Act deals with the offences committed by the companies and says that if an offence is committed by a company under Section 138 of the Act, every person, at the time, the offence was committed, was in-charge and responsible to the company in the conduct of the business of the company, is liable along with the company to be proceeded against and punished accordingly.
  • In the case of Aneeta Hada v. Godfather Travels & Tours (P) Ltd.[2] the Supreme Court has held that there cannot be any vicarious liability unless there is prosecution against the company.
  • In the case of M.S. Pharmaceuticals Corporation Ltd v/s Neeta Bhalla & Anr[3], National Small Industries Corporation Ltd v/s Harmeed Singh Paintal & Anr[4], and K.K. Ahuja v/s V.K. Vora & Anr[5], the Supreme Court had explained the necessity of specific averment in the complaint regarding the company and that director/ managing director/ joint managing director/ other employees of the company cannot be prosecuted under Section 138 of the NI Act unless the company is impleaded as an accused.

Therefore, in the instant case, since the demand notice was served only on the petitioner/accused and there was no demand notice against the company, it held that without arraying the company as an accused in the complaint case, the petitioner cannot be prosecuted for an offence and subsequently allowed the case.

Our Comments

Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (“NI Act”) provides that where any cheque is drawn by any person on an account maintained by him with a banker and if it is returned back by the banker due to:

  • Insufficient balance to honour the cheque;
  • The cheque value exceeds the amount arranged for payment from the account;

such person is deemed to have committed an offence and is punishable with an imprisonment or fine or with both.

However, before charging a person with such offence, it is required that the following three conditions are fulfilled:

  • the cheque is presented to the bank within 6 months from the date on which it is drawn or within the period of its validity, whichever is earlier;
  • the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
  • the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within 15 days of the receipt of the said notice.

It is only if the abovementioned conditions are present, the person drawing such cheque can be held liable.

While the aforesaid provides for the reason for charging such person to such offence, it is also pertinent to note the applicability of Section 141 to such case. Section 141 of the NI Act provides for “offences by companies”. Several judicial pronouncements had already quashed cases due to no averment against the company before alleging a person who was acting on behalf of such company, thereby clearly providing the extension of Section 141, to the company first before moving ahead and charging the person-in-charge and holding good the concept of “vicarious liability”.

The MP High Court Order thus relied on Aneeta Hada Vs. Godfather Travels and Tours Private Ltd., and S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla and Another and is in sync with the observations of SC.

Decriminalisation of offence committed u/s 141 of the NI Act– is it desirable?

Aside, it may be pertinent to note that the Department of Financial Services had recently issued a Suggestion Paper[6] and had laid down certain provisions of 19 Acts for de-criminalisation of offences which were open for public comments. One of the provisions include Section 138 of the NI Act. Several Supreme Court judgements such as M/s. Dalmia Cement (Bharat) Ltd. v. M/s. Galaxy Traders and Agencies Ltd[7] and Indian Bank Association and others v. Union of India[8], have already recognised the essence and intent of the section and deliberated on the nature of default involved in the matter. It is pertinent to note that as per the 213th report of the Law Commission[9]; almost 20 percent of the pending litigation relates to cheque dishonour disputes.

In India, contractual relationships are a common way of doing business. The whole purpose of issuing a cheque is to make payment ultimately, and if the person knows that even if he is unable to make the payment, no strict legal action can be taken against him, a cheque will lose its value as a negotiable instrument as there is no promise of getting the payment. Hence, it might not be a feasible idea to decriminalise the section.

Our other Articles on this subject may be viewed at:

  1. Dishonour of PDCs may not be an offence u/s 138 of NI Act- click here
  2. Bounced cheque: SC ruling makes prosecution easier- click here

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SEBI prescribes norms for structured digital database, system driven disclosures & CoC violations

CS Vinita Nair, Senior Partner | Vinod Kothari & Company

July 23, 2020

Link to gazette notification:

Effective date: July 17, 2020


SEBI in the Board meeting held on June 25, 2020 (‘SEBI BM’) discussed amendments in PIT Regulations on Structured Digital Database, continual disclosures and amendments in the Code of Conduct (CoC).

This article discusses the position prior to amendment, relevant discussion at SEBI BM and actionable post amendment.

Structured Digital Database (SDD-1)

Prior to the amendment

Reg 3(5) of the regulations provided maintenance of SDD-1 with names of persons with whom UPSI was shared and PAN/ any other identifier of the person (where PAN was not available). SDD was required to be maintained with adequate internal controls and checks such as time stamping and audit trails to ensure non-tampering of the database.

The regulation indicated that just the listed entity is required to maintain the same. However, SEBI clarified in the guidance note, pursuant to an insertion made on July 5, 2019, that the requirement to maintain SDD-1 was applicable to listed companies, and intermediaries and fiduciaries who handle UPSI of a listed company in the course of business operations.

Discussion in SEBI BM

As per the agenda of the SEBI BM It was proposed to specify following in relation to SDD:

  • Nature of UPSI;
  • Details of persons or entities who have shared;
  • Period of preservation of SDD-1;
  • Prohibiting entities from outsourcing the same.

Post amendment

  • SDD-1 is required to be maintained by the Board of directors or heads of organization of every person required to handle UPSI;
  • SDD-1 shall additionally contain the name of the person sharing the UPSI.
    • So the names of person sharing and the one with whom the same is shared will be recorded along with PAN/ any other identifier of the person (where PAN was not available).
  • SDD-1 shall be maintained internally and not be outsourced.
  • SDD-1 to be preserved for a period of 8 years after completion of relevant transactions or even longer in case of pending proceedings.

System Driven Disclosures (SDD-2)

Prior to the amendment

Continual disclosures under Reg 7 (2) (b) was required to be made by the promoters, member of promoter group and designated persons to the stock exchanges within two trading days of receipt of the disclosure or becoming aware of such information. System driven disclosure was implemented vide SEBI Circular dated May 28, 2018 only for The CEO and upto two levels below CEO of a company and all directors. The database was submitted to the depositories along with PAN of the individuals.

Discussion in SEBI BM

Investigation of delay or non-compliance due to manual submissions takes up considerable time and effort and clogs the system. In order to eliminate it was proposed to automate the process of filing such disclosures by way of SDD-2 thereby enabling timely and fair disclosure without intervention of entities involved. SEBI will be issued detailed circular on the same to the market participants.

Post amendment

Reg 7 (2) (c) inserted to provide enabling power for issue of format and manner of submitting SDD-2.

Exemption from trading window restrictions

Prior to the amendment

Trading window restriction was not applicable on transactions specified in proviso to Reg 4 (1), in respect of pledge for a bonafide purpose and transactions undertaken in accordance with respective SEBI Regulations such as acquisition by conversion of warrants or debentures, subscribing to rights issue, further public issue, preferential allotment or tendering of shares in a buy-back offer, open offer, delisting offer.

Discussion in SEBI BM

Offer for sale was not included in the said list despite SEBI having laid detailed procedure for the same.

Post amendment

Enabling clause inserted to include the transactions which are undertaken through such other mechanism as may be specified by the Board from time to time. SEBI vide Circular dated July 23, 2020 provided that trading window restriction shall not apply in case of rights entitlement and Offer for Sale.

Crediting the amount for CoC non-compliance to IPEF

Prior to the amendment

Only profits from contra trade were disgorged and credited to Investor Protection and Education Fund (IPEF) administered by SEBI. The listed entity had the option to take disciplinary action including by way of recovery, clawback.

Discussion in SEBI BM

The listed entity could take action against person violating the CoC by way of disciplinary actions viz. wage cut, collecting of certain amount etc. There was no uniform approach w.r.t. utilization of amounts levied by the listed entities/ intermediaries/ fiduciaries for other violations of CoC viz. trades during window closure, trade without pre-clearance etc.

Also, a clawback is generally a contractual agreement between the employee and the employer in which the employee agrees to return previously paid or vested remuneration to the employer under certain circumstances. However, every employment agreement may not have a “clawback” clause or provision. Whereas, disgorgement as an equitable remedy, aimed at depriving the wrongdoer of his ill-gotten gains. It was suggested to substitute ‘clawback’ with ‘disgorgement’.

Post amendment

Any amount collected for violation of CoC shall also be remitted to SEBI for credit to the IPEF. The word ‘clawback’ has been deleted in Schedule B and Schedule C. SEBI vide Circular dated July 23, 2020 has provided that such amounts shall be credited to the IPEF through the online mode or by way of a demand draft (DD) in favour of the Board (i.e. SEBI – IPEF) payable at Mumbai. The bank account details of SEBI – IPEF for online transfer is given below:

Informing violation of PIT Regulations to Stock Exchange

Prior to the amendment

Violation of PIT Regulations was required to be informed to SEBI. SEBI vide Circular dated July 19, 2019 prescribed format for standardized reporting of violations under CoC.

Discussion in SEBI BM

The intimations received from listed companies/ intermediaries/fiduciaries were maintained in non IT based environment. To ensure that such intimations were captured electronically in an IT based environment to create a data repository, which could be used for conducting examination of cases or for any other data analysis, in future, it was recommended to file intimations with the stock exchanges.

Post amendment

The violations will be required to be reported to the stock exchanges in the form and manner as may be prescribed by SEBI. SEBI vide Circular dated July 23, 2020 prescribed the format in supersession of July, 2019 circular.

Whether the intimations filed with the stock exchanges will be publicly available, is not clear.

Comparison of formats

The format is broadly similar to that prescribed in July, 2019, however, has following modifications:


July, 2020 Circular July, 2019 Circular


Details of DP Whether the DP is promoter or belongs to promoter group Whether the DP is promoter /promoter group/ holding CXO level position (e.g. CEO, CFO, CTO etc). The details highlighted is anyways provided under Designation of DP and Functional role of DP. This seemed repetition.
Details of transaction No of shares traded and value (Rs.) (Date- wise) No of shares traded (which includes pledge) and value (Rs.) (Date- wise). The legislative note under definition of ‘trading’ in the Regulations clarify that trade includes pledge.
Details of violations Details of violations observed under Code of Conduct. Details of violations observed under SEBI (PIT) Regulations, 2015. Reference aligned with Para 12 of Schedule B of the Regulations.
Amount collected for CoC violation ·       Mode of transfer to IPEF (Online/ DD)

·       Details of the transfer.

No such field. It seems that the amount is to be first transferred and thereafter, reporting is to be done as payment details is required to be furnished.

Actionables for the listed entities/ intermediaries/fiduciaries


Maintenance of SDD-1 to be ensured with details of persons sharing the UPSI.  SDD to be preserved for minimum 8 years from completion of relevant transactions. Internal control manual/ SOP, if any, will be required to be updated to capture the amendment.

SDD-1 may be maintained by Compliance Officer or may be maintained by various functional heads who are in possession of UPSI and share the same for legitimate purpose. The Compliance Officer should have access to the same as that is required for deciding of pre-clearance for the trades by DPs.


Reporting continual disclosure in SDD-2 after the format is prescribed by SEBI. In case SEBI decides to implement SDD-2 in the manner it implemented in 2018, the listed entity will be required to furnish name and PAN details of promoter, member of promoter group and all designated persons to the depository.


The CoC will be required to be amended to capture the amendments by removing reference of clawback provision and specifying to deposit amounts collected for violation to IPEF.

Violation of the regulations and of CoC to be reported to the stock exchange instead of SEBI by listed entity/ intermediary/ fiduciary in the format provided by SEBI vide circulated dated July 23, 2020.


Partitioning of advisory services from distribution activities

– Harshil Matalia (

Updated as on July 04, 2020

The Securities and Exchange Board of India (SEBI) had notified SEBI (Investment Advisers) Regulations, 2013 (IA Regulations)[1] in 2013, to regulate activities of Investment Adviser (IA). IA is a person who provides investment advices with respect to financial and investment products to its clients for a consideration. Regulation 3 (1) of the IA Regulations mandates every person which acts as an IA or holds itself out as an IA to register itself unless the person is exempted from registration under regulation 4 of IA Regulations.

A series of consultation papers were issued in 2016, 2017 and 2018, which was followed by another consultation paper[2] proposing amendments in the IA regulations released by SEBI on January 15, 2020. Subsequently, SEBI in its meeting held on February 17, 2020[3] approved the proposals on regulatory changes based on comments received on consultation paper. On July 03, 2020, SEBI has amended IA regulations by introducing SEBI (IA)(Amendment) Regulations, 2020[4] (Amendment Regulations) which shall come into force on September 30, 2020. The main objective to bring such regulatory amendments is to protect the interest of investors and prioritize investors’ interest over the interest of IA.

This write-up provides a brief note on amendments brought by SEBI and its implications on the sector.

Segregation of Advisory & Distribution Activities

As per regulation 15(5) of the IA Regulations, there is an obligation on IA to disclose all conflicts of interest that arises while serving its clients. There is a possibility that IA would advise to invest in products which shall fetch maximum commission or products that may be risky and less sellable in the market. To overcome such a situation, IA must disclose potential conflict of interest to the client.

An IA may be engaged in activities other than investment advisory and hence it is necessary to ensure an arms-length relationship between its activities as an IA and other activities as prescribed under regulation 15(3). Individuals registered as IAs are not allowed to provide distribution or execution services under amended IA Regulations. However, corporate entities registered as IAs can offer execution or distribution services provided that the investment advisory services are offered through separate identifiable division or department.

Further as per recent amendments in Regulation 22 of IA Regulations, “family of IA” shall not provide distribution services to the same client advised by IA. SEBI has inserted a definition of ‘Family of IA’ which shall include individual IA, spouse, children and parents. SEBI has also prescribed the requirement for non-individual IAs to have client level segregation at a group level which means that client can either take advisory or distribution services from the IA and the same client cannot avail any other service, as the case may be, by the same IA or its group entities. Group for this purpose shall mean:

  1. For Company- an entity which is a holding, subsidiary, fellow subsidiary, associate or an investing company or venturer of the company as per the provisions of Companies Act, 2013 or;
  2. In any other case- an entity which has controlling interest or which is subject to controlling interest of a non-individual investment adviser.

Implementation of Advice (Execution)

IAs also offer implementation services to its clients i.e. execution of advice provided to the client by charging some reasonable consideration. Thus, the client finds ‘all in one shop’ by availing such services. It has been suggested that IA should clearly declare to the client that it will not seek any power of attorney or authorisations from its clients for auto implementation of investment advice. However, SEBI in Amendment Regulations emphasis that whether to avail implementation services would be sole choice of client and the IA cannot force its client to avail implementation services. Further, IA shall provide implementation services to its advisory clients only through direct schemes/products in the securities market. IA or group or family of IA shall not charge directly or indirectly any consideration including commission or referral fees for providing implementation services. SEBI has also mandated IAs to provide declaration that no consideration shall be received by IA for implementation of advice or execution services. The said declaration has been inserted under item 5 of the First schedule of IA Regulations.

Terms and Conditions of Investment Advisory Services

As per regulation 19, an IA shall maintain copy of agreement with the client, if any, along with other records specified under the said regulation. Since the requirement of advisory agreement is not mandatory under the erstwhile IA Regulations, most of the clients always remain unaware about the terms and conditions of the advisory services that they are going to obtain from IAs.

SEBI has been receiving numerous investor complaints against IAs that they charge exorbitant advisory fees, promising false returns, non-disclosure of detailed fees structure etc. In absence of written agreement between adviser and client, client may not be able to prove his claim.

Therefore, SEBI has mandated an execution of agreement between IA and client which shall specify key terms and conditions, as may be prescribed by SEBI, regarding investment advisory services and this would in turn facilitate transparency.

Advisory Fees

As per the Code of Conduct for IAs prescribed under third schedule of IA Regulations, IAs shall charge fair and reasonable fees to the clients in lieu of providing advisory services. There have been several complaints received by SEBI regarding unreasonable fees being charged by IAs. To restrain such instances and unfair practices, SEBI has inserted Regulation 15A regarding advisory fees that can be charged by IAs to its clients.

The discussion paper has provided two modes of charging fees to clients. IAs can either charge fees by opting Assets under Advice (AUA) mechanism or they can charge fixed fees. SEBI inserted the definition of AUA in Regulation 2(aa) of IA Regulations which shall mean aggregate net asset value of securities and investment products for which IA has rendered investment advice irrespective of whether the implementation services are provided by investment adviser or concluded by the client directly or through other service providers. Under AUA mechanism, fees shall be charged on the basis of underlying assets under advice subject to maximum 2.5 percent of AUA per annum per family across all schemes/ products/ services provided. On other hand, as per fixed fees terms, IA can charge maximum Rs. 75,000 p.a. per family across all schemes/ products/ services provided. The option of choosing mode for charging fees is available with IA, however, change of mode can be effected only after 12 months of on boarding/last change of mode.

In practice, it would be difficult to implement maximum ceiling limit proposed by SEBI. There are certain portfolios that contain high risk products which requires effective skills and essential time to provide any investment advice. In such cases, maximum ceiling would be discouraging for IAs to charge a particular fees to compensate for their efforts. Therefore, in Board memorandum, SEBI has proposed to reconsider and enhance fixed fees from Rs. 75,000 to Rs. 1,25,000 p.a. per ‘family of client’ and fees under AUA mechanism shall be 2.5 percent of AUA per annum per ‘family of client’ across all schemes/ products/ services offered by IA. SEBI inserted a definition of ‘Family of client’ which constitutes individual, dependent spouse, dependent children and dependent parents. IAs would also be required to mention detailed fees structure along with adequate calculations under terms and conditions of advisory agreement. The above-mentioned proposed fees structure is not yet finalised; and is expected to be specified by the SEBI at the earliest. Also, SEBI is expected to bring more clarity that whether IA can charge fees using different fees structure to different categories of customers.

Eligibility Criteria for IAs

The eligibility criteria for IA includes qualification and net worth requirement. Under the erstwhile IA Regulations, regulation 7 and 8 deals with the qualification and net worth requirements respectively. IAs or a principal officer of non-individual IAs shall have minimum qualification as prescribed under the regulation 7.

SEBI has amended the qualification and net worth requirement. SEBI has introduced the definition of “persons associated with investment advice” and “principal officer” in Amendment Regulations. All client facing persons such as sale staff, service relationship managers, client relationship managers, etc. shall be deemed to be persons associated with investment advice, whereas principal officer shall mean managing director/managing partner, designated director etc. who is responsible for overall business operations of non-individual IAs. In terms of the erstwhile IA Regulations, IA shall have either professional qualification/post-graduation or graduation along with five year experience of advisory as mentioned in regulation 7(1). However, as per recent amendments, an individual IA and principal officer in case of non-individual IA shall be required to meet both the criteria that is to have professional qualification/post-graduation along with 5 years experience at all times. The requirement of certification on financial planning (NISM) remains unchanged.

In terms of the erstwhile IA Regulations, IAs which are body corporate shall have a net worth of not less than twenty-five lakh rupees and for IAs who are individuals or partnership firms shall have net tangible assets of value not less than rupees one lakh. However, SEBI has increased minimum net worth criteria to rupees fifty lakhs and rupees five lakhs for non-individual and individual IAs respectively. However, all persons associated with investment advice shall comply with the qualification requirements with minimum two years of experience. The existing IAs shall comply with new eligibility norms within 3 years from the date of commencement of Amendment Regulations. The summary of erstwhile eligibility criteria along with recent amendments is given below:

For Individual IAs




Persons associated with Investment Advice including representatives


Professional qualification/post-graduation Professional qualification/post-graduation with 5 years of experience Professional qualification/post-graduation with 2 years of experience
Graduation with 5 years of experience



Net Worth

Rs. 1 lakh Rs. 5 lakhs

Not applicable

For Non-individual IAs


Erstwhile for representatives

Amended for principal officer

Persons associated with Investment Advice including representatives


Professional qualification/post-graduation Professional qualification/post-graduation with 5 years of experience Professional qualification/post-graduation with 2 years of experience
Graduation with 5 years of experience



Net Worth

Rs. 25 lakhs Rs. 50 lakhs

Not applicable


Use of Nomenclature

In order to obviate misunderstanding and confusion amongst investors regarding the roles and responsibilities of distributors including mutual fund distributors who refer to themselves as ‘independent financial adviser’ or ‘wealth adviser’, it is relevant that the nomenclature should not mislead the investors. Therefore, SEBI has inserted Regulation 3(3) which specifies that any person other than IA registered with SEBI, dealing in distribution of securities shall not use the nomenclature “Independent Financial Adviser (IFA) or Wealth Adviser or any other similar name.

Conversion of Individual IAs to Non-individual IAs

SEBI has inserted additional criteria under regulation 13 which directs individual IA to apply for registration as non-individual IA, in case number of clients of such individual IA exceeds 150 in total.


With these amendments, SEBI took efforts to make robust regulation for investment advisers. Some of the changes would definitely pick up the slacks, however, SEBI should reassess the proposal for ceiling limit on advisory fees and bring more clarity.




[4] and

MCA widens CSR for defence personnel

Measures for the CAPF and CMPF veterans and dependants now a part of CSR activity

Ankit Vashishth, Executive, Vinod Kothari and Company;


Schedule VII of the Companies Act, 2013 (‘Act’) currently includes measures taken for the armed forces veterans, war widows and their dependants as one of the CSR activities. The Ministry of Corporate Affairs (“MCA”) vide its Notification[1] dated 23rd June, 2020 has included contribution made towards the benefit of Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans and their dependents including widows, within the ambit of CSR.

MCA has issued several notifications either to clarify or broaden the ambit of Schedule VII. This Notification is yet another step taken by the MCA for widening the scope of CSR activities to include CAPF and CMPF veterans and their dependants and war widows.

This note tries to provide a quick coverage on the said amendment.

Difference between Armed Forces and CAPF/CPMF

Armed Forces CAPF CPMF
The term “armed forces” basically means – Indian Armed Forces which are the military forces of the Republic of India. It comprises three professional uniformed services :

1.   The Indian Army

2.   The Indian Navy

3.   The Indian Air Force

CAPF (Central Armed Police Force)[2]  consists of :

1.         Assam Rifles (AR);

2.         Border Security Force (BSF);

3.         Central Industrial Security    Force (CISF);

4.         Central Reserve Police Force (CRPF);

5.         Indo Tibetan Border Police (ITBP);

6.         National Security Guard (NSG); and

7.       Sashastra Seema Bal (SSB)

The nomenclature CAPF will be used uniformly for CPMF as per the Office Memorandum [3]issued by the Ministry of Home Affairs issued on March 18, 2011

Current CSR spending pattern and changes expected due to the amendment

The current pattern for CSR spending for armed forces veterans, war widows and their dependants include contributions to several funds like:

  1. Armed Forces Flag Day Fund (AFFDF)[4]
  2. Army Wives Welfare Association (AWWA)[5]
  3. The Army Welfare Fund Battle Casualties[6]

Apart from donating to these funds, companies have also provided financial relief to the martyr’s families and have conducted workshops for the children of war widows as a part of their CSR projects.

Further, in addition to the above, contribution to “National Defence Fund” which is used for the welfare of the members of the Armed Forces (including Para Military Forces) should be eligible for being a CSR activity.

As a result of the enhanced scope for CSR spending for CAPF/ CAMF, contribution to the fund “Bharat Ke Veer Corpus Fund”[7], which was previously not eligible for CSR considering the fact that it specifically benefits CAPF, will now be covered as per the amendment. Accordingly, any contribution to this fund will now qualify as a CSR activity.

High Level Committee on CSR

MCA had constituted[8] a High Level Committee (HLC) on CSR in February, 2015 under the Chairmanship of Secretary (Corporate Affairs) to review the existing CSR framework and formulate a coherent policy on CSR and further make recommendations on strengthening the CSR ecosystem, including monitoring implementation and evaluation of outcomes. Later, the HLC on CSR was re-constituted[9] in November, 2018. The scope of HLC was widened to include recommendation of guidelines for enforcement of CSR provisions. Though the Report discussed on amending Schedule VII in line with promoting sports, senior citizens’ welfare, welfare of differently abled persons, disaster management, and heritage, however, it did not consider widening the clause relating to the scope of armed forces in the Schedule.

Further, as evident from the data given in the HLC Committee Report[10], CSR expenditure made on armed force veterans, war widows/ dependents have seen an upward trend over the years, however it forms a very small proportion of the total CSR expenditure made.

Concluding Remarks

The service spirit of CAPF is no less than that of the Indian Army. Acknowledging this fact MCA has brought this amendment. While all the areas for CSR are extremely important for the overall socio-economic welfare and development, the measures taken for the benefit of veterans and dependants of the armed forces and CAPF/ CPMF is an extremely noble activity.

Link to our other articles:

CSR: A ‘Corporate Social Responsibility’ or a ‘Corporate Social Compulsion’?

Proposed changes in CSR Rules

FAQs on Corporate Social Responsibility

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[3] Office Memorandum can be viewed here



[6] The Army Welfare Fund Battle Causalities







RBI guidelines on governance in commercial banks

Vinita Nair | Senior Partner

Vinod Kothari & Company