Tag Archive for: amendment

Regulatory threshold enhanced to Rs. 5000 crore, misalignments in CG norms with equity listed cos straightened

– Payal Agarwal, Partner | corplaw@vinodkothari.com 

– Updated on January 23, 2026

Since the introduction of High Value Debt Listed Entities (HVDLEs) as a category of debt-listed entities placed on a similar pedestal to equity-listed entities in terms of corporate governance norms, the regime has undergone several rounds of extensions and regulatory changes. After several extensions towards a mandatory applicability of corporate governance norms, a new Chapter V-A was introduced in LODR, vide amendments notified on 27th March 2025 (see a presentation here), amending, amongst others, the thresholds towards classification of an entity as HVDLE (increased from Rs. 500 crores to Rs. 1000 crores). The new chapter, however, was not updated for the changes brought for equity-listed entities vide the LODR 3rd Amendment Regulations, 2024  and required some refinement, particularly, in respect of provisions pertaining to related party transactions (see an article – Misplaced exemptions in the RPT framework for HVDLEs and the representation made to SEBI). 

In order to address the gaps as well as providing some relaxations to HVDLEs, SEBI released a Consultation Paper  on 27th October, 2025 (CP) primarily proposed an increase in the threshold for identification as HVDLEs and alignment of provisions of Chapter V-A with the corresponding provisions in Chapter IV subsequent to LODR 3rd Amendment Regs, 2024 facilitating ease of doing business, including measures related to RPTs.  The proposals were approved by SEBI in its Board Meeting held on 17th December, 2025. 

SEBI vide Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2026 (‘LODR Amendment 2026’),  has notified the following amendments effective from January 22, 2026.

Threshold for identification of HVDLEs 

• Increased from extant Rs. 1000 crores to Rs. 5000 crores . Further, the sunset clause of 3 years as per Reg 15 (1AA) & Reg. 62C(2) will not be applicable to entities that cease to be HVDLE due to revised thresholds.
• Based on the data of pure debt listed entities as on June 30, 2025, revision in threshold will reduce the number of HVDLE entities from 137 to 48 entities (apprx. 64% entities)
• VKCO Comments: The increase in the threshold was necessitated on account of the huge compliance burden placed on HVDLEs coupled with the fact that such threshold is disproportionately low for NBFCs engaged in substantial fundraising through debt issuances. Further, the proviso to Reg. 15 (1AA) & Reg. 62C (2) expressly clarifies the position for entities ceasing to be an HVDLE as on January 22, 2026 with the revised threshold coming into effect, that it need not continue to comply with the CG requirements for a period of 3 years. Earlier there had been instances of entities that ceased to be HVDLEs due to outstanding value of listed debt securities as on March 31, 2025 receiving notices from SEs for non-compliance with CG norms despite such entities ceasing to meet the revised threshold. 

Alignment of corporate governance norms for HVDLEs with that for equity-listed entities 

Board composition, committees, filing of vacancy of director/ KMPs etc.

• Insertion of proviso to clarify that prior approval of shareholders is required for directorship as NED beyond the age of 75 years at the time of appointment or re-appointment or any time prior to the NED attaining the age of 75 years to ensure alignment with similar amendment made for equity listed entities [Reg 62D(2)/ Reg 17(1A)]
• Time taken to receive approval of regulatory, government or statutory authorities, if applicable, to be excluded from the 3 months’ timeline for shareholders’ approval for appointment of a person on the Board [Reg 62D(3)/ Reg 17(1C)]
• Exemption from obtaining shareholders’ approval for nominee directors of financial sector regulators or those appointed by Court or Tribunal, since such nomination is for the purpose of oversight and upholding public interest, and by SEBI registered Debenture Trustee registered under a subscription agreement for debentures issued by HVDLEs [Reg 62D(3)/ Reg 17(1C)]
• Any vacancy in the office of a director of an HVDLE resulting in non-compliance with the composition requirement for board committees i.e., AC, NRC, SRC and RMC to be filled within 3 months [Proviso to Reg 62D(5)/ Reg 17(1E)]
• Any vacancy in the office of a director of an HVDLE on account of completion of tenure resulting in non-compliance with the composition requirement for board committees i.e.. AC, NRC, SRC and RMC to be filled by the date such office is vacated [Second proviso to Reg 62D(5)/ Reg 17(1E)]
• Additional timeline of 3 months for filling vacancy in the office of KMP in case of entities having resolution plan approved, subject to having at least 1 full-time KMP [Reg 62P (3)/ Reg 26A (3)]

Secretarial Audit

• Alignment of the provisions of Secretarial Audit and Secretarial Compliance Report with Reg 24A as applicable to equity listed entities,  to strengthen the secretarial audit and to prevent conflict of interests, which mandates the following:  [Reg 62M(1)/ Reg 24A]
  • An individual may be appointed for a term of 5 years and a firm may be appointed for a maximum of 2 terms of 5 years each subject to approval of shareholders in the annual general meeting. Thereafter a cooling-off period of 5 years will be applicable;
  • Requirements relating to eligibility (being a Peer Reviewed Company Secretary)  and disqualifications, removal of secretarial auditors prescribed.
  • The Secretarial Compliance Report also to be submitted by a Peer Reviewed Company Secretary or Secretarial Auditor fulfilling the eligibility requirements indicated in Reg. 24A.

VKCO Comments: Further disqualifications for Secretarial Auditor and list of services that cannot be rendered by the Secretarial Audit was prescribed vide Annexure 2 and Annexure 3 of  SEBI Circular dated December 31, 2024 and  further clarified vide SEBI FAQs on Listing Regulations (FAQ no. 5) and list of services provided by ICSI. 

The amendments made in Reg 24A in December, 2024 were required to be ensured by the equity listed companies with effect from April 1, 2025 for appointment, re-appointment or continuation of the Secretarial Auditor of the listed entity. Therefore, it was amply clear that the applicability is prospective and to be ensured while appointing Secretarial Auditor for FY 2025-26 onwards. Reg. 24A (IC) clarifies that any association of the individual or the firm as the Secretarial Auditor of the listed entity before March 31, 2025 is not required to be considered for the purpose of calculating the tenure.

Pursuant to LODR Amendment 2026, Reg. 62M (1) cross refers to the requirements under Reg 24A which in turn mandates compliance with effect from April 1, 2025. However, it may not be practically feasible for HVDLEs to ensure compliance towards the end of the financial year and a transition time may be required by such HVDLEs. In our view, the requirements should be applicable for Secretarial Auditor appointments with effect from April 1, 2026  which will be required to be done with shareholders’ approval at the AGM 2026 and not impact the existing tenure/ appointments already done by HVDLE. 

Related Party Transactions

• Alignment of RPT related provisions with Reg 23, instead of reproducing each of the amendments made in Reg 23 effective from December 13, 2024 and November 19, 2025  [Reg 62K (1)]
  • Turnover scale based materiality thresholds for RPTs and other amendments applicable to  equity-listed entities are now applicable to HVDLEs (see an article on the approved amendments here)
•  NOC of debenture-holders through DT to be obtained in the manner prescribed by SEBI  [Reg 62K (5)] (see our FAQs here)
• Aligning the exemptions from RPT approval and clarification on ‘listed’ holding company, with amendments made in Reg. 23 (5) [Reg 62K (7)]

VKCO Comments: Pursuant to the above amendments, HVDLEs will be able to avail the benefits of recent amendments made in Reg 23 as detailed below:

• Remuneration and sitting fees paid by the listed entity or its subsidiary to its director, key managerial personnel or senior management, except who is part of promoter or promoter group, shall not require audit committee approval or disclosure if it is not material.
• Independent directors of the audit committee, can provide post-facto ratification to RPTs within 3 months from the date of the transaction or in the immediate next meeting of the audit committee, whichever is earlier, subject to certain conditions like transaction value does not exceed rupees one crore, is not material etc. The failure to seek ratification of the audit committee can render the transaction voidable at the option of the audit committee and if the transaction is with a related party to any director, or is authorised by any other director, the director(s) concerned shall indemnify the listed entity against any loss incurred by it. Audit committee can grant omnibus approval for RPTs to be entered by its subsidiary in addition to listed entity subject to the certain conditions.  
• Exemption for RPTs in the nature of payment of statutory dues, statutory fees or statutory charges entered into between an entity on one hand and the Central Government or any State Government or any combination thereof on the other hand or  transactions entered into between a public sector company on one hand and the Central Government or any State Government or any combination thereof on the other hand.
• Scale based threshold for determining material RPTs ranging from minimum of 10% of annual consolidated turnover to Rs. 5000 crore based on the consolidated turnover of the HVDLE.
• Prior approval of the audit committee of the listed entity required for a subsidiary’s RPTs above Rs. 1 crore if it exceeds the lower of 10% of the annual standalone turnover of the subsidiary (or 10% of paid-up share capital and securities premium, if no audited financials of at least one year) or the listed entity’s material RPT threshold under Regulation 23(1) of LODR.
• Omnibus shareholder approvals for RPTs granted at an AGM shall be valid up to the next AGM held within the timelines prescribed under Section 96 of the Companies Act, 2013 (currently maximum 15 months), while such approvals obtained in general meetings (other than AGMs) shall be valid for a maximum of one year

The most critical point that remains pending to be addressed is the nature of disclosures to be made before the audit committee and shareholders while approving RPTs – as to whether the existing disclosure requirements as per Chapter VIII of SEBI Master Circular dated July 11, 2025 will apply or the threshold based disclosure requirement as applicable to equity listed companies i.e. disclosure as per Annexure 13A of SEBI Circular dated October 13, 2025 for RPTs not exceeding 1% of annual  consolidated  turnover  of  the  listed  entity  as  per  the  last  audited financial  statements  of  the  listed  entity  or  ₹10 Crore,  whichever  is lower, and disclosure as per ISN on Minimum information to be provided to the Audit Committee and Shareholders for approval of Related Party Transactions for RPTs exceeding the aforesaid limit. Considering that HVDLEs will be proceeding with obtaining  omnibus approval for RPTs proposed to be undertaken during FY 2025-26, in the absence of any clarification or amendment in the Master Circular, the HVDLEs will continue to follow the existing disclosure requirements.

Other amendments

• Recommendations of board to be included along with the rationale in the explanatory statement to shareholders’ notice [Reg 62D(17)/ Reg 17(11)]
• Exemption from shareholders’ approval requirements for sale, disposal or lease of assets between two WoS of the HVDLE [Reg 62L (6)/ Reg 24(6)]
• Minor terminology changes from year to financial year, income to turnover etc. 
• Disclosure requirement of material RPTs in quarterly corporate governance report omitted. Format and timeline of period CG compliance report to be prescribed by SEBI [Reg 62Q(2)/ Reg 27(2)]

VKCO Comments: For equity-listed entities, reporting on compliance with corporate governance norms are a part of Integrated Filing – Governance, required to be filed within 30 days from end of each quarter. The move to provide flexibility to SEBI in prescribing timelines for corporate governance filings may be in order to extend the applicability of Integrated Filing requirements to HVDLEs as well. 

Conclusion

While the  present amendment strictens the compliance requirement for the HVDLEs with outstanding listed debt securities of Rs. 5000 crore or more, it also provides the ease of compliance as provided for certain matters to  equity listed companies. The actionable for HVDLEs will be mainly amending the RPT policy to align with the amended requirements, evaluate the eligibility of the existing secretarial auditor in the light of amended requirements. The entities that cease to be HVDLEs can evaluate the need to retain the committees and policies, in the light of applicable laws.

Our other resources:

1. Misplaced exemptions in the RPT framework for HVDLEs
2. SEBI strictens RPT approval regime, ease certain CG norms for HVDLEs
3. Presentation on CG Norms for HVDLEs