Archive for category: Corporate Laws

-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.