Getting material on “material” events and information:

SEBI notifies amendments to Listing Regulations

-Payal Agarwal, Manager  (payal@vinodkothari.com) 

Keeping in view of the significance of the amendments, we are conducting a workshop on the same. Details can be accessed here – https://vinodkothari.com/2023/06/workshop-on-sebi-lodr-2nd-amendment-regulations-2023/

The importance of transparency and timely dissemination of material information for a listed entity needs no emphasis, since most of these events and information may have a direct bearing on the price discovery of the securities of the listed entities and the investors’ decisions. The intent of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) is to ensure a seamless flow of information; the Regulation is complemented by Schedule III thereto, which provides an indicative list of the events or information in a listed entity that may be considered “material” and thereby, requires prompt disclosure by way of intimations to the stock exchange(s) in which the entity is listed.

While Para A of Part A of Schedule III specifies the list of information/ events which are “deemed” material, Para B specifies a list of information/ events which are to be tested based on the application of guidelines of materiality. Further, Para C requires intimation of any major development that is likely to affect the business and Regulation 30 also provides a residuary provision of intimation of any other information or event that does not fall either under Para A or Part B of Part A of the Listing Regulations, however, is material.  The guidelines of materiality for the purpose of testing the events/ information under Para B of Part A of Schedule III are provided in sub-regulation (4) of Reg 30 and are supposed to be documented in the policy for determination of materiality (“Materiality Policy”) of the listed entity. The Materiality Policy of a listed entity plays a prominent role in determining the disclosure practices of a listed entity.

SEBI vide an amendment notification dated 14th June 2023 has notified (“Amendment Regulations”) several changes to the Listing Regulations which were earlier proposed in a Consultation Paper with respect to the disclosure of material events. The same has now been incorporated under the Listing Regulations itself. A few of these include :

1. Quantifying the meaning of “material”, thereby limiting discretion with the listed entities,
2. Requiring amendments in Materiality Policy;
3. Reducing timelines for disclosures;  
4. Mandatory verification of market rumours by top 100 (250 from FY 24-25) listed entities;
5. Broadening and shuffling of the events/ information listed under Schedule III etc.

The Amendment Regulations are applicable from the 30th day of the  publication of the notification, i.e., on and from 14th July, 2023. Further, the amendments are applicable only to the equity-listed entities, since debt-listed entities including High-value Debt Listed Entities are outside the scope of Regulation 30. We have listed some of the major amendments in this write-up.

Based on the market study, SEBI has observed that currently, many companies which have listed their specified securities only disclose the events listed in Para A of Part A of Schedule III to the exchanges; the rest of the events or developments remain prone to subjectivity and therefore, remain a subject of indecision. One of our previous studies “Corporate Governance & material price sensitive information: Need for listed entities to frame effective materiality policy” also indicates that in practice, most companies either did not have any quantifiable thresholds for determination of materiality and where they did, the threshold was mostly 10% either on a standalone or on a consolidated basis, as compared to the present amendment specifying a threshold as low as 2% of the consolidated turnover, among others.

Key Changes under the Amendment Regulations

Quantitative criteria for determination of materiality of an event/ information

Apart from the “deemed material events” as listed in Para A of Part A of Schedule III, the determination of the materiality of other events and information depends on the Materiality Policy of a  listed entity. To do away with the unreasonable discretion applied by listed entities, the Amendment Regulations include a quantitative criteria for determining thresholds for carrying out the test of materiality of an event/ information. It is pertinent to note that the quantitative thresholds are, in addition to, and not in substitution, of the existing abstract tests of materiality.

The criteria is based on a combination of turnover, net worth and profit/ loss after tax where such event/ information is considered “material”, whose value or the expected impact in terms of value, exceeds the lower of the following;  

1. two per cent of turnover, as per the last audited consolidated financial statements of the listed entity;
2. two per cent of net worth, as per the last audited consolidated financial statements of the listed entity, except in case the arithmetic value of the net worth is negative;
3. five per cent of the average of absolute value of profit or loss after tax, as per the last three audited consolidated financial statements of the listed entity.

Understanding the materiality thresholds

• “Enterprise”-based and not “entity”-based: The thresholds are based on the last audited consolidated financial statements of the listed entity. Considering that the present financial year is the first year of applicability, the thresholds appearing in the financial statements as on 31st March, 2023 will be relevant to determine materiality, except for profit/ loss, where an average of the last 3 FYs is required to be taken into account. 

• “Value” v/s “expected impact in terms of value”: The thresholds are required to be tested for both “value” as well as “expected impact”. While “value” would generally be certain, and known at the time of the event or information requiring disclosure, “expected impact in terms of value” is to be determined on the basis of the likelihood of triggering the threshold.
  • For instance, the materiality of a capacity is to be tested both on the basis of the “value” of the capital expenditure being incurred by the listed entity, as well as, the “expected impact” on the turnover the listed entity emanating from such capacity addition.
• “Negative” net worth: Where a listed entity’s networth is negative for a financial year, the materiality of an event or information is to be determined on the basis of the remaining two parameters, i.e., turnover and net profits/ loss. Needless to say, turnover cannot be negative, hence similar conditions for the same cannot exist.
• “Absolute” value of average profit/ loss after tax: The threshold w.r.t. profit/ loss is to be computed by taking the absolute values of profit or loss after tax, for the immediately preceding 3 FYs. The averaging does not mean netting-off in this case, where profits of a company in one year gets reduced due to the losses in other financial years, or vice versa; rather, the values are required to be taken on an absolute basis.
  • For example, suppose a listed company reported a profit of Rs. 5 crores in FY 20-21, profit of Rs. 3 crores in FY 21-22 and loss of Rs. 1 crore in FY 22-23. The limit of materiality in the instant case will be derived as [5% of {(5+3+1)/3}], i.e., Rs. 15 lacs.

Disclosure of events occurred prior to the Amendment Regulations and continuing 

While the amendments are applicable from 14th July, 2023, there may be events that have occurred prior to the notification of these amendments, but continue to have an impact on the listed entity post the amendments coming into effect in the context of indicating “materiality”. Such event or information, is also required to be disclosed to the stock exchanges as a material event/ information in terms of Reg 30 of the Listing Regulations, within 30 days from the Amendment Regulations becoming applicable, i.e, by 13th August, 2023.

Which past events are required to be disclosed? is an intriguing question that may haunt the KMPs of listed entities. The points below may help one find an answer to the same. 

1. Only such information/ events need to be disclosed that are not already available in the public domain;
2. Considering that the same is on the basis of thresholds as per last audited financial statements, one may travel backwards upto the approval of the last audited financial statements to track undisclosed material event or information, i.e., from 1st April, 2023 till effective date of the Amendment Regulations.
3. The information/ event needs to be “material” in terms of Reg 30 of the Listing Regulations, and that would have triggered disclosure requirements as per the Amendment Regulations; and
4. The information/ event needs to be continuing in nature. One-off events having no long-drawn/ continuing impact is not required to be disclosed if the same occurred prior to the Amendment Regulations becoming effective.

Comparison with global precedents on quantifying materiality

Disclosures of events/ information on the basis of determination of its materiality is not a feature peculiar to India. Subjective tests/ indicators for determining materiality are prevalent in various jurisdictions. However, in the UK, the Listing Rules specify quantitative thresholds on the basis of which the “materiality” of an event/ information is to be tested, alongside subjective factors. Rule 9.6 of the UK Listing Rules requires disclosure of material information to the stock exchange. The table below provides a comparison between the “class tests” laid down by the UK and the materiality thresholds notified by SEBI –

UK Listing Rules	SEBI Listing Regulations
5% of gross assets	No equivalent criteria
5% of profits before tax	5% of three-years’ average profit after tax
5% of consideration	2% of turnover
5% of gross capital	2% of net-worth

Contents of Materiality Policy of the listed entity

A “policy” is expected to serve as a guiding document to its users, and assist them in the implementation of a particular function to which it relates. On the contrary, in many cases it is seen that the statutory policies are formed as a replica of the text of applicable laws, without containing the intended guidance it was expected to provide.

While the Regulations cast an obligation on the board-authorised KMPs to determine materiality of an event or information and consequent disclosure of the same to the stock exchange, however, there may be various instances where the authorised KMPs may not have an immediate access to the material event/ information. In order to address the issue of delayed reporting due to the ignorance of the KMP about a material event/ information, the Amendment Regulations now requires the Materiality Policy to be framed in a manner so as to assist the relevant employees in identifying potential material event or information and reporting the same to the authorised KMPs.

• Meaning of “relevant” employees: Depending on the organisational hierarchy, “relevant employees” may generally mean to include the heads of departments/ functions, project heads, factory managers, etc. The list of employees designated as Designated Persons under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) may also be helpful in this regard.
• Sensitisation and Standard Operating Procedures (SOPs): Relevant employees may be sensitized on the requirements under Reg 30 of the Listing Regulations, to avoid chances of non-compliance. Further, the meaning of relevant employees and other related matters confidential to the listed entity may be separately intimated to the employees by way of an SOP instead of inclusion in the policy. The policy, in turn, may refer to the SOP prepared by the listed entity.
• Identifying potentially material event/ information: The relevant employees, though having access to material information, may not be well placed to determine the materiality of such event or information. An indicative list of information/ events that may be considered to be “material”, along with the quantitative thresholds in absolute terms may be provided to them. The responsibility for determination of materiality ultimately rests on the authorised KMPs itself. 

Further, the Materiality Policy may contain tests for materiality in addition to the proposed thresholds specified above, but the same shall not have an effect of diluting any requirements of the Regulations.

Reduction in timelines for disclosure of material events or information

The Amendment Regulations reduce the timeline for disclosure of material events or information to “twelve” hours, as against the present timeline of “twenty-four” hours, from the occurrence of the event/ information. The same has been done to restrict the possibilities of the leakage of information through media/ otherwise, prior to the information becoming generally available through stock exchange intimations. Such material events/ information emanating from the listed entity itself will be required to be disclosed within the reduced timeline of twelve hours. For other information not emanating within the listed entity itself, the existing timeline of twenty-four hours will continue to be applicable.

Nature of information	Timelines for disclosure
Developments happening or information originating within a listed entity	Within 12 hours
Information originating outside a listed entity that is informed to the same by a third party	Within 24 hours
Outcome of board meeting for matters specified in Schedule III	Within 30 minutes from conclusion of board meeting
Schedule of analysts or institutional investors meet	Atleast 2 clear working days in advance
Detailed reasons and other disclosures pertaining to resignation of independent director	Within 7 days from date of resignation
Presentation and audio/ video recording of analyst/ investor meet	before the next trading day or within 24 hours from the conclusion of such calls, whichever is earlier
Transcripts of analyst/ investor meet	Within 5 working days of conclusion of such call

A detailed understanding of the timelines for disclosures may be referred to in Annex-II of the Consultation Paper.

Mandatory verification of market rumours

Reg 30(11) of the Listing Regulations provides a general provision for verification of market rumours by the listed entity. However, to ensure that the listed entities  give heed to such information being disseminated in the market through media or other public sources, the Amendment Regulations now mandate verification of such market rumours. Given the scattered and completely unfathomable reach of electronic media and social media currently, rumours may be spreading anywhere, and it is practically impossible for a listed entity to respond.

• Applicability: on top 100 listed entities w.e.f. 1st February, 2024; on top 250 listed entities w.e.f 1st August, 2024
• Action required from listed entity: confirm, deny or clarify rumour
• Source of rumour: mainstream media

The definition of mainstream media has been inserted vide the Amendment Regulations as:

“mainstream media” shall include print or electronic mode of the following:

i. Newspapers registered with the Registrar of Newspapers for India;

ii. News channels permitted by Ministry of Information and Broadcasting under Government of India;

iii. Content published by the publisher of news and current affairs content as defined under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021; and

iv. Newspapers or news channels or news and current affairs content similarly registered or permitted or regulated, as the case may be, in jurisdictions outside India;”

• Nature of information: rumours of an impending specific material event or information in terms of the provisions of Reg 30

Approach of a listed entity in responding to rumors

The sources of information from mainstream media being infinite, it may not be practically possible for a listed entity to keep a probe on all market rumours and respond to the same. It is important to note that the disclosures are required for information that are material in terms of Reg 30 of the Listing Regulations, and has probably been leaked prior to public dissemination by the listed entity.

Therefore, an ideal approach would be to keep checking for an unusual price movement in the scrips of a listed entity that may signal the presence of a material information in public selectively. Such rumours may thereafter be traced, and if found to be material in terms of Reg 30 read with Schedule III, appropriately responded to by the listed entity.

Broadening disclosures under Schedule III

Keeping up with the contemporary requirements and to do away with the information asymmetry, various line items have been amended/ included in the list of material events/ information under Schedule III. Further, for various existing line items, clarification/ explanation has been inserted as necessary. Below, we provide a gist of the amendments along with the impact of such change.

Modifications under existing clauses of Schedule III

Existing clauses under Schedule III	Amendments under Schedule III	Impact of the amendments
Deemed material events under Para A of Part A of Schedule III
Acquisition(s) (including agreement to acquire), Scheme of Arrangement (amalgamation/ merger/ demerger/restructuring), or sale or disposal of any unit(s), division(s) or subsidiary of the listed entity or any other restructuring.   Explanation.- For the purpose of this sub-para, the word ‘acquisition’ shall mean,- (i) acquiring control, whether directly or indirectly; or, (ii)acquiring or agreeing to acquire shares or voting rights in, a company, whether directly or indirectly, such that – (a) the listed entity holds shares or voting rights aggregating to five per cent or more of the shares or voting rights in the said company, or; (b) there has been a change in holding from the last disclosure made under sub-clause (a) of clause (ii) of the Explanation to this sub-para and such change exceeds two per cent of the total shareholding or voting rights in the said company.	Acquisition(s) (including agreement to acquire), Scheme of Arrangement (amalgamation, merger, demerger or restructuring), sale or disposal of any unit(s), division(s), whole or substantially the whole of the undertaking(s) or subsidiary of the listed entity, sale of stake in associate company of the listed entity or any other restructuring Explanation (1) – For the purpose of this sub-paragraph, the word ‘acquisition’ shall mean- (i)acquiring control, whether directly or indirectly; or (ii)acquiring or agreement to acquire shares or voting rights in a company, whether existing or to be incorporated, whether directly or indirectly, such that – (a)the listed entity holds shares or voting rights aggregating to five per cent or more of the shares or voting rights in the said company; or (b)there has been a change in holding from the last disclosure made under sub-clause (a) of clause (ii) of the Explanation to this sub-paragraph and such change exceeds two per cent of the total shareholding or voting rights in the said company; or (c)the cost of acquisition or the price at which the shares are acquired exceeds the threshold specified in sub-clause (c) of clause (i) of sub-regulation (4) of regulation 30.   Explanation (2) – For the purpose of this sub-paragraph, “sale or disposal of subsidiary” and “sale of stake in associate company” shall include- (i)an agreement to sell or sale of shares or voting rights in a company such that the company ceases to be a wholly owned subsidiary, a subsidiary or an associate company of the listed entity; or (ii)an agreement to sell or sale of shares or voting rights in a subsidiary or associate company such that the amount of the sale exceeds the threshold specified in sub-clause (c) of clause (i) of sub-regulation (4) of regulation 30.   Explanation (3)- For the purpose of this sub-paragraph, “undertaking” and “substantially the whole of the undertaking” shall have the same meaning as given under section 180 of the Companies Act, 2013.”	The scope of disclosures on sale/ disposal has been modified to also include –  Whole or substantially the whole of undertaking  Sale of stake in the associate company of the listed entity   It is clarified that acquisition of shares or voting rights in a company proposed to be incorporated will also be included within the meaning of “acquisition” for this clause.    In addition to the existing events in relation to “acquisition” as were considered material for disclosure, the same has also been linked with the materiality thresholds incorporated under Reg 30.    Materiality for the sale/ disposal of the “subsidiary” or “associate” has been linked with the materiality thresholds under Reg 30    Sale or disposal of stake in a subsidiary/ associate that results in the cessation of the existing relation of the entity as a wholly-owned subsidiary, subsidiary or an associate of the listed entity shall require disclosure, irrespective of the quantum or amount involved.
Revision in Rating(s)	New Rating(s) or Revision in Rating(s)	Clarificatory change – requires disclosure of all ratings, whether newly obtained or revised    A question that remains unanswered is as to whether the re-affirmation of existing ratings will also require intimation?    While there may not be an explicit requirement, it is still suggested to disclose the same.
Fraud/defaults by promoter or key managerial personnel or by listed entity or arrest of key managerial personnel or promoter	Fraud or defaults by a listed entity, its promoter, director, key managerial personnel, senior management or subsidiary or arrest of key managerial personnel, senior management, promoter or director of the listed entity, whether occurred within India or abroad: For the purpose of this sub-paragraph: (i) ‘Fraud’ shall include fraud as defined under Regulation 2(1)(c) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. (ii)‘Default’ shall mean non-payment of the interest or principal amount in full on the date when the debt has become due and payable. Explanation 1- In case of revolving facilities like cash credit, an entity would be considered to be in ‘default’ if the outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for more than thirty days.   Explanation 2- Default by a promoter, director, key managerial personnel, senior management, subsidiary shall mean default which has or may have an impact on the listed entity.”	The scope of frauds/ defaults that require disclosure has been expanded to include the same conducted by –  Director (was earlier covered under Para B)  Senior management  Subsidiary  Similarly, the scope of arrest stands modified.  It is clarified that such instances are required to be reported irrespective of whether the same occurred in India or abroad.    The meaning of “fraud” and “default” has been clarified, including in the case of revolving facilities. It is clarified that for defaults other than of the listed entity itself, the same is required to be reported only when the same has an impact on the listed entity.  Therefore, personal defaults of individuals having no impact on the listed entity need not be reported.
Change in directors, key managerial personnel (Managing Director, Chief Executive Officer, Chief Financial Officer, Company Secretary etc.), Auditor and Compliance Officer	Change in directors, key managerial personnel (Managing Director, Chief Executive Officer, Chief Financial Officer, Company Secretary, senior management etc.), Auditor and Compliance Officer	The same has been extended to the senior management as well
Reference to BIFR and winding-up petition filed by any party / creditors	Winding-up petition filed by any party / creditors	Clarificatory change – reference to BIFR has been removed since the same is non-existent
Events under Para B of Part A of Schedule III that are to be tested on materiality as per Reg 30(4)
Change in the general character or nature of business brought about by arrangements for strategic, technical, manufacturing, or marketing tie-up, adoption of new lines of business or closure of operations of any unit/division (entirety or piecemeal).	Any of the following events pertaining to the listed entity   (a) arrangements for strategic, technical, manufacturing, or marketing tie-up; or   (b)  adoption of new line(s) of business; or   (c) closure of operation of any unit, division or subsidiary (in entirety or in piecemeal).	The red highlighted part has been omitted, so as to require disclosure on the occurrence of such events, irrespective of whether there is a change in the nature of business pursuant to that.
Agreements (viz. loan agreement(s) (as a borrower) or any other agreement(s) which are binding and not in normal course of business) and revision(s) or amendment(s) or termination(s) thereof.	Agreements (viz. loan agreement(s) or any other agreement(s) which are binding and not in normal course of business) and revision(s) or amendment(s) or termination(s) thereof.	The reference of “as a borrower” has been removed to include such material loan agreements as well, where the listed entity is a party in the capacity of a lender.  This does not include loan agreements entered into by financing companies in the normal course of its business.
Litigation(s) / dispute(s) / regulatory action(s) with impact	Pendency of any litigation(s) or dispute(s) or the outcome thereof which may have an impact on the listed entity	The substitution of “regulatory actions” is followed by the insertion of two new clauses under Para A of Part A (see table below) It is clarified that the pendency of any litigation or dispute or its outcome is also required to be reported
Fraud/defaults etc. by directors (other than key managerial personnel) or employees of listed entity	Frauds or defaults by employees of the listed entity which has or may have an impact on the listed entity	Instances of fraud/ defaults by directors have been included within the deemed material events.  Only such instances of frauds/ defaults by employees that may have an impact on the listed entity and the impact is likely to be material require disclosures.
Giving of guarantees or indemnity or becoming a surety for any third party.	Giving of guarantees or indemnity or becoming a surety by whatever name called for any third party.	To ensure compliance in spirit, a phrase has been added such that nomenclature does not matter, if the effect remains that of giving guarantee/ indemnity/ surety.

Newly inserted clauses under Schedule III

Newly inserted clauses pursuant to the amendment	Impact of the amendments
Agreements entered into by the shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, employees of the listed entity or of its holding, subsidiary or associate company, among themselves or with the listed entity or with a third party, solely or jointly, which, either directly or indirectly or potentially or whose purpose and effect is to, impact the management or control of the listed entity or impose any restriction or create any liability upon the listed entity, shall be disclosed to the Stock Exchanges, including disclosure of any rescission, amendment or alteration of such agreements thereto, whether or not the listed entity is a party to such agreements:   Provided that such agreements entered into by a listed entity in the normal course of business shall not be required to be disclosed unless they, either directly or indirectly or potentially or whose purpose and effect is to, impact the management or control of the listed entity or they are required to be disclosed in terms of any other provisions of these regulations.    Explanation: For the purpose of this clause, the term “directly or indirectly” includes agreements creating obligation on the parties to such agreements to ensure that listed entity shall or shall not act in a particular manner.	All agreements entered into by a stakeholder of the listed entity or of its holding, subsidiary or associate company having an impact on the management or control of the listed entity, or imposing any restriction or liability on the listed entity shall require disclosure, if the same is not in the normal course of business.  An agreement that is entered into the normal course of business is also required to be disclosed if it has an impact on the management or control of the listed entity. These may generally include the Shareholders’ Agreements wherein the shareholders may put certain conditions or restrictions with respect to the management of the affairs of the listed entity.    For example, agreements creating security interest on one or more assets of the listed entity against the financing facilities provided to the same will be excluded from reporting under this clause.
In case of resignation of key managerial personnel, senior management, Compliance Officer or director other than an independent director; the letter of resignation along with detailed reasons for the resignation as given by the key managerial personnel, senior management, Compliance Officer or director shall be disclosed to the stock exchanges by the listed entities within seven days from the date that such resignation comes into effect.	As against the existing regulations that require disclosure of detailed reasons of resignation only in case of an auditor or an independent director, the Amendment Regulations require such disclosure for all classes of persons whose change requires intimation to the stock exchanges, along with the letter of resignation
In case the Managing Director or Chief Executive Officer of the listed entity was indisposed or unavailable to fulfil the requirements of the role in a regular manner for more than forty five days in any rolling period of ninety days, the same along with the reasons for such indisposition or unavailability, shall be disclosed to the stock exchange(s)	This requires intimation to the SEs where the MD/ CEO is unavailable to fulfil his roles in a regular manner for more than 45 days in a continuous period of 90 days, with reasons thereof.    This may ideally include instances where the MD/ CEO is not available to look after the affairs of the listed entity as a result of prolonged illness, serious ailments, etc.
Announcement or communication through social media intermediaries or mainstream media by directors, promoters, key managerial personnel or senior management of a listed entity, in relation to any event or information which is material for the listed entity in terms of regulation 30 of these regulations and is not already made available in the public domain by the listed entity. Explanation – “social media intermediaries” shall have the same meaning as defined under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021	This requires intimation of mass announcements made by the specified stakeholders of listed entity that the entity itself has not directly made available in the public domain to be intimated to the stock exchanges.    Only such communications that are material to the listed entity in terms of Reg 30 and are undisclosed is required to be intimated.    For example, information about a charitable program or some employee welfare programme announced in the media, would not generally be “material” to the listed entity, and therefore, does not require disclosure.
Action(s) initiated or orders passed by any regulatory, statutory, enforcement authority or judicial body against the listed entity or its directors, key managerial personnel, senior management, promoter or subsidiary, in relation to the listed entity, in respect of the following: (a) search or seizure; or (b) re-opening of accounts under section 130 of the Companies Act, 2013; or (c) investigation under the provisions of Chapter XIV of the Companies Act, 2013; along with the following details pertaining to the actions(s) initiated, taken or orders passed: i.name of the authority; ii.nature and details of the action(s) taken, initiated or order(s) passed; iii.date of receipt of direction or order, including any ad-interim or interim orders, or any other communication from the authority; iv.details of the violation(s)/contravention(s) committed or alleged to be committed; v.impact on financial, operation or other activities of the listed entity, quantifiable in    monetary terms to the extent possible.	Actions right from the stage of their initiation are required to be reported  by any regulatory, statutory, enforcement authority or judicial body against the listed entity or its directors, key managerial personnel, senior management, promoter or subsidiary, in relation to the listed entity, in the nature of search/ seizure, re-opening of accounts, or investigation under the Act Specific details that are required to be reported have been specified
Action(s) taken or orders passed by any regulatory, statutory, enforcement authority or judicial body against the listed entity or its directors, key managerial personnel, senior management, promoter or subsidiary, in relation to the listed entity, in respect of the following: (a)     suspension; (b)      imposition of fine or penalty; (c)      settlement of proceedings; (d)      debarment; (e)      disqualification; (f)    closure of operations; (g)      sanctions imposed; (h)      warning or caution; or (i) any other similar action(s) by whatever name called; along with the following details pertaining to the actions(s) initiated, taken or orders passed: i.     name of the authority; ii. nature and details of the action(s) taken, initiated or order(s) passed; iii.  date of receipt of direction or order, including any ad-interim or interim orders, or any other communication from the authority; iv.details of the violation(s)/contravention(s) committed or alleged to be committed; v. impact on financial, operation or other activities of the listed entity, quantifiable in monetary terms to the extent possible.	This is a further expansion of the aforesaid clause wherein other types of actions are covered.
Voluntary revision of financial statements or the report of the board of directors of the listed entity under section 131 of the Companies Act, 2013	If a listed entity applies for voluntary revision of its financial statements, the same needs to be intimated to the stock exchanges.
Delay or default in the payment of fines, penalties, dues, etc. to any regulatory, statutory, enforcement or judicial authority.	In absence of any specific clarification provided, delay of even one day in making such payments will be covered under the present clause. Having said that, it is important to note that the insertion has been made under Para B, and therefore, materiality has to be determined under Reg 30(4)

Disclosure of events or information other than as specified under Schedule III

Apart from the list provided under Part A of Schedule III as discussed above, the provisions of sub-regulation (12) of Reg 30 should not be disregarded since it requires a listed entity to make disclosures of all events or information that may have a material impact on the listed entity, even if the same is not indicated in  Para A or B of Part A of Schedule III. 

“In case where an event occurs or an information is available with the listed entity, which has not been indicated in Para A or B of Part A of Schedule III, but which may have material effect on it, the listed entity is required to make adequate disclosures in regard thereof.”

Further, while a few clauses of Schedule III explicitly covers events or information occurring in a subsidiary of a listed entity, having a material impact on the listed entity, for other events or information, where a subsidiary is not explicitly covered, the same still requires disclosure in terms of sub-regulation (9) of Reg 30. 

“The listed entity shall disclose all events or information with respect to subsidiaries which are material for the listed entity.”

It is important to note that for the purpose of each of the aforesaid, whether an event or information is “material” or not for a listed entity, shall require determination on the basis of the principles laid down in sub-regulation (4) of Regulation 30.

Actionables on the listed entities

While the amendments become effective in almost a month from now, there are various preparatory steps the listed entities are required to ensure for effective implementation, once the amendments come into force. These include:

• Amending the Materiality Policy in line with the regulatory requirements
• Laying down internal SOPs for identification of relevant employees and reporting to authorised KMPs
• Reviewing and ensuring systems in place for preventing leakage of any material information prior to its dissemination by the listed entity on the stock exchange
• Reviewing the list of Senior Management Personnel (SMP) and ensuring that the listed entity has properly identified and designated persons as SMP
• Sensitizing employees, directors, senior management, promoters and other stakeholders on the amendments and the conduct expected of them
• Laying down SOP for tracking unusual price movements, existence of market rumors and determination of its materiality

Tracking intimations that may have escaped disclosure earlier, is of such nature that requires disclosure as per amended criteria of “materiality” and is still continuing in nature.

Documentation : preventive approach to future threats

As already discussed above, the intent of regulation 30 is to ensure a seamless flow of information that is material to a listed entity. The amendments make the disclosure requirements more elaborate and comprehensive, but may also result in a brainless dumping of irrelevant and redundant information. There may be instances which are not actually material to the listed entity but still disclosed to the stock exchanges or vice versa. Further, while the KMPs authorised for determination of materiality and making disclosures may change over a period of time, the listed entity being a corporate entity having perpetual succession, may face a claim/notice regarding non-disclosure of an event or information at a future point of time.

In order to deal with the unlimited possibilities, it is recommended that the listed entities (or authorised KMPs thereto) follow a practice of documentation of all events/information in relation to the listed entity and the basis on which such information has been considered material or not, thereby leading to the disclosure/ non-disclosure of the same.

Impact of the amendments

The amendments to Reg 30 read with Schedule III is an attempt towards strengthening the disclosure requirements to the stock exchanges and promoting information symmetry and uniformity across the listed entities. The step can surely be termed as stringent, and having an impact of making the compliance more rigid. The quantitative thresholds of materiality, being miniscule, may seemingly have an impact of providing redundant information on the stock exchanges. However, if connected properly with the thread of materiality, the enhanced disclosures will lead to a better dissemination of significant information to the investors and public at large. The principle that needs to guide the practices of listed entities  is that the information shall be “relevant” and not “redundant”, as also recognised by international precedents. Too much information often leads to overlooking the relevant information. On the other hand, SEBI’s proposal of coupling the meaning of “unpublished price sensitive information” under PIT Regulations with Reg 30 of the Listing Regulations will lead to such redundant information also requiring to be considered as a “price-sensitive” information, having insignificant/ no impact on the price of the securities of the listed entity.