SEBI LODR Corporate Governance Enhancements

In 3rd amendment of FY 25 to LODR, several important changes have been introduced to

strengthen corporate governance, better transparency norms, and streamline processes for
equity listed entities in India. These initiatives, put forward by SEBI also aim to improve ease
of doing compliance while warranting better participation of Board and Key Managerial
personnel.

Here’s a look at the impact of key changes in LODR read with the working committee report
and the consultation paper.

I. Ease of compliance:

1. Combining periodic filings and timelines for filing:

Compliances under reg 13 (3) and reg 27 would now be integrated. The format and
effective date from when new formats would be applicable are yet to be prescribed
by SEBI. However, based on the working committee report and the consultation
paper, it is expected that the content of the disclosures/ filings would be detailed

2. Compliances no more required: Compliance requirements under Reg. 7(3) on

having registered share transfer agent (already captured in quarterly share capital
reconciliation audit report), (ii) Reg. 39(3) - on event-based disclosure of loss of
physical share certificates and (iii) Reg. 40(9)/(10) - Annual certification on adhering
to the timeline for processing requests relating to physical shares are done away with
immediate effect.

3. QR code for disclosure of financial results: The requirement of publishing detailed

advertisements in newspapers for financial results is now optional for listed entities.
In substitution, a relatively smaller advertisement with the QR code and weblink to
the page where the full financial results of the listed entity are available shall be
published for the benefit of the investors. This change is effective from immediate
effect. Therefore, companies may choose the above option for December quarter
financial results.

4. Board of director and committees:

a. Time limit to fill vacancies in board committees: If there is a vacancy in any

board committee (viz. AC, NRC, RMC, SRC) due to vacation of office of board
of directors and it is resulting in non-compliance of LODR , it can be filled
within three months from the date of such vacancy. Further if such vacancy in
 the board committee arises due to expiration of term of office of director then
such vacancy shall be filed before expiration of term of office of board of
director. This provision will not apply where vacancy in office of director does
not lead to non-compliance at board committees. This change brings much
desired reasonable time to identify and evaluate the new committee member for
the concerned committee. Uptil now, LODR only provided for timeline for
filling up the vacancy within three months in the office of director. There was
no provision for filling up the vacancy at board committee.

b. Exclusion of time taken for regulatory or government approvals: where

regulatory or statutory or government approvals are required for appointment or
re-appointment, time taken for such approvals will be excluded from the
timeline of 3 months prescribed in reg. 17(1C) for obtaining shareholder
approval. This would be a welcome change for Government company, Banks,
Stock-brokers, etc.

c. No shareholder approval: Furthermore, shareholder approval would not be

required for directors who are nominated by financial sector regulators or
appointed by a court or tribunal, simplifying the process in these specific cases.

II. Related Party Transactions (with immediate effect):

1. Exempted related party transaction: Following will not be considered as related

party transaction thereby exempting it from approvals and disclosures under LODR:

a. Corporate actions by subsidiaries of a listed entity and corporate actions

received by the listed entity or its subsidiaries which are uniformly applicable /
offered to all shareholders in proportion to their shareholding.

b. Acceptance of current account deposits or saving account deposits by banks

and payment of interest thereon in compliance with the directions issued by
RBI from time to time.

c. Retail purchases from any listed entity or its subsidiary by its directors or its
employees, without establishing a business relationship and at the terms which
are uniformly applicable / offered to all employees and directors.

However, one would still have to evaluate such requirement from the perspective
of Section 177 of Companies Act, 2013.

2. Approval of RPTs by the audit committee of the listed entity:

a. Exemption from Audit Committee Approval under LODR:

Remuneration and sitting fees paid to directors, key managerial personnel, or

senior management (excluding promoters/promoter group) is now exempt from
prior approval of Audit Committee only if the transaction is not a material
transaction under Regulation 23(1) of LODR. Further such transactions would
also not be required to be disclosed in disclosures sent to stock exchanges on
related party transactions.

However, one would still have to evaluate such requirement from the
perspective of Section 177 of Companies Act, 2013.

b. Post-Facto Ratification of related party transaction to bring in line with

provisions of Companies Act, 2013:
Independent directors in the audit committee can ratify related party
transactions within 3 months from entering the transaction or in the immediate
next meeting, whichever is earlier subject to:

i. Value of transaction(s) less than Rs. 1 crore in a financial year.

ii. Transaction is non-material under Regulation 23(1) of LODR.
iii. Rationale for not being able to seek prior approval must be presented
during ratification.
iv. Ratification details to be disclosed in half-yearly RPT disclosures under
regulation 23(9) of LODR.
v. Additional conditions as specified by the audit committee.

The value of Rs. 1 crore may be a very small amount for certain listed entities.

c. Consequences of non-ratification:

Failure to ratify renders the transaction in concern voidable at the discretion of

the Board of Directors of the Company. Director(s) involved would have to
indemnify the listed entity against any loss if the related party is linked to them.

d. Omnibus approval for related party transactions entered by subsidiary:

For transactions at subsidiaries omnibus approval can also be taken in line with
omnibus approval undertaken by listed entity. The Audit Committee of the listed
entity will have to set out criteria for granting the omnibus approval and shall
monitor those related party transactions on quarterly basis.

e. Exemption of shareholder approval for related party transaction: Payment

of statutory dues, fees, or charges to the Central or State Government,
 Transactions between two public sector companies (including government
companies) and transactions between a public sector company and the Central
or State Government (or any combination) would not require members approval
even if they cross materiality threshold.

III. Disclosure of material events or information under regulation 30 (with immediate

effect):

1. Timeline for disclosure of material events or information arising out of the

decisions made at the Board Meeting: Board Meeting Decisions/ Outcome can
now be disclosed as follows:

a. If meeting ends after trading hours of the day but >3 hours before next trading
starts: Disclosure must be made at the earliest but not later than 3 hours of
the conclusion of the Board Meeting.

b. If meeting ends during trading hours of the day or the remaining before the
trading starts for the day is ≤3 hours: Disclosure must be made at the earliest
but not later than 30 minutes of the conclusion of the Board Meeting.

2. Timeline for disclosure of litigation or dispute not instituted by the listed

entity: If any litigation or dispute is instituted against the Company (other than tax
litigation or dispute) which qualifies for disclosure under paragraph B of Part A of
Schedule III of LODR, the listed entity can evaluate its impact and if qualified, can
make disclosure to Stock Exchange at the earliest but not later than 72 hours of
receipt of the notice by the listed entity. The listed entity shall ensure that the
Structured Digital Database maintained under PIT Regulations is updated with
details of such litigation or dispute.

3. Disclosure of acquisition by listed entities:

a. Disclosure of acquisition in case of any company: This disclosure is

required if listed entity would hold shares/voting rights aggregating to 20%
(up from 5%) and for subsequent changes exceeding 5% (up from 2%).

b. Disclosure of acquisition in case of unlisted entity: acquisition of shares or

voting rights aggregating to 5% or changes exceeding 2% disclosed quarterly
in Integrated Filing (Governance).

4. Analyst or institutional / Investor meets:

 a. A new concept of disclosure of names of analysts or institutional investors is
introduced. Such disclosure is currently optional for listed entities.

b. Presentations prepared by a listed entity for analyst or institutional investors

meet or post-earnings / quarterly calls to be disclosed to stock exchanges before
the beginning of such events.

c. Audio recordings of post-earning / quarterly calls shall be made available

promptly on the company’s website before the next trading day or within 24
hours from the conclusion of such calls, whichever is earlier.

d. Video recordings of post-earnings / quarterly calls shall be on company’s

website within 48 hours from the conclusion of such calls.

e. Transcripts of post-earning / quarterly calls to be available on website for 5

years and thereafter it needs to be preserved by the company for 8 years.

f. Audio / video recordings to be available on website for 2 years (instead of 5

years till now.) This audio / video recordings needs to be preserved by company
for 8 years as per the preservation policy.

g. Transcripts of post-earning / quarterly calls to be available on website for 5

years and thereafter it needs to be preserved by the company for 8 years as per
the preservation policy.

5. Disclosure of imposition of penalty or fine: Monetary limit will now be applied

for disclosure of imposition of penalty or fine under Para A (20) of Part A of
Schedule III of LODR in the following manner:

a. Immediate Disclosure within 24 hours of receipt of notice of monetary

penalty:

i. Penalties or fines by sectoral regulators/ enforcement agencies

required to be disclosed if it is above ₹1 lakh or more .

ii. Penalties or fines by other authorities/ judicial body required to be

disclosed if it is above ₹10 lakhs or more.

b. Quarterly Disclosure of rest amount: Penalties not going beyond the above
thresholds to be disclosed quarterly in Integrated Filing (Governance) with
details as per Para A(20), Schedule III of LODR.
 6. Clarification with respect to disclosure of material events specified under
Schedule III:

a. Alignment is brought between reg 29 and reg 30 by aligning points requiring

prior intimation of fund raising with points requiring disclosure as outcome
of board meeting under Para A, point 4 of Part A of Schedule III of LODR.

b. Fraud by senior management under Para A (6) of Part A of Schedule III of

LODR should be disclosed only if it is in relation to the listed entity.

c. Introduction of explanation on the types of forensic audit which are required

to be disclosed under Para A (17) of Part A of Schedule III for ample clarity.

IV. Role of Key Stakeholders (with immediate effect):

1. Position of Compliance Officer

The Compliance Officer is now placed directly under the supervision of the Board
of Directors of the Company. This is a strategic shift in terms of power, duties and
responsibilities of the Compliance Officer. This change is to be placed before the
Nomination and Remuneration Committee and Board of Directors of the Company
and may result in revisiting the deliverables and mechanisms of monitoring
performance.

2. (Express) Role of key stakeholders

The key managerial personnel, directors, promoter, promoter group or any other
person dealing with the listed entity are expected to disclose to the listed entity all
information that is relevant and necessary for the listed entity to ensure compliance
with the applicable laws. This introduction would remove any ambiguity on
statutory responsibility of key stakeholders towards compliance of all applicable
laws including securities laws.

V. Reclassification of Promotors (with immediate effect):

SEBI has revamped process of reclassification of promoter and/ or promoter group to

public:

1. Instead of stock exchange approval as per the existing framework, now companies
will have to take NOC from stock exchange (prior to seeking shareholder approval,
if applicable).
 2. Board of directors of the company to provide their views on proposed reclassification
of promoters within 60 days instead of 90 days till now.

3. Time bound process of reclassification: The regulations will specify clear timelines:
Stock Exchanges must provide the No-Objection Certificate (NOC) within 30 days,
the listed entity must seek shareholder approval within 60 days, and the entity must
notify the stock exchanges within 5 days after receiving shareholder approval.

4. Under regulation 31A(8)(b) of LODR the outcome of the board meeting, including
their views on the reclassification request, must be disclosed instead of minutes.

This is shift in approach of the regulator from ‘permission’ mode to ‘no objection’
mode. In other words, the regulator has limited its intervention by relying on the
wisdom of Board of Directors and allowing the shareholders to make the decision while
limiting the role of Stock Exchange to ensuring compliance of Reg. 31A of LODR.

VI. Other key changes (with immediate effect)

1. Secretarial Auditors:

a. Appointment, reappointment of secretarial auditors would now be in line with

provisions for appointment, re-appointment of statutory auditors prescribed under
section 139 (1) and (2) of Companies Act, 2013. An individual Practicing Company
Secretary [‘PCS’] shall be appointed for a term of 5 years and a PCS firm may be
appointed for a maximum of 2 terms of 5 years each subject to approval of
shareholders in a general meeting.

b. PCS to be appointed as a secretarial auditor shall be a peer reviewed company

secretary.

c. A cooling-off period of 5 years for re-appointment of an individual PCS as a

secretarial auditor (after 1 term of 5 years) and for re-appointment of a secretarial
audit firm (after 2 consecutive terms of 5 years) would now be applicable.

d. The Company will be able to remove Secretarial auditor(s) only with the approval
of shareholders of a listed entity.

e. From April 1, 2025, appointment, re-appointment or continuation of secretarial

auditors of listed entities shall be in compliance with the aforesaid provisions.
Further, with effect from April 1, 2025, the Secretarial Compliance Report
submitted by a listed entity to be signed only by the Secretarial Auditor or by a Peer
Reviewed Company Secretary who satisfies the aforesaid requirements.
 The format of secretarial audit report and annual secretarial compliance report is
awaited.

2. Record date:

a. Time gap between intimation and actual record date has been reduced to 3
working days (from 7 working days) except for corporate action through a
scheme of arrangement.

b. Minimum gap between two record dates has been reduced to 5 working days
(from 30 days).

c. Minimum gap between two book closures is now omitted.

3. Additional information on website:

The following additional documents / information to be disclosed on the website of a

listed entity in the interest of the investors:

a. Article of Association
b. Memorandum of Association
c. Brief profile of board of directors (incl. directorships and full-time positions in
body corporates)
d. Employee benefits related scheme documents (excl. commercial secrets and such
other information that would affect competitive position of the listed entity as
approved by the Board of the listed entity)
e. Details pertaining to analysts or institutional investors meet, post earnings or
quarterly calls as prescribed

4. Annual Reports:

As per regulation 36(2) of LODR, the requirement to send physical copies of abridged
Annual Reports to shareholders without an email ID has been replaced with a letter
containing the exact path where complete details of the Annual Report is available.

5. Subsidiary related compliance requirements:

The requirement of approval of shareholders under regulation 24(6) for sale, disposal
or lease of assets of material subsidiary shall not be applicable if such a transaction is
between two wholly owned subsidiaries of the listed entity.
 6. Schemes involving reduction of capital on account of writing off accumulated
losses:

SEBI has now stated that the requirement for obtaining a no-objection letter from
stock exchanges for schemes writing off accumulated losses against share capital or
reserves would not be required. Such draft scheme need only be filed with stock
exchanges for disclosure purposes.

7. Relaxations from certain compliance requirements for companies coming out of

the IBC Framework:

Companies coming out of Corporate Insolvency Resolution Process (CIRP) would

now have additional time to compliance with LODR:

a. Three-month time for filling up the vacancy of KMP subject to having at least one
full-time KMP.
b. Three months to have required board / committee composition.
c. Additional time of 45 days (or 60 days for annual results) to be provided for
disclosure of financial results for the quarter in which the resolution plan is
approved.

VII. Amendments for which notification will be released by SEBI in due course.
There are certain changes where SEBI would be notifying formats/ procedures in due course:
1. Integrated filings for quarterly compliances
2. Disqualification for appointment of a practising company secretary as secretarial
auditor
3. Guidelines for disclosures by debt listed entities to stock exchange in XBRL format.