Relaxation of compliance with certain provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

INTRODUCTION

The Securities and Exchange Board of India (“SEBI”) in exercise of its powers conferred under Section 11(1) of the SEBI Act, 1992 read with Regulation 101 of the Listing Obligations and Disclosure Requirements Regulations, 2015 (“LODR Regulations”) has issued two circulars vide circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2023/167 dated October 7, 2023ⁱ and circular No. SEBI/HO/DDHS/P/CIR/2023/0164 dated October 6, 2024ⁱⁱ (hereinafter collectively referred to as “Circulars”). These Circulars essentially provide relaxation to entities that have listed their specified or non-convertible securities on stock exchanges from certain provisions of the LODR Regulations.

BACKGROUND

The Ministry of Corporate Affairs (“MCA”) vide General Circular No. 09/2023 dated September 25, 2023, has provided relaxation to the companies from sending physical copies of financial statements (including board’s report, auditor’s report or other required documents) to their shareholders for annual general meetings (“AGMs”) to be conducted till September 30, 2024.ⁱⁱⁱ These relaxations were, however, restricted primarily to the provisions under the Companies Act, 2013. Therefore, in order to bring parity and extend similar relaxations to the provisions of the LODR Regulations, SEBI has issued the Circulars

The following are the key highlights of the Circulars:

1. Relaxations applicable to listed entities with specific securities listed on the stock exchanges.
   
   Regulation 36(1)(b) of the LODR Regulations provides that the hard copy of the statement containing the salient features of all documents as prescribed under Section 136 of the Companies Act, 2013 or the rules made thereunder shall be dispatched by the listed entities to the shareholders who have not registered their email addresses either with the listed entity or with any depository. Regulation 44(4) of the LODR Regulations further requires listed entities to send proxy forms to holders of security mentioning that a holder may vote either for or against each resolution.
   
   SEBI vide Master Circular dated July 11, 2023, had initially relaxed the applicability of Regulation 36(1)(b) for AGMs and Regulation 44(4) for annual general meetings held in electronic mode till September 30, 2023.^iv However, with the issuance of the circular dated October 7, 2023, this relaxation is extended till September 30, 2024.
   
   The said circular however, clarifies that listed entities shall be required to send hard copy of their full annual report to those shareholders who request for the same.^v Further, the notice of the AGMs published by advertisement in accordance with Regulation 47 of the LODR Regulations shall continue to provide the web-link to the annual report in order to enable the shareholders to have access to the full annual report.^vi


2. Relaxations applicable to listed entities with non-convertible securities listed on the stock exchanges.
   
   Regulation 58(1)(b) of the LODR Regulations provides that a listed entity shall send hard copy of the statement containing the salient features of all the documents as per Section 136 of the Companies Act, 2013 and rules made thereunder to holders of non-convertible securities who have not registered their email addresses either with the listed entity or with any depository. With the issuance of the circular dated October 6, 2023, SEBI has provided limited relaxation to this compliance till September 30, 2024.

In conclusion, while there may be situations where relaxation from compliance is necessary to address specific challenges or circumstances faced by listed entities, it is imperative that such exemptions are granted judiciously, taking into consideration the best interests of all stakeholders. The relaxations granted under the Circulars will take care of the difficulties and problems associated with printing and physically delivering annual reports and other mandatory documents to security holders. Additionally, these easings will lower the expenses incurred on the compliance for listed entities.