SEBI – Page 16 – Vinod Kothari Consultants

SEBI continues to tighten the regulatory regime for debt listed entities as it aims to promote corporate bond market. After equating debt listed entities with outstanding value of listed non-convertible debt securities of Rs. 500 crore and above with equity listed entities for the purpose of corporate governance norms, SEBI proposes a stricter approval regime for Related Party Transactions (‘RPTs’) under Reg. 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’) vide Consultation paper on review of Corporate Governance norms for a High Value Debt Listed Entity (‘HVDLE’)[1]. This has been rolled out just before the corporate governance provisions become applicable on a mandatory basis effective from April 1, 2023. The composition of 138 HVDLEs, in terms of shareholding pattern, as on March 31, 2022 was as under:

Figure 1: Analysis of shareholding pattern of the HVDLE

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Identification Of Related Parties Of Subsidiaries

February 6, 2023/0 Comments/in Corporate Laws, PIT, SEBI /by Aisha Begum Ansari

Which law to follow? – Listing Regulations or laws applicable to subsidiaries?

– Aisha Begum Ansari, Manager | aisha@vinodkothari.com

The RPT provisions under the SEBI Listing Regulations were substantially amended by SEBI on November 9, 2021. Pursuant to the amendment, the definitions of related party, RPT, material RPT, requirements of obtaining audit committee, and shareholders’ approval were changed.

The definition of ‘RPT’ was amended to include cross RPTs. Earlier, only transactions between the listed entity and its related parties were covered, but now, the following transactions are also covered:

Transaction between listed entity and its related parties;
Transaction between the subsidiaries of listed entity and its related parties;
Transaction between listed entity and related parties of subsidiaries;
Transaction between subsidiaries and related parties of listed entity;
Transaction between subsidiaries and related parties of other subsidiaries.

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NCLT’s powers to rectify register of members restricted in case of breach of securities laws

January 23, 2023/0 Comments/in Companies Act 2013, Corporate Laws, SEBI /by Sharon Pinto

– Sharon Pinto, Manager | sharon@vinodkothari.com

Introduction

A recent judgment by the Supreme Court in Ifb Agro Industries Limited vs Sicgil India Limited, has put to rest the concerns regarding rectificatory jurisdiction of NCLT u/s 59 of Companies Act, 2013 (section 111A of the erstwhile Companies Act, 1956). The ruling has shed light on the scope of NCLT jurisdiction in case of rectification of the register of members, in cases where there are violations of specific laws and the facts of the case are such that the same requires proper enquiry, adjudication under the specific statute. The two major questions addressed by Hon’ble Supreme Court are as follows:

What is the scope and ambit of Section 111A of the Companies Act, 1956 (‘Act, 1956’) / Section 59 of the Companies Act, 2013 (‘Act, 2013’), to rectify the register of members?
Which is the appropriate forum for adjudication and determination of violations and consequent actions under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997 (‘SEBI SAST Regulations’) and the SEBI (Prohibition of Insider Trading) Regulations 1992 (‘SEBI PIT Regulations’)?

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As social stock exchanges seem imminent, auditors get ready with social audit standards

January 20, 2023/0 Comments/in Corporate Laws, LODR, SEBI, Sustainability, Sustainability /by Staff

ICAI and ICSI issue social audit standards

– Sharon Pinto & Kaushal Shah (corplaw@vinodkothari.com)

Background

As we understand, the concept of Social Stock Exchanges (‘SSEs’) have been brought under the regulatory purview of Securities and Exchange Board of India (‘SEBI’) for listing and raising of capital by Social Enterprises, the details of which can be read in our article Social stock exchanges: philanthropy on the bourses as well as our other resources linked with the concept of SSEs and social sectors.

Social Enterprises are defined under regulation 292A (h) of the SEBI (ICDR) Regulations, 2018 (‘ICDR Regulations’) and are expected to be engaged in the specified activities provided therein. With the objective to assess the impact created by such social activities by the Social Enterprises, Self Regulatory Organisations (‘SRO’s) recognised under ICAI, ICSI and such other bodies as may be prescribed by SEBI have been considered to be eligible to act as platforms to register Social Auditors. ICAI has approved the formation of an SRO named ‘Institute of Social Auditors of India’ while ‘ICSI Institute of Social Auditors’ is the recognsied SRO under ICSI. Such auditors are also required to undergo a certification program conducted by National Institute of Securities Market (‘NISM’).

ICAI has recently sought interest for the initial empanelment of Social Auditors.^[1] The eligibility criteria for empanelment as a Social Audit firm requires having a track record of minimum three years of conducting social impact assessment. Further, average annual grants or expenditure of social enterprise of the last 3 financial years should be atleast Rs. 50 lakhs and the firm should have suitable human resources in the field of social development having experience of usage of relevant methodology of social audit. The disqualifications includes any individual or any of the partner/director of an entity being convicted for an offence of moral turpitude or declared as an undischarged insolvent/bankrupt or has been debarred by SEBI.

To put it in simple terms, Social Auditors are required to conduct Social Audit of the activities carried on by Social Enterprises. To aid the Social Auditors in carrying out the Social Audit, both the SROs being ICAI and ICSI have rolled out the Social Audit Standards (‘SAS’) to assist and guide their empanelled auditors for the purpose of carrying out the audit in accordance with the SAS Framework. Looking at the imminence of SSEs to come into reality with SEBI granting in-principle approval to both BSE and NSE in December, 2022, SROs have rolled out SAS for the quick reference and guidance for their registered auditors.

In this write-up, we have covered the key takeaways from the SAS and its relevance, applicability as well as mapping with the global principles on social audit.

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