SEBI issues consultation paper on Reg. 30 of LODR Regulations 

• Payal Agarwal, Assistant Manager (payal@vinodkothari.com) 

[This version: 15th November, 2022]

The importance of transparency and timely dissemination of material information for a listed entity needs no emphasis, since these events and information 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 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 application of guidelines of materiality. These guidelines of materiality are provided in sub-regulation (4) of Reg 30 and are determined on the basis of 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.

The Consultation Paper, while removing discretion and the scope for non-quantitative tests for determining materiality, also seeks to make several other changes in the requirement for seamless disclosures. Notably, the Consultation Paper proposes a threshold of 2% of turnover, that too, standalone, for the listed entity, as the likely impact of the event or information, whereas, as per our study  “Corporate Governance & material price sensitive information: Need for listed entities to frame effective materiality policy”, 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.

If the proposals in the Consultation Paper are finally implemented, we feel that there will be a lot more events calling for Reg 30 disclosures. Currently, for many companies which have listed their specified securities, it is only the events listed in Para A of Part A of Schedule III which come for disclosure on the exchanges; the rest of the events or developments remain prone to subjectivity and therefore, indecision.

The Consultation Paper will remain open for comments till 27th November, 2022. We provide a gist of the key proposals in the Consultation Paper.