Presentation on LODR Amendments

BRSR Reporting: Actions and disclosures required for business sustainability

Abhishek Saraf, Manager and Payal Agarwal, Executive (


The Business Responsibility and Sustainability Reporting (“BRSR”), originating from the MCA report on Business Responsibility Reporting, has found its way into the regulatory provisions by way of an amendment to the Regulation 34(2)(f) of the Listing Regulations[1], notified on 5th May, 2021. Further, SEBI vide circular dated 10th May, 2021 introduced the format of BRSR and the guidance note to enable the companies to interpret the scope of disclosures.

The BRSR will replace the existing BRR format w.e.f. FY 2022-23. For the FY 2021-22, the top 1000 listed entities may voluntarily submit the BRSR and from FY 2022-23 onwards, the same has to be submitted mandatorily. It is notable that the BRSR, though replacing BRR, is actually an extension of the existing BRR reporting While the BRSR has been made effective from FY 2022-23, it has to be understood that reporting is secondary, and needs to be backed by the company taking appropriate actions to ensure a positive report. Where the BRSR reporting of a company is negative, the same, though not a non-compliance of the regulatory provisions, will result in a negative impact on the minds of the stakeholders.

Read more

Financial transactions with promoter entities become part of CG disclosure

SEBI’s move to strengthen transparency

Pammy Jaiswal| Partner| Vinod Kothari and Company


It has always been interesting to see how SEBI takes various steps to increase the level of transparency for augmenting the level of corporate governance in a listed company. Recently, SEBI notified the changes under the SEBI Listing Regulations on 6th May, 2021, which contained several significant changes to enhance corporate governance (hereinafter referred to as CG), like specifying the scope of the risk management committee or intimation of recordings and transcripts for analyst meetings[1]. Following the said notification, SEBI, on 31st May, 2021, came up with a circular[2] dealing with enhanced disclosures under CG report to be submitted to the stock exchange under Regulation 27 (2) of the SEBI Listing Regulations by adding Annexure IV to the existing formats.

The new requirement coming out from this circular is extremely significant since it aims at revealing almost all types of financial transactions (to say almost 24 types of permutations) which the company has entered into with its close connections and which may have the highest chances of involving any conflict of interest.



In this write up we have tried to critically discuss and examine the requirements emanating from the said circular.

Scope and time of applicability

  • Annexure IV which contains the new disclosures will have to be filed by the listed entities which have listed their specified securities.
  • The same is to be filed on a half yearly basis starting from the first half year 2021-2022, i.e., for the half year ended 30th September, 2021.
  • While Regulation 27 (2) only talks about quarterly filings within 21 days from the end of the quarter, therefore, there is no explicit time period within which this new annexure will have to be filed with the exchange from the end of the half year.
  • The disclosure will not only cover the financial transactions undertaken during the half year ended 30th September, 2021, but also cover all outstanding financial contracts which the entity has entered any time in the past.

Financial Permutations covered


Critical Aspects

While the format under the new annexure may seem to be simple in terms of presentation, however, it has various aspects related to it which needs to be discussed. Owing to the extent of disclosure required, listed companies will have to consider and understand every part under the format before feeding the details. Some points which need to be discussed include the actionable, the meaning of the entities controlled by the promoters, the meaning of direct and indirect accommodation, distinction between a LoC and a co-borrowing arrangement, and last but not the least the ‘affirmation’ on the economic interest of the company.

Actionable on the part of the listed entity

  • Identify the entities
    • This identification process may reveal that companies have a large number of interested entities falling under these 4 types of entities.
  • Identify transactions
    • After having prepared the list of entities that are included under the 4 categories, the next step will be to identify the financial transactions which include loan, guarantee or security in connection with the loan to the entities under the list.
  • Identify outstanding balances
    • Once the entities and the transactions entered into with them have been identified, listed companies will have to identify the outstanding balance as on the date of the report.
    • Since the transactions involve providing guarantee or security as well, there can be a situation that companies will have to look for both on and off-balance sheet items to come to the actual outstanding balance for the purpose of reporting.

Entities controlled by Promoters/ PG

While the meaning of the term promoter and PG is well defined under SEBI ICDR Regulations, the question that may arise is which entities will be considered to be controlled by the promoters or the PG. The meaning of control here has to be taken form SEBI Takeover Regulations, which defines it as a right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or PAC, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

As per the definition of PG, entities which have a substantial stake (20%) held by the promoters or by common group pf shareholders are covered under the said definition of PG. However, if one has to identify the entities which are controlled by PG, it may cover even larger number of companies.

Nature of book debt covered

As per the format of annexure IV, any other form of debt advanced is also required to be included for the purpose of the said disclosure. Looking at the intent of the disclosure, any book debt that is present in the books like merely selling of goods on credit should not be made part of this disclosure. In our view, only the book debt which has the color of an advance and which is in the nature to serve as a financial accommodation (for example selling of goods on credit for an unreasonable period of time or under unreasonable terms of understanding) is required to be disclosed.

Meaning of direct and indirect financial accommodation

As per the requirement, one of the biggest challenges for the listed entities will be to identify the connecting links or conduits through which these interested entities have been benefitted. Such transactions are generally camouflaged and put through layers to create smokescreen. These entities which are used to route the benefits to the interested parties are merely acting as a stopover. Therefore, it is extremely important to identify such transactions where there is a clear and direct nexus between flow of money from the listed entity to the intermediary and ultimately to the interested party. For instance, if a company raises preference share capital with the reason that it needs it for its own business operations, however, uses the funds so raised to on lend to another entity.

Difference between LoC and co-borrowing arrangement

The new requirement includes an LoC to be disclosed in the half yearly report. One needs to understand that providing a guarantee or giving an LoC by the listed company is nothing but to agree and provide financial accommodation to the borrower. It is significant to note that companies cannot disguise the LoC into a co-borrowing arrangement and therefore, avoid the disclosures to be made under Annexure IV.

Under a co-borrowing arrangement, if the listed entity is the co-borrower, then it should be getting the benefit or be a beneficiary of the loan being taken together with the interested party. Acting merely as a signatory to the co-borrowing agreement will make it no different from being considered as a guarantee or providing an LoC.

Affirmation for being in economic interest of listed company

One of most crucial and difficult part of the disclosure is the part requiring affirmation that loan (or other form of debt), guarantee / comfort letter (by whatever name called) or security provided in connection with any loan or any other form of debt is in the economic interest of the Company.

Some pointed issues under this are:

  • Who will give this affirmation?

The report on CG as per the SEBI circular (annex I, annex II and annex III) are required to be signed either by the compliance officer or the company secretary or the MD or CEO or CFO. However, Annex IV (which is the new requirement) requires the affirmation to be signed either by the CEO or CFO.

Further, the practicing professionals who provide their report on compliance with CG requirements and which has to be annexed with the CG report cannot be expected to dive into this question and scrutinize the reasoning provided by the company.

  • What will be the basis of this affirmation?

Further, it is imperative to note that the entities covered under this disclosure are mainly upstream entities which are either promoters or PG or controlled entities by them. Therefore, it becomes all the more difficult to justify the act of financial accommodation to be in the economic interest of the company. If it were a case of downstream accommodation (like subsidiaries, associates, joint ventures, etc.), it would have been much easier to form a basis to affirm that the same is serving the economic interest of the company since any profits in them will reflect in the consolidated financial results of the listed entity, however, the same reason cannot be for an upstream entity.

Also, merely earning an interest on loan granted or a commission on a guarantee or security or even on lending cannot act as a justification here since the earning interest or commission cannot be said to serve the economic interest of a company which is not even in the business of lending. Having said that listed NBFCs may have an upper hand in terms of providing justifications in this case.

Whether the same needs to be reviewed by the Audit Committee as well?

Regulation 18 of the Listing Regulations read with Part C of Schedule II as well as section 177 of the Companies Act requires that the audit committee needs to scrutinize the inter-corporate loans and investments. While the same is required and covers loans, there does not seem to be any reason to exclude provision of security or extending guarantee since it is given in connection with loan.
The management needs to show the audit committee how does the transactions covered for the purpose of the said disclosure are in the economic interest of the Company.

Comparison between section 185 of the Companies Act, 2013 and Annexure IV

Section 185 of the Companies Act, 2013 (Act, 2013) deals with the provisions to provide loan and related services to directors or the interested entities. While section 185 is more from an angle of regulated provisions, the extent of casting restrictions on providing loan to directors or its connected parties is divided into two parts. One is completely prohibited (to directors and to firms where the director or his relative is partner) and the other one is restrictive, which means, financial accommodation can be given subject to prior approval of the shareholders.

The new disclosure requirement has several similarities with section 185 which are given below:

Basis of comparison Section 185 Annex IV of SEBI Circular dated 31st May, 2021
Services covered Provision of loan, provision of guarantee or Letter of Comfort and providing security in connection with the loan Similar
Mode Direct as well as indirect Similar
Entities covered ·      director of company, or its holding company or any partner or relative of any such director;


·      any firm in which any such director or relative is a partner;


The aforesaid two bullets are completely prohibited


·      any private company of which any such director is a director or member;


·      any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together;


·      any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company

Refer to figure 1 above.

While the format requires the financial accommodation made, if any, to the directors or their relatives or entities controlled by them, it will surely not include or have any disclosure relating to financing of directors since it is completely prohibited under section 185 of the Act, 2013.


The aforementioned disclosure shall exclude the reporting of any loan (or other form of debt), guarantee / comfort letter (by whatever name called) or security provided in connection with any loan or any other form of debt:

  1. by a government company to/for the Government or government company
  2. by the listed entity to/for its subsidiary [and joint-venture company whose accounts are consolidated with the listed entity.
  3. by a banking company or an insurance company; and
  4. by the listed entity to its employees or directors as a part of the service conditions.

While one of the exclusions is for a banking company, it is imperative note the following:
 SEBI (LODR) Regulation does not define the term “banking company” but the term “banks”.
 Section 5(c) of the Banking Regulation Act, 1949 (‘BR Act’) defines banking company as: “banking company” means any company which transacts the business of banking in India;”
 Further, section 5(d) of the BR Act defines company as: “company” means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956) and includes a foreign company within the meaning of section 591 of that Act;”
 Public sector banks like State Bank of India, being a body corporate, do not fall under the aforesaid definition of banking company. However, it is engaged in the business of banking and should therefore, be excluded.

Accordingly, clarity on the same is still awaited from SEBI.

Concluding remarks

As stated in the beginning, SEBI’s move to increase the standards for CG has been extremely interesting. Further, considering the fact that listed companies have a limited amount of time to arrange for huge amount of information, this circular needs the immediate attention of the listed entities.

[1] Our write up on the same can be viewed here

[2] To view the circular, click here

‘Material Subsidiary’ under LODR Regulations: Understanding the metrics of materiality

Barsha Dikshit |

Himanshu Dubey |

The term ‘subsidiary’ or ‘subsidiary company’ as defined under the Companies Act, 2013[1] (‘Act’) refer to a company in which a holding company controls the composition of the Board of directors or may exercise at least 51% of the total voting power either on  its own or together with one or more of its subsidiaries. A company may have a number of subsidiaries; however, all of them may or may not have a material impact on the holding company or on the group at a consolidated level. Therefore, regulations sometimes require identification of such subsidiaries which may have a material impact on the overall performance of the holding company/group.

Though SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (‘SEBI LODR’), define the term ‘Material Subsidiary’ as a subsidiary, whose income or net worth exceeds ten percent (10%) of the consolidated income or net worth, respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year, however, there remains confusion w.r.t. the criteria provided for determining the materiality of a subsidiary. For instance, whether a subsidiary having negative net worth exceeding 10% of the consolidated net worth of the listed company will be qualified as a material subsidiary? Or say if the net worth at the group level is negative, however the net worth of the subsidiary is positive, will that subsidiary be treated as a material subsidiary, etc.

Through this article the author has made an attempt to decode some of these puzzling issues relating to determination of materiality of a subsidiary.

The Concept of ‘Material Subsidiary’

In present day corporate world, operating through a network of subsidiaries and associates is quite common. Sometimes, it is a matter of corporate structuring discretion, and sometimes, it is purely a product of regulation – for example, overseas direct investment can be made only through subsidiaries or joint venture entities. While the listed subsidiaries are always under the observation of SEBI, an appropriate level of review and oversight is required by the board of the listed entity over its unlisted subsidiaries for protection of interests of public shareholders. The board of directors of a holding company cannot take a tunnel view and limit their perspective only to the company on whose board they are sitting. After all, subsidiaries operate with the resources of the parent, and therefore, what happens at subsidiaries and associates is of immediate relevance to the holding company.  Accordingly, the obligation of the board of a listed entity with respect to its subsidiaries has been increased vide SEBI LODR Amendment Regulations, 2018 dated 9th May, 2018[2], thereby reducing the threshold for determining materiality of a subsidiary to 10% (as opposed to the previous limit of 20%) of the consolidated income or net worth respectively, of the listed entity and its subsidiaries, in the immediately preceding accounting year.

Since the material subsidiaries have a considerable role in the overall performance of the holding company or the group as a whole, it is important to arrive at the correct interpretation of the term in line with the intent and purpose of the definition as well as the compliance requirements following it.

In terms of the definition provided under Regulation 16(1)(c) of SEBI LODR the triggers for determining materiality of a subsidiary are- Net Worth [3]and Turnover. That is to say, the pre-requisites for determining materiality of a subsidiary are:

  1. It has to be a subsidiary, in terms of the definition provided under Act, 2013; and
  2. Its income/net worth in the immediately preceding financial year exceeds 10% of the consolidated net worth of the listed company.

It is pertinent to note that the definition of material subsidiary currently provides for 10% or more impact on the consolidated turnover or net worth of the listed company/group, however, it does not specify whether the said impact has to be in positive or negative. It just says that the impact has to be 10% of the overall income/net worth. Since the turnover of a company cannot be negative, the focus has to be made on the later.

A parent company is required to prepare consolidated financial statement taking into account the performance of its subsidiaries. While a subsidiary, with a good performance and positive net worth/income can add on the overall growth of the group, the same can affect the overall performance of the group with its negative net worth, and if the said impact exceeds 10% of the income/net worth of the consolidated performance of the group, the said subsidiary will become material and shall require special attention of the parent company. Therefore, for the purpose of determining the ‘materiality’, one has to drop the minus sign of the net worth of the subsidiary or group and has to see the absolute term and the overall impact it has on the group. In other words, if a subsidiary is big enough to shake the performance of its holding company, it shall be qualified as a ‘material subsidiary’.

Let us take some illustrations to understand the definition provided under Reg. 16 (1) (c) of SEBI LODR:

Illustration 1:

XYZ Limited is a subsidiary of ABC Limited. In the FY 2019-20, the net worth of XYZ Limited was Rs. 50 Crs. and the consolidated net worth of ABC Limited company was Rs. 400 Crs., Whether XYZ Limited be considered as a material subsidiary of ABC Limited?

Yes. The contribution of XYZ Limited towards the consolidated net worth of ABC Limited is more than 10%, therefore XYZ Limited shall be consolidated as a ‘material subsidiary’ of ABC Limited.

Illustration 2:

Net worth of XYZ Limited in FY 2019-20 was Rs. (50) Crs., however, the consolidated net worth of ABC Limited was Rs. 400 Crs, will XYZ Ltd. be considered as a material subsidiary of ABC Ltd?

Yes. Irrespective of having a negative net worth, since XYZ Limited contributes more than 10% of the consolidated net worth of ABC Limited, XYZ Limited shall be considered as a ‘material subsidiary’ of ABC limited.

Illustration 3:

Net worth of XYZ Limited in FY 2019-20 was Rs. (50) crores, and the consolidated net worth of ABC Limited was Rs. (400) Crs., will XYZ Limited be considered as a material subsidiary of ABC Limited?

Yes. Even if the net worth at the subsidiary level and the consolidated level are negative, however, one has to see as to how much contribution the subsidiary has in the consolidated net worth of the holding company. Therefore, irrespective of having negative net worth, XYZ Limited shall be considered as a ‘material subsidiary’ of ABC limited.

Illustration 4:

Net worth of XYZ Limited in FY 2019-20 was Rs. 50 crores and the consolidated net worth of ABC Limited was Rs. (400) Crs., will that subsidiary be considered as a material subsidiary of ABC Limited?

Yes. In the given case, because of the positive net worth of the subsidiary the net worth of the holding company has contributed to reduce the negative net worth of the holding company by more than 10%. Therefore, the subsidiary, viz. XYZ Limited shall be considered as a material subsidiary of ABC Limited.

Illustration 5:

Net worth of XYZ Limited in FY 2019-20 was Rs. 30 Crs. and the consolidated net worth of ABC Limited was  Rs. (400) Crs., will that subsidiary be considered as a material subsidiary of ABC Limited?

No. Even though the positive net worth of the subsidiary is contributing to reduce the negative consolidated net worth of the holding company, however, that contribution is less than 10%, therefore in this case, XYZ Limited shall not be considered as a ‘material subsidiary’ of ABC Limited.

Thus, for determining ‘materiality’ of a subsidiary, the emphasis should not be on whether net worth is positive or negative, rather the impact of its net worth or income on the overall consolidated performance of the listed entity is to be seen.

Special Situation in case of Regulation 24 (1)

 In the SEBI LODR, the term ‘Material Subsidiary’ has been defined twice, i.e under regulation 16 (1)(c) and under regulation 24 (1). While the threshold for determining ‘materiality’ provided under regulation 16 (1) (c) is 10%, the one provided under reg. 24 (1) is 20%. The reason behind the said increase in the threshold is the higher level of impact the said subsidiary can make on the performance of the listed company/group. That is to say, when a subsidiary is ‘material’ it requires attention of the parent company, however when it becomes significantly material, such that it can give shock to the parent company with its performance, it requires higher attention. Therefore regulation 24 (1) requires those significantly material subsidiaries to have on independent director of the parent company in its board.

The need for an independent director can be established by the fact that they are expected to be ‘independent’ from the management and act as the fiduciary of shareholders. This implies that they are obligated to be fully aware of the conduct which is going on in the organizations and also to take a stand as and when necessary, on relevant issues.

The requirement of appointing independent director is applicable only in case of significantly material subsidiary (unlisted), whether incorporated in India or not, and not in case of material subsidiary. 

Obligation of the Listed Entity with respect to its Material Subsidiary(ies)

Other than the obligations provided under Reg. 24 of SEBI LODR for the listed companies w.r.t. their subsidiaries, the following additional obligations are applicable in case of material subsidiaries:

  • Formulating Policy– The listed entity is required to formulate a policy for determining materiality of its subsidiaries, and shall disseminate the same on its website.
  • Appointment of Independent Director– Pursuant to Regulation 24(1) of the LODR, at least one (1) independent director of the listed entity is required to be a director on the board of an unlisted material subsidiary (with respect to this provision, material subsidiary has been defined with a threshold of 20% of the consolidated income or net worth).
  • Disposing of shares in Material Subsidiary – A listed company shall not dispose of shares in its material subsidiary resulting in reduction of its overall shareholding to less than 50% or cease to exercise control over subsidiary without passing special resolution in general meeting except in case where such divestment is made under a scheme of arrangement (duly approved by the Tribunal/ Court) or in case of resolution plan duly approved in terms of section 31 of IBC, 2016.
  • Selling, disposing and leasing of assets – Pursuant to Regulation 24(6) of the LODR, the sale or disposal or leasing of assets amounting to more than 20% of the assets of a material subsidiary (on an aggregate basis during a financial year), subject to certain exceptions, requires prior approval of the shareholders of the listed holding company by way of a special resolution.
  • Secretarial Audit: Pursuant to Regulation 24A of the LODR, all listed entities and their Indian unlisted   material   subsidiaries   are   required   to   undertake   a secretarial audit and annex such reports to the annual report of the listed entity.

The discussion above can be summarised in the presentation below:

Role of Policy on determining Materiality of Subsidiary

The definition of ‘material subsidiary’ under regulation 16(1)(c) defines a subsidiary that is material to the listed entity and the explanation to the aforesaid provision allows the listed entity to formulate a policy for the same, i.e., a listed entity can develop criteria that is stricter than what has been provided in the Regulations. However, nothing has been provided regarding the contents of the Policy in the SEBI LODR. Therefore, the Policy is nothing but a replica of what has already been provided in the law, as in order to ensure compliance of the law, listed entities frames policy for determining materiality of subsidiaries based on the contents of the regulations. Thus, the requirement of the policy is limited to ensure compliance of the law.

Can a section 8 company be treated as ‘Material Subsidiary’?

Section 8 Company, as defines in the Act, 2013 are companies that are formed with an object of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object. These companies are required to apply their profit, if any or other income in promoting their objects and are prohibited from payment of any dividend to its members. Whereas, the benchmark for satisfying the definition of ‘material subsidiary’ is contribution towards consolidated income or net worth of the holding company.

When we consolidate the holding company with a Section 8 company, it will however depict a wrong picture of the wealth of the holding company, as the holding company can never claim any right over the profits of a Section 8 Company. Therefore, the question of consolidation of section 8 with that the holding company does not arise.

Given that the income of a section 8 company cannot be consolidated with that of the listed company or can say that since the performance of a section 8 company has no role to play on the overall performance of the listed company, a section 8 company cannot be treated as a ‘material subsidiary’. 

Concluding Remarks

The term “material subsidiary” has been prioritized over the years because of the impact it may have over the consolidated performance of the listed entity. The principle behind emphasizing absolute numbers of the net worth is the impact of the same on the consolidated figures. Any changes in the income/net worth of these material subsidiaries will be reflected proportionally on the listed entity since the net worth derived from the said material subsidiaries constitutes an integral part of the consolidated net worth of the listed entity. Accordingly, the listed entities should determine the materiality of its subsidiaries wisely and comply with the requirements of SEBI LODR as are applicable on the material subsidiaries.

Our other videos and write-ups may be accessed below:


Other write-up relating to corporate laws:


[1] Section 2 (87) of the Act


[3] Section 2 (57) of the Act defines net worth as:

“Net worth” means aggregate value of the paid up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation



SEBI eliminates one-to-one analyst meets from the purview of LODR

-Recommendations of sub-group dropped under the LODR Amendment

By CS Aisha Begum Ansari, Assistant Manager, Vinod Kothari & Company


Information symmetry is extremely important in a listed company since it helps in effective price discovery and builds the faith of the investors.  Analyst and investor meets are one of the many ways used by the companies to disseminate information. The companies usually conduct analyst or investor meets after the disclosure of financial results to answer the questions relating to financial performance, future prospects, etc. based on generally available information without disclosing any unpublished price sensitive information (‘UPSI’). Such meets generally include conference calls or meeting with group of investors or group of analysts as per the prefixed schedule. Further, the same also includes one-to-one meet or calls with investors or analysts, which may either be prefixed or in the nature of walk-in.

While, SEBI mandates provisions under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) and SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations’) to curb as well as regulate such leak of UPSI; one of the recent changes under the Listing Regulations vide SEBI Listing Regulations (Second Amendment) Regulations, 2021[1] (‘LODR Amendment’) issued on 7th May, 2021 seems to have completely excluded one-to-one meet from the regulatory ambit prescribing disclosure requirements.

This article discusses the regulatory requirement in relation to investor meet, phases of amendment, present requirement and international practice.

Compliance requirements under SEBI Regulations

Erstwhile Listing Agreement

Clause 49 of the Listing Agreement[2] which specified the reporting requirements, obligated the companies to disclose on its website or intimate the stock exchange the presentations made by it to the analysts. Also, the companies were required to disclose in its Report on Corporate Governance, presentations made to institutional investors or the analysts as a means of communication to shareholders.

 Listing Regulations (prior to amendment)

The Listing Regulations mandated listed entities to disclose the schedule of analyst or investor meets and presentations to such analysts or investors –

  1. On the website of the listed entity [Regulation 46(2)(o) of Listing Regulations]
  2. On the website of the stock exchange where its securities are listed (Clause 15 of Para A, Part A of Schedule III of Listing Regulations).
  3. Means of communication in the form of presentations made to institutional investors or analyst in the annual corporate governance report. (Para C(8)(e) of Schedule V to Listing Regulations).

Erstwhile PIT Regulations (1992)

The 1992 regulations prescribed elaborate requirement in relation to analyst meets. Listed companies were required to follow the following guidelines while dealing with analysts and institutional investors:—

  • Only Public information to be provided – Listed companies were required to provide only public information to the analyst/research persons/large investors like institutions. Alternatively, the information given to the analyst were required to be simultaneously made public at the earliest.
  • Recording of discussion – In order to avoid misquoting or misrepresentation, it was suggested that at least two company representative to be present at meetings with analysts, brokers or institutional investors and discussion should preferably be recorded.
  • Handling of unanticipated questions – A listed company were required to be careful when dealing with analysts’ questions that raise issues outside the intended scope of discussion. It was suggested that unanticipated questions could be taken on notice and a considered response could be given later. If the answer included price sensitive information, a public announcement was required to be made before responding.
  • Simultaneous release of Information – When a company organized meetings with analysts, the company was required to make a press release or post relevant information on its website after every such meet. The company could also consider live webcasting of analyst meets.

PIT Regulations

PIT Regulations, presently, mandate listed entities to develop best practices to make transcripts or records of proceedings of meetings with analysts and other investor relations conferences on the official website to ensure official confirmation and documentation of disclosures made. Further, the listed entity needs to ensure that information shared with analysts and research personnel is not UPSI.

Discussion in working group/ committee reports

Report submitted by the Committee on Corporate Governance[3]

The Committee was of the view that the disclosure of schedules of analyst/ institutional investor meetings does not serve any practical purpose, and there have been instances of its misuse. Hence, the Committee recommended that the disclosure of schedules of analyst/institutional investor meetings may not be required. However, the information to be shared at such meetings has to be strictly in compliance with the SEBI PIT Regulations.

Report on disclosures pertaining to analyst/ investors meets[4]

The issue of information asymmetry between various classes of investors arising out of limited disclosures in respect of analyst meets/ institutional investors meet/ conference calls was discussed by Primary Markets Advisory Committee (PMAC) in the meeting in July, 2020. SEBI, based on the recommendation of PMAC, had formed sub-group which issued the ‘Report on disclosures pertaining to analyst meets, investor meets and conference calls’ (‘Report’) on November 20, 2020.

The Committee deliberated on best practice followed by listed entities in India, regulatory regime in developed countries and acknowledged the fact that existing regulations are not followed in letter and spirit by majority of listed companies thereby causing information asymmetry.

The Report explicitly distinguished between group analysts or investors meet and one-to-one in terms of the regulatory compliance. The Report recommended disclosure of transcripts and recordings of proceedings of group investors meet on the website of the company and to the stock exchange within a prescribed time frame whereas for one-to-one meetings, it recommended disclosing the number of such meetings in the quarterly compliance report on corporate governance along with a confirmation that no UPSI was shared with them.

The committee provided the rationale that the fundamental reason for analysts to seek meetings with the listed entity was to check their hypothesis that they have developed, based on controls and processes that have been built to comply with the public disclosures and complying with regulations relating to handling of private information and that premature public disclosure of these questions may lead to a regime of ‘’mandatory dissemination of proprietary information’’.

It is also important to note that the sub-group in its Report discussed that the content of the discussions for one-to-one meets, should not be intimated to the stock exchange due to following demerits:

  • Invasion of privacy of the institutional investors;
  • Allow third parties not a part of the meet to take speculative positions for trading decisions; and
  • Lead to overload of information to retain investors

Based on the sub-group’s discussion, the following recommendations were made:

  • Provide number of one-to-one meet as part of corporate governance report on a quarterly basis while submitting to the stock exchange;
  • The same needs to carry an affirmation that no UPSI was shared by any official of the company in such meetings; and
  • Company to maintain a record of all one-to-one meetings covering the name/names of the investor who were met, the name of the fund that he/ she represents, name of the brokerage firm which fixed the meeting (if any), the location, date and time of the meeting and a reference to the presentation made and preserve the same for a period of at least eight years.

Discussion in SEBI Board meeting of March 25, 2021[5]

The agenda provides details of recommendation made in relation to group analyst meet, however, does not provide any rationale/ discussion with respect to one-to-one meeting or reason for excluding the requirement from Listing Regulations altogether.

Anomaly in the LODR Amendment

Regulation 46(2)(o) and Clause 15(a) of Para A, Part A of Schedule III of Listing Regulations defines the term ‘meet’ as ‘group meetings or group conference calls’ for the purpose of disclosure of schedule of analyst/ investor meet and presentations made by the company to them.

Further, regulation 46(2)(oa) and Clause 15(b) of Para A, Part A of Schedule III provides for manner of disclosure of audio/ video recordings and transcripts of post earning calls or quarterly calls on the website of the company and to the stock exchange respectively.  The said sub-clause has no reference of the term ‘meet’. The said provisions are reproduced below:

Regulation 46(2)(oa):

“(oa) Audio or video recordings and transcripts of post earnings/quarterly calls, by whatever name called, conducted physically or through digital means, simultaneously with submission to the recognized stock exchange(s), in the following manner:

  • the presentation and the audio/video recordings shall be promptly made available on the website and in any case, before the next trading day or within twenty-four hours from the conclusion of such calls, whichever is earlier;
  • the transcripts of such calls shall be made available on the website within five working days of the conclusion of such calls:

Provided that—

  1. The information under sub-clause (i) shall be hosted on the website of the listed entity for a minimum period of five years and thereafter as per the archival policy of the listed entity, as disclosed on its website.
  2. The information under sub-clause (ii) shall be hosted on the website of the listed entity and preserved in accordance with clause (a) of regulation 9.

The requirement for disclosure(s) of audio/video recordings and transcript shall be voluntary with effect from April 01, 2021 and mandatory with effect from April 01, 2022.”

Clause 15(b) of Para A, Part A of Schedule III

“(b) Audio or video recordings and transcripts of post earnings/quarterly calls, by whatever name called, conducted physically or through digital means, simultaneously with submission to the recognized stock exchange(s), in the following manner:

  • the presentation and the audio/video recordings shall be promptly made available on the website and in any case, before the next trading day or within twenty-four hours from the conclusion of such calls, whichever is earlier;
  • the transcripts of such calls shall be made available on the website within five working days of the conclusion of such calls:

The requirement for disclosure(s) of audio/video recordings and transcript shall be voluntary with effect from April 01, 2021 and mandatory with effect from April 01, 2022.”

Since, the term ‘meet’ is not mentioned in the above provisions, it leads to an interpretation that in case of post earning calls or quarterly calls, irrespective of the fact whether such meeting is with the group of investors or one-to-one meeting, audio/ video recordings and transcripts will be required to be submitted to the stock exchange.

Regulatory regime in other countries

1. United States of America

Regulation Fair Disclosure[6] (referred as ‘Regulation FD’) prohibits companies from selectively disclosing material non-public information (referred as ‘MNPI’) to analysts, institutional investors, and others without concurrently making widespread public disclosure.

Response to question 101.11 of the FAQs on Regulation FD[7] allows directors of the company to speak privately with a shareholder or group of shareholders by implementing policies and procedures to help avoid insider trading. Also, where a shareholder expressly agrees, through confidentiality agreement, to maintain confidentiality of MNPI, a private communication between the director and a shareholder does not violate Regulation FD norms.

2. Canada

Part V of the National Policy on Disclosure Standards[8] provides guidelines with respect to private briefings with analysts/ institutional investors. The Policy does not prohibit one-to-one discussions with analysts but identifies that the potential of selective disclosure of material non-public information is fraught with difficulties. It emphasizes on timely public disclosure of material information and entering into confidentiality agreements with the analysts.

3. United Kingdom

Market Abuse Regulation (“MAR”)[9] prevents selective disclosure of MNPI. MAR requires that the companies must not disclose MNPI selectively at the investor meetings.  If they do, an immediate announcement would be required but it would still be a breach of the regulations.

4. Singapore

Rule 703(4) of the Singapore Exchange Listing Rules[10] requires the issuer to observe the Corporate Disclosure Policy as provided under Appendix 7.1. of Rule[11]. Para 23 under PART VIII of the Policy recommends the issuer to observe an “open door” policy in dealing with analysts, journalists, stockholders and others.

Issuer is required to abstain from disseminating material information which has not been disclosed to the public before. However, if such material information is inadvertently disclosed at meetings with analysts or others, it must be publicly disseminated as promptly as possible by the means described in Part VIII.


One-to-one meets carry a significant amount of risk with it for being a source / device for leak of UPSI especially where the same are not explicitly regulated.   The intent behind recording and disclosing the same is to safeguard the company officials from any potential charge of breach of PIT Regulations. One will have to wait and watch if the relaxation results in any adverse implications.   Further, SEBI will have to clarify on the ambiguity relating to disclosure requirements of one-to-one analysts meet w.e.f. post earning calls or quarterly calls if the intent is to restrict only to ‘meet’ as defined in the respective clauses.













Our article titled SEBI proposes enhanced disclosures for meetings with analyst, investors, etc. can be accessed through following link:




SEBI notifies substantial amendments in Listing Regulations

Proposals approved in SEBI BM of March, 2021 made effective

Payal Agarwal | Executive  ( )                                                                                                      May 07, 2021


SEBI, the capital market regulator of India, vide a gazette notification dated 06th May, 2021 notified Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021 [“the Amendment Regulations”] that were approved in SEBI’s Board Meeting held on March 25, 2021. Most of the amendments were already rolled out earlier as consultation papers in 2020. The amendments become effective from May 06, 2021.

This article discusses the major amendments carried out and the likely impact and actionable for the listed entities.

Brief of the amendments are as follows –

A gist of all the amendments under the Amendment Regulations have been captured in a snippet.

1.     Applicability of the Listing Regulations

In terms of Regulation 3 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2013 (‘Listing Regulations’) the provisions of Listing Regulations are applicable to entities that list the designated securities on the stock exchange.

The Amendment Regulations clarify that the applicability of certain provisions of Listing Regulations based on market capitalisation will continue to apply even where the entities fall below the prescribed threshold.

While the market capitalisation may be derived for any day, the recognised stock exchanges viz. BSE Limited and National Stock Exchange of India Limited releases a list of listed entities based on market capitalisation periodically. However, the provisions under Listing Regulations become applicable based on market capitalisation as at the end of the immediate previous financial year.

The present amendment on the continuation of applicability of provisions even after the listed entity ceasing to be among the top 500, 1000, 2000 listed entities, as the case may be, seems inappropriate. The applicability of these provisions were originally introduced in view of the size of the listed entities that held major market cap. Indefinite applicability of the said provisions despite fall in the market capitalisation of the listed entity is more of a compliance burden. The provision should be amended by SEBI in line with the timeframe provided under Reg. 15 i.e. where a listed entity does not fall under the list of top 100, 500, 1000, 2000 for three consecutive financial years, the compliance requirement should cease to apply.

Therefore, a conjoint reading of both the provisions should be allowed to take a liberal interpretation in respect of the newly-inserted Regulation 3(2) as well, thereby relaxation of compliance requirements on completion of a look-back period of 3 consecutive financial years.

2.     Risk Management Committee

Regulation 21 of Listing Regulations requires the listed entities to constitute a Risk Management Committee (RMC).  A comparative study of the erstwhile and the amended provisions w.r.t RMC is given below –

Topic Erstwhile provisions Amended provisions
Applicability of RMC ·       On top 500 listed entities (Based on market capitalisation) ·       On top 1000 listed entities based on market capitalisation
Composition ·       Members of Board of Directors

·       Senior executives of listed entity

·       2/3rds IDs in case of SR Equity Shares

·       Minimum 3 members

·       Majority being members of board of directors

·       Atleast 1 Independent Director (ID)

·       2/3rds IDs in case of SR Equity Shares

Minimum no. of meetings One Two
Quorum Not specified ·    2 or 1/3rds of total members of RMC, whichever is higher

·       Including atleast 1 member of Board

Maximum gap between two meetings Not specified Not more than 180 days gap between two consecutive meetings
Roles and responsibilities The board of directors were to define the role and responsibility and delegate monitoring and reviewing of the risk management plan and such other functions, including cyber security. As provided under Part D of Schedule II, that inter alia  includes:

·       Formulating of risk management policy;

·       Oversee implementation of the same;

·       Monitor and evaluate risks basis appropriate methodology, processes and systems.

·       Appointment, removal and terms of remuneration of CRO.

Power to seek Information No such power. The same was only available with Audit Committee under Reg. 18 (2) (c). RMC has powers to seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.

The roles and responsibilities of the RMC has now been specified in the Regulations itself, which were once left at the discretion of Board. The formulation of Risk Management Policy has also been delegated to the RMC, with particular contents of the policy being specified under the Schedule.

An important role of the RMC, among others, include review of the appointment, removal and terms of remuneration of Chief Risk Officer (CRO). The appointment of CRO is not a mandatory requirement under Listing Regulations. CRO is required to be appointed for all banking companies, and non-banking financial companies (NBFCs) having asset size of Rs. 50 billions or more, being registered as an Investment and Credit company, Infrastructure Finance Companies, Micro Finance Institutions, Factors, or Infrastructure Debt Funds. Further, the Insurance Regulatory and Development Authority of India (IRDAI) Corporate Governance Guidelines requires the insurance companies to appoint CRO.

The role of RMC further provides for co-ordination with other committees where the roles  overlap. It is seen that the risk management function is also laid upon the Audit Committee. Therefore, the roles of both the committees might be overlapping. In view of the same, some companies choose to constitute one joint committee combining the roles of both Audit Committee and RMC.  From the provisions providing for co-ordination of activities, it may also be taken as a clear indication that the committees cannot be merged into one, but co-ordinate where the activities require so.

Actionables –
  • Changes in the constitution of RMC / Constitution of RMC in case of first-time applicability;
  • Modification of the Risk Management Policy as per the Amendment Regulations;
  • Amending the existing charter of the Committee to align with the amendments.

While the Amendment Regulations are effective immediately, the changes cannot take place overnight. Therefore, it is advisable that the listed entities shall take the matter of constitution/ re-constitution of RMC in the ensuing Board Meeting.  The modification of Risk Management Policy will be then taken up by the RMC and can be done within a reasonable period of time.

What should be this period? A probable answer to this should lie in the proviso to clause (a) of Reg. 15 that permits a timeline of six months from the applicability to comply with corporate governance requirements as stipulated under regulations 17 to 27, clauses (b) to (i) and (t) of sub-regulation (2) of regulation 46 and para C, D and E of Schedule V. However, that is applicable only in case of companies covered in Reg. 15 (2) (a). Therefore, the time available is till June 30, 2021 as thereafter, the companies will be required to confirm on RMC composition in the quarterly filings done under Reg. 27.

3.     Overriding powers of LODR Regulations

Earlier, proviso to Regulation 15(2)(b) provided a clear stipulation of overriding effect of specific statute in case of conflicting provisions. The Amendment Regulations provides for deletion of the said proviso effective from September 1, 2021. No rationale seems to have been provided in the agenda[1] put up before SEBI at the board meeting for this major amendment.

Regulators viz. RBI, IRDA, PFRDA at times have specific corporate governance related compliances that are stricter and at times conflicting with the requirements of Listing Regulations. For eg. With respect to composition of Audit Committee for a public sector bank, RBI Circular of September, 1995 provides for following composition in case of public sector banks: (a) Executive Director of the Bank (Wholetime director in case of SBI) (b) two official directors (i.e. nominees of Government and RBI) and (c) Two non-official, non-executive directors (at least one of them should be a Chartered Accountant). Directors from staff will not be included in ACB. This is certainly conflicting with the composition provided in Reg. 18 of Listing Regulations.

Subsequent to September 1, 2021 these entities will be regarded as non-compliant of the provisions of Listing Regulations and may be subject to penalty in terms of SEBI Circular dated January, 2020.

4.     Reclassification of promoters into public – related exemptions and procedural changes

Regulation 31A of the LODR Regulations specifies the conditions and approvals post which the promoters can be re-classified into public shareholders. SEBI had proposed changes to the same in a consultation paper dated 23rd November, 2020. The consultation paper was critically analysed in our article. Amendments have been made on similar lines in Regulation 31A.

5.     Alignment with the provisions of the Companies Act, 2013

Certain amendments have been made to remove the gap between the provisions of LODR Regulations, with that of the Companies Act, 2013 as given below –

  • Separate meeting of independent directors – The requirement of conducting a separate meeting of the independent directors without the presence of any other member of the Board of the company is required under both the Companies Act, 2013 as well as the LODR Regulations. However, whereas the Companies Act requires one meeting in a financial year, the LODR Regulations required one meeting in a year (calendar year). Therefore, the same has been substituted with a “financial year” so as to align the requirements of both the governing laws.
  • Display of Annual Return on website – Section 92 read with allied rules requires the companies, having a website, to display its Annual Return on the website. New clause has been inserted under Regulation 46 of LODR Regulations that requires placing the Annual Return on the website of the company.
  • Changes in requirements pertaining to placing of financial statements on website – The audited financial statements of each of the subsidiaries was required to be  placed on the website prior to the Amendment Regulations. New provisos has been inserted under the same so as to avoid preparation of separate financial statements of the subsidiary company, where the requirements under the Companies Act, 2013 are met if the consolidated financial statements are placed instead of separate ones.

6.     Mandatory website disclosures

Regulation 46 of the LODR Regulations provides the mandatory contents to be placed on the website of a listed entity. Most of the disclosures were already existing under respective regulations viz. Reg 30, 43A etc. However, the same has been consolidated under regulation 46. This will now enable stock exchanges to levy penalty in terms of SEBI circular dated 22nd January, 2020.

7.     Analyst meet

The listed entity is required to disclose the schedule of analyst or institutional investor meet and the presentations made to them on its website under regulation 46 and on the website of the stock exchange under Schedule III. The Amendment Regulations have explained the term ‘meet’ to mean the group meetings and calls, whether digitally or by physical means. The Amendment Regulations will require the listed entity to upload the audio/ video recordings and the transcripts within the prescribed timeframe. The same is in line with SEBI’s Report on disclosures pertaining to analyst meets, investor meets and conference calls. However, the amendment does not cover disclosure of one-to-one investor/ analyst meet conducted with select investors recommended in the said Report.

8.     Consolidation of various SEBI circulars

Certain circulars of SEBI lay down various requirements to be complied with in relation to the LODR Regulations. The Amendment Regulations have consolidated the requirements under the principal LODR Regulations.

  • Requirement of Secretarial Compliance Report – While the requirement of Annual Secretarial Compliance report were applicable on the listed entities and its material subsidiaries since a few years back, the same has now been specifically provided under newly inserted sub-regulation (2) of Regulation 24A. Earlier, the practice came pursuant to a SEBI circular.
  • Timeline for report of monitoring agency regarding deviation in use of proceeds – Pursuant to the requirements of Regulation 32 of the LODR Regulations, the monitoring agency is required to give a report on the utilisation of proceeds of issue on a quarterly basis. While timelines were not specified in the LODR Regulations, the report was required to be given within 45 days from the end of the quarter. This timeline was pursuant to the SEBI circular dated 24th December, 2019 . Now, with the Amendment regulations, the same is specified under regulation 32(6) of the LODR Regulations.
  • Requirement of Business responsibility and sustainability report (BRSR)- SEBI had proposed a new format to replace the existing Business Responsibility Report. The proposal was finalised and the BRSR format has been made mandatorily applicable from FY 2022-23 onwards, vide SEBI circular dated April, 2021 . The same has also been consolidated under Regulation 34 of the LODR Regulations. A detailed discussion on BRSR is covered in our article.


The Amendment Regulations are very crucial and significant in nature. While on one hand, certain provisions are aligned with the Companies Act, 2013, whereas on the other hand, overriding powers have been given to LODR Regulations which will require the listed entities formed under special statute to comply with the LODR Regulations in entirety. Uniformity in timelines and relaxation in certain disclosure requirements will encourage ease of doing business, and the coverage of certain provisions extended to listed entities based on market capitalisation will have a remarkable impact on the corporate governance of listed entities.