SEBI Asks Top 100 Listed Companies To Confirm Or Deny Market Rumour From Oct 1

To streamline the disclosure requirements, Sebi has notified rules asking the top 100 listed companies by market capitalisation to confirm, deny, or clarify any market rumour reported in the mainstream media as of October 1.

Further, for the top 250 listed entities, the rule will kick in on April 1, 2024, the Securities and Exchange Board of India said in a notification.

These companies will have to 'confirm, deny, or clarify any reported event or information in the mainstream media that is not general in nature and that indicates that rumours of an impending specific material event' are circulating amongst the investing public within 24 hours from the reporting of the information.

To strengthen corporate governance at listed entities, SEBI came out with a framework to address the issue of certain shareholders enjoying special rights perpetually.

Any special right granted to the shareholders of a listed entity will be subject to the approval of the shareholders in a general meeting by way of a special resolution once every five years, starting from the date of grant of such a special right.

This comes amid public institutional shareholders increasingly voicing their concerns against special rights being conferred upon the promoters, founders, and certain body corporates of those companies.

SEBI noted that shareholders' agreements are drafted in such a way that those special rights (nomination rights) would continue to be available even after significant dilution of their holding in those entities. This permits the shareholders to enjoy such special rights perpetually, which is against the principle of rights being proportional to one's holding in a company.

Also, the regulator said that all directors appointed to the board of a listed entity need to go through a periodic shareholders' approval process, thereby providing legitimacy for the director to continue to serve on the board.

This would substantially address the concerns around the grant of board permanency by listed entities to certain selected persons -- mostly promoter-directors or related persons -- by invoking the rights conferred on it by the AoA of a company or by such persons being appointed as directors deliberately making them not liable to 'retirement by rotation' and without a defined tenure.

"With effect from April 1, 2024, the continuation of a director serving on the board of directors of a listed entity shall be subject to the approval of the shareholders in a general meeting at least once every five years from the date of their appointment or reappointment, as the case may be," SEBI said.

As of March 20, 2024, if any director is serving on the board of a listed entity without his or her appointment being subject to shareholders' approval during the last five years, the listed entity will have to get shareholders' approval in the first general meeting to be held after March 31, 2024, for his or her continuation on the board.

SEBI said that agreements whose purpose and effect are to impact management or control, impose any restriction, or create any liability need to be disclosed to the stock exchanges. However, agreements entered into by a listed entity for the business operations of a company—supply agreements, purchase agreements, etc.—would be excluded from the scope of disclosures.

Also, the regulator issued rules to strengthen the framework for slump sales executed outside the scheme of arrangement framework to safeguard the interests of minority shareholders.

It introduced provisions in the disclosure rules for the sale, disposal, or lease of the whole or substantially the whole of the undertaking of the listed company and also mandated disclosure of the objects and commercial rationale for such sale, disposal, or lease to the shareholders.

SEBI said that for the material events or information that emanate from the listed entity, including those related to acquisitions, schemes of arrangement, consolidation of shares, and buybacks of securities, the timeline for disclosure by the entity has been reduced from 24 hours to 12 hours.

In the case of information that emanates from a decision taken in a meeting of the board of directors, the disclosure should be made within 30 minutes of the closure of such a meeting.

Listed entities have been asked to disclose fraud and defaults by directors or senior management, as SEBI has specified material information for investors. Currently, such disclosure by a listed entity or its key managerial personnel or promoter and the arrest of key managerial personnel or promoters are mandated.

In addition, listed entities have been asked to disclose defaults in payment of fines, penalties, and dues to any regulatory, statutory, enforcement, or judicial authority.

Also, the regulator asked listed entities to make disclosures in relation to cybersecurity incidents, cybersecurity breaches, or loss of data and documents in the quarterly corporate governance report.

With regard to vacancies in certain key managerial posts, SEBI said that any vacancy in the offices of Chief Executive Officer, Managing Director, and Whole-Time Director needs to be filled within three months from the date of such a vacancy.

Listed entities will have to submit a certificate to the bourses regarding the status of payment of interest, dividend, repayment, and redemption of principal of non-convertible securities within one working day of it becoming due.

To give these rules effect, Sebi has amended the Listing of Obligations and Disclosure Requirements rules, which would come into force on July 14.