Sebi allows listed companies to pass related party transactions through ordinary resolutions

Capital market regulator Securities and Exchange Board of India (Sebi) on Thursday announced modified regulations pertaining to related party transactions allowing listed companies to pass ordinary resolutions instead of special resolutions in all such transactions where parties abstain from voting on such resolutions.

The regulator also allowed re-classification of promoters as public shareholders under various circumstances.

Sebi said the two provisions of the regulations, which are facilitating in nature, are applicable with immediate effect.

The listing regulations would consolidate and streamline the provisions of existing listing agreements for different segments of the capital market, viz, equity (including convertibles) issued by entities listed on the main board of the stock exchanges, small and medium enterprises listed on SME Exchange and institutional trading platform, non-convertible debt securities, non-convertible redeemable preference shares, Indian depository receipts, securitised debt instruments and units issued by mutual fund schemes.

The regulations have thus been structured to provide ease of reference by consolidating into one single document across various types of securities listed on the stock exchanges.

The Listing Regulations have been sub-divided into two parts - substantive provisions incorporated in the main body of regulations and procedural requirements in the form of schedules to the regulations.

The regulations start by providing broad principles (in line with International Organization of Securities Commissions (IOSCO) principles) for periodic disclosures by listed entities and also have incorporated the principles for corporate governance (in line with OECD principles). These principles underlie specific requirements prescribed in different chapters of the regulations. In the event of the absence of specific requirements or ambiguity, these principles would serve to guide the listed entities.

Obligations that are common to all listed entities have been enumerated. These include general obligation of compliance of listed entity, appointment of common compliance officer, filings on electronic platform, mandatory registration on Sebi Compliance Redress System (SCORES), etc.

Obligations which are applicable to specific types of securities have been incorporated in separate chapters.

Stock Exchanges have been given responsibility to monitor compliance or adequacy / accuracy of compliance with provisions of these regulations and to take action for non-compliance.

The related provisions have been aligned and provided at a common place for ease of reference. For example, all clauses dealing with disclosure of events or information which may be material or price sensitive spread across the Listing Agreement have been provided as a schedule to the regulations. All disclosures required to be made on the website of the listed entity have been enumerated at a single place for ease of reference and all requirements pertaining to disclosures in annual report have been combined.

Streamlining and segregation of initial issuance / listing obligations: In order to ensure that there is no overlapping or confusion on the applicability of these regulations, pre-listing requirements have been incorporated in respective regulations, viz, ICDR Regulations, ILDS Regulations, etc. These provisions pertain to allotment of securities, refund and payment of interest, 1 per cent security deposit (in case of public issuance), etc.

Post-listing requirements have been incorporated in Listing Regulations.

Wherever necessary, the provisions in Listing Regulations have been aligned with those of the Companies Act, 2013.

A shortened version of the Listing Agreement (2 page approximately) will be prescribed which will be required to be signed by a company getting its securities listed on stock exchanges. Existing listed entities will be required to sign the shortened version within six months of the notification of the regulations.

Sebi on Thursday also said that its new rules on classification of promoters as public shareholders will also come into effect immediately for listed firms, even as it gave 90 days to implement all the other provisions of the listing regulations.