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Identifying Senior Managers: Listing rules may force companies to relook at the tag

Identification as a “senior management person” brings information needs as well as obligations 

– Pammy Jaiswal and Mahak Agarwal

Background

The concept of Senior Management ( herein, ‘SM’, and senior management person or personnel as ‘SMP’ or ‘SMPs’) was not there under the regime of the Companies Act, 1956 and was first introduced under Section 178 of the Companies Act, 2013 (Act, 2013). The law requires the Nomination and Remuneration Committee to get into compensation policies of SMPs.  The definition under the Listing Regulations has, over time, been aligned with that under the Act, 2013. These definitions have been around for almost 10 years now, and therefore, largely seem to have settled.

However, the LODR (2nd Amendment) Regulations[1] have introduced several new information requirements and obligations pertaining to SMPs, which has given rise to the need for relooking at the said position from a fresh perspective.

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

-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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Stricter framework for sale, lease or disposal of undertaking by a listed entity

– Nitu Poddar | corplaw@vinodkothari.com

Reg 37A of Listing Regulations requires additional voting and disclosure requirements

Keeping in view of the significance of the amendments, we are conducting a workshop on the same. Details can be accessed athttps://vinodkothari.com/2023/06/workshop-on-sebi-lodr-2nd-amendment-regulations-2023/
The article was also published by IndiaCorpLaw and can be viewed here

Disposal of an undertaking (whole or substantially the whole) can be done either as part of a scheme of arrangement or otherwise by way of slump sale / business transfer agreement (‘BTA’). Disposal, other than by way of scheme of arrangement, have so far been regulated as per section 180(1)(a) of the Companies Act, 2013 (‘Act’) which requires approval of the shareholders by way of special resolution. SEBI has prescribed approval requirement in this regard by way of introduction of regulation 37A vide SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023 (‘Amendment Regulations’) effective from June 14, 2023 that requires listed entities to follow a stricter regime for disposal of undertaking inter alia mandating approval from majority of the public shareholders who are not interested in the transaction, disclosure of the object, commercial rationale and use of proceeds arising from such transaction. While there is an exemption provided in case of transactions with a wholly owned subsidiary (WOS), the approval regime will apply in case of disposal of undertaking by such WOS or any reduction in shareholding in the WOS subsequent to transfer of the undertaking.

The said amendment is based on the Consultation Paper rolled by SEBI on February 21, 2023. Apart from incorporating the provisions proposed in this regard in the Consultation Paper, the amendment has introduced new provisions as well. Provision with respect to seeking approval from the shareholders of the listed entity in case a WOS is used as a conduit for transfer in undertaking is a new requirement brought in through the amendment.

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Workshop on SEBI LODR 2nd Amendment Regulations, 2023

In view of the overwhelming response received for our workshop held yesterday, we are announcing a repeat workshop on 30th June, 2023. You may register your interest here – https://docs.google.com/forms/d/e/1FAIpQLSff223EAvPfU3roZogwubvO0cQ1S1Dx8R9Kopv8XH-ff0nX_g/viewform
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Understanding CSR for NGO

– Pammy Jaiswal, Partner | corplaw@vinodkothari.com

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SEBI LODR amendments: Minority say in independent directors, added regulations for debt issuers

Pammy Jaiswal | Partner | Vinod Kothari and Company (pammy@vinodkothari.com)

Background

Following the various recommendations provided by the Primary market Advisory Committee (PMAC), SEBI in its board meeting held on 30th September, 2022 discussed several proposals including the agenda to review the process for independent directors’ (IDs) appointment, re-appointment or removal,  introducing the need to appoint a monitoring agency for overseeing the utilisation of the issues proceeds from the preferential issue and the qualified institutional placements (‘QIP’), requirement of obtaining NoC from SEBI for schemes of arrangement involving such companies which have listed their Non-Convertible Securities (‘NCS’) and several other changes dealing with disclosures and financial results for NCS listed entities. Our snippet covering the aforesaid board decisions may be viewed here.

These proposals have been notified, as the SEBI Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2022 (LODR 6th Amendment Regulations) have come into effect vide Notification dated 14th November, 2022 (‘Effective Date’). Our snippet covering the amendments may be viewed here.

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Round-up of regulatory updates during 2021

We have attempted to collate all major regulatory amendments notified throughout the year, with our resources on the same. Below we present a regulatory round-up for the year 2021, be it for MCA, SEBI, RBI or the like, along with the links to our major articles/ FAQs on the same.

Our youtube video giving a quick view on the same can be accessed at – https://www.youtube.com/watch?v=WJbJx2jgK9A

This version: 4th December, 2021

NBFCs licensed for KYC authentication: Guide to the new RBI privilege for Aadhaar e-KYC Authentication

-Kanakprabha Jethani (kanak@vinodkothari.com)

Background

On September 13, 2021, the RBI issued a notification[1] (‘RBI Notification’) permitting all NBFCs, Payment System Providers and Payment System Participants to carry out authentication of client’s Aadhaar number using e-KYC facility provided by the Unique Identification Authority of India (UIDAI), subject, of course, to license being granted by MoF. The process involves an application to the RBI, onward submission after screening of the application by the RBI, then a further screening by UIDAI, and final grant of authentication by the MoF,

We discuss below the underlying requirements of the PMLA, Aadhaar Act and regulations thereunder (defined below) and other important preconditions for this new-found authorisation for NBFCs. Read more