SEBI, through LODR has maintained that

information material and to be known by

the shareholders of the company and the
public in general should be published and
made freely available. This article shall
highlight on the relevant provisions of the
said regulation which help SEBI achieve
such transparency.

DISCLOSURES UNDER SEBI

(LISTING OBLIGATIONS AND
DISCLOSURE REQUIREMENTS)
REGULATIONS, 2015

Akshay Amesur
 NMIMS SCHOOL OF LAW

RЕSЕARCH ARTICLЕ SUBMITTЕD ON;

DISCLOSURES UNDER SEBI (LISTING OBLIGATIONS AND DISCLOSURE

REQUIREMENTS) REGULATIONS, 2015
IN COMPLIANCЕ TO PARTIAL FULFILLMЕNT OF THЕ MARKING SCHЕMЕ, FOR
SЕMЕSTЕR X OF 2018-2019, IN THЕ SUBJЕCT OF FINANCIAL MARKET
REGULATIONS IN BUSINЕSS
SUBMITTЕD TO FACULTY:
PROF. SHRIKANT AITHAL
FOR ЕVALUATION

SUBMITTЕD BY:
Akshay Amesur- A066

RЕCЕIVЕD BY: ____________________________

ON DATЕ: _________ TIMЕ: ______

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The Intention and Authority

Section 21 of Securities Contract (Regulation) Act, 1956 (“SCRA”) provides that ʺWhere the
securities are listed on the application of any person in any recognised stock exchange, such
person shall comply with the conditions of the listing agreement with that stock exchangeʺ.
Pursuant to insertion of these provisions in SCRA in 1956, the Listing Agreement, although a
contract, was made a statutory requirement, thereby making it mandatory for every listed entity
in India to comply with the Listing Agreement. Section 11A(2) of the SEBI Act empowers
SEBI to specify the requirement for listing and transfer of securities and matters incidental
thereto. Section 12A of the SCRA empowers SEBI to issue directions to any company whose
securities are listed or proposed to be listed in a recognised stock exchange in the interest of
investors, or orderly development of securities market.

There was a need to enhance the enforceability of the regulatory provisions contained in the
Listing Agreement and also to comply with the mandate of the Parliament given in section 12A
of SCRA and section 11A of SEBI Act. Considering this need, Securities Exchange Board of
India(Listing obligations and disclosure requirement) Regulations, 2015 (hereinafter, “SEBI
LODR” or “Regulations”).

Basis of relevant provisions:

SEBI LODR is largely based on the disclosures as required under the report titled ‘principles
for periodic disclosure by listed entities’ by Technical Committee of the International
Organization of Securities Commissions. The report prescribed the requirement of material
disclosures, and gave the liberty to an extent to the companies to determine the events that they
would consider to be material. SEBI has adopted this rationale in Regulation 30 read with
Schedule III part A para b.

Specific Analysis of disclosures:

As per SEBI LODR, Regulations 29, 30 and 31 cast legal obligation on the listed entities to
provide disclosures to the stock exchange. The general intention behind the disclosures is make
the investors and the shareholders of the company to have available knowledge about the
material information of the company which may have impact on the business of the company.

I) Regulation 29 of the SEBI LODR provide for the prior intimation to be given by the
company to the stock exchanges where such company is listed about the meeting of the
board of directors in which any of the following proposals are to be considered:

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 A) Financial results viz. quarterly, half yearly, or annual.
In terms of Regulation 33 of the SEBI LODR, every listed company shall submit:
i) quarterly and year-to-date standalone financial results to the stock exchange
within forty-five days of end of each quarter.
ii) Annual audited standalone financial results for the financial year, within
sixty days from the end of the financial year along with the audit report

Thus, as a matter of practice, before every such meeting where such financial results
are to be considered by the board, the company gives a disclosure to the Stock Exchange
about the said meeting.

Example: for the board meeting wherein the quarterly results for the quarter of 2018-
2019 were considered, the disclosures were given by Bandhan Bank1, Kotak Bank2 and
HDFC Bank3 prior-hand for the meetings to be held on January 10, 2018, January 21,
2018 and January 19 2018 respectively.

A disclosure in this regard shall be given at least five days prior to the date of the Board
Meeting.

Genesis: The said provision wasn’t new and existed in the old Listing Agreement.
Clause 41(III) of Equity and Clause 43(III) of SME were the relevant provisions in the
Listing Agreement which dealt with the same.

B) Proposal for Buyback of shares

Relevant disclosures relating to buy back of securities have been prescribed under
SEBI (Buyback of securities) Regulation, 2018. However, for every such meeting
such a proposed where the proposal is first made, prior intimation is required in
terms of the said Regulation.
Examples: Thyrocare, TCS and Mphasis has given prior intimations for the,
meetings to be held on August 4, 20184, June 15, 20185 and August 7, 20186
respectively.

1
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=541153#
2
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=500247#
3
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=500180#
4
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=539871#
5
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=532540#
6
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=526299#

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 Genesis: The said provision wasn’t new and existed in the old Listing Agreement.
Clause 20c of equity and Clause 21b of SME were the relevant provisions in the
Listing Agreement which dealt with the same.
C) Proposal for voluntary delisting from the stock exchange
The technical disclosures regarding the voluntary delisting of shares are provided
under SEBI Delisting Regulations. Only the disclosure regarding the Board meeting
in which
Examples: In the last year, announcements in accordance with the said regulation
was made by Rasoi Limited and Monot limited on November 21, 20187 and August
14, 20188 respectively.
Genesis: The said provision wasn’t new and existed in the old Listing Agreement.
A part of Clause 36 was the relevant provisions in the Listing Agreement which
dealt with the same.
D) fund raising by way of further public offer, rights issue, American Depository
Receipts/Global Depository Receipts/Foreign Currency Convertible Bonds,
qualified institutions placement, debt issue, preferential issue or any other method
and for determination of issue price.
Genesis: The said provisions was new when it was introduced in the LODR. No
provision of Listing Agreement required a disclosure in this regard.
E) Declaration/recommendation of dividend

Example: Such disclosures were made by JK Cements and Birla Corporation for the
meetings to be held on May 12, 2018 and May 16, 2018 respectively.

Genesis: The said provision wasn’t new and existed in the old Listing Agreement.
Clause 19a of equity and Clause 20a of SME were the relevant provisions in the Listing
Agreement which dealt with the same.

F) Issue of convertible securities

G) Proposal for declaration of bonus securities
Example: In the last year, announcements in accordance with the said regulation
was made by TCS, Jubilant Foodworks and Emami Limited for the meetings to be
held on April 19, 2018, May 8, 2018 and May 3, 2018.

7
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=507649#
8
https://www.bseindia.com/corporates/ScripWiseCorpAction.aspx?scrip_cd=505343#

Page | 4
 Genesis: The said provision wasn’t new and existed in the old Listing Agreement.
Clause 19b of equity, Clause 20b of SME were the relevant provisions in the Listing
Agreement which dealt with the same.
Recent Amendment: Before, the amendment which came into effect from October
1, 2018, a disclosure to the stock exchange was not required where the agenda to
the meeting did not specify the point of issuing bonus shares.
For the above meeting, other than what is specified in (A) above, a disclosure in this
regard shall be given at least two days prior to the date of the meeting.
Clause (3) of the said Regulation provides that the following actions shall be reported
at least 14 days prior to the date of the Board meeting:
i) Meetings where the proposal regarding any alteration in the form or nature of
any of its securities that are listed on the stock exchange or in the rights or
privileges of the holders is to be discussed
ii) Meetings where any alteration in the date on which, the interest on debentures
or bonds, or the redemption amount of redeemable shares or of debentures or
bonds, shall be payable
II) Regulation 30 provides that every listed entity shall make disclosures of any event
which in the opinion of the board is material. Regulation 30 of the Listing Regulation,
2015, corresponds to the Clause 36 of the Listing Agreement. The SEBI in Clause 36
of the present Listing Agreement has provided the list of certain events which would
be treated as material events/ information.
No specific definition has been provided in the Agreement of the term “Material
Event/Information” or “Materiality”. However as per Clause 36 of the Listing
Agreement, the material event/information would be such event/information which;
 Affects the Performance/ Operations of the Company
 Is considered as the Price Sensitive Information.

In contrast to Clause 36 of the Listing Agreement, the Regulation 30 of the Listing

Regulation,2015, categorises the material event/ information into:

i) Events Specified in Part A of Part A of Schedule III of the Listing Regulations

(Deemed Material Events)
ii) Events Specified in Part B of Part A of Schedule III of the Listing Regulations
(Events/Information whose materiality will be tested on the basis of the Policy
framed by the Listed Entity)

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List of Events Specified in Part A of Part A of Schedule III of the Listing Regulations
(Deemed Material Events)

The list of events mentioned in this part of Part A of Schedule III is prescriptive in
nature that specify the events that should and must be disclosed to the Stock Exchanges
in order make the information available publicly.

List of Events Specified in Part B of Part A of Schedule III of the Listing Regulations
(Events whose materiality will be tested on the basis of the Policy framed by the Listed
Entity)

As per the Regulation 30, every Listed Entity shall make disclosures to Stock
Exchanges which in the opinion of Board of Directors of the Listed Company is
material. The Listed entity should lay down the policy/guideline approved by the Board
of Directors determining the materiality of an event/information based on the following
criteria’s as mentioned in the Regulation 30 (4) of the Listing Regulations;

 The omission of an event/information which is likely to result in discontinuity

or alteration of event or information already available publicly;
 The omission of an event/information which is likely to result in significant
market reaction if the said omission came to light at a later date.
 If the Board thinks any other matter is material. In other words, the Board of
Directors of the Listed entity will lay down the policy/guidelines for testing the
materiality of an event/information for the purpose of deciding whether to make
the disclosure to Stock Exchange or not. Such policy/guidelines shall be
disclosed on the website of the listed entity.

Any other event /information which may be material other than events/ information
specified in the above categories needs to be disclosed to the Stock Exchange.

Who shall be responsible to disclose

Regulation 30 (5) of the Listing Regulation clearly states that one or more Key
Managerial Person (KMP) authorised by the Board of Directors of the Listed entity
for determining the materiality of an event/ information and shall disclose such
events/information to the Stock Exchange.

Time frame to disclose

Page | 6
 The listed entities shall disclose the material events/information to the Stock
Exchange within 24hours of the occurrence of the event or the information except
the outcome of the Board of Directors Meeting shall be disclosed within 30 minutes
of the conclusion of the Board Meeting. In case the disclosure is made after 24 hours
of the occurrence, then along with relevant disclosure provide the reasons or
explanation for delay.

The contact details of KMP(s) authorised by the Board of Directors shall be

disclosed to the stock exchanges and on the website of the listed entity. The KMP(s)
shall also disclose the material event or information on the website of the Company
for s period of 5 years and thereafter as per the archival policy of the listed entity,
as disclosed on its website. Further, the listed entities shall also disclose the material
event or information about its subsidiaries. The SEBI has also issued a circular
dated 9th September, 2015, relating to continuous disclosure requirements for listed
entities. The circular states the details that needs to be disclosed while disclosing an
event/information mentioned in Part A or Part B of Part A of Schedule III with the
Stock Exchange. Further, the circular also provides the guidelines as to when an
event /information can be said to have occurred.

III) Regulation 31 prescribes that the following:

i) That the listed entity must submit to the stock exchange a statement showing
holding of securities and shareholding pattern separately one day prior to listing
of securities on the stock exchange
ii) That the listed entity must submit to the stock exchange a statement showing
holding of securities and shareholding pattern separately on a quarterly basis,
within 21 days from the end of each quarter.

Periodic reporting under the US LAW

A company defined as a “reporting company” or one that registers its securities in the United
States is subject to the periodic and reporting requirements of Sections 13(a) and 15(d) of the
Exchange Act. 42 The reporting obligations include a requirement to file annually using Form
10-K, to file quarterly using Form 10-Q, and to file specified events using Form 8-K.

Public companies in the United States must prepare two full year reports, one for the SEC and
another for shareholders. Form 10-K is the full year report provided by listed companies to the
SEC and federal regulation governs its form and content. The 10-K reports must contain

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detailed financial and operating information, as well as discussion of the company’s
performance and operations. The content of these reports includes financial and non-financial
information and is provided within a standard template. The reports are formatted in three parts
under standard item headings. Part I provides an overview, including a description of the
business and an outline of any legal proceedings. Part II presents the financial statements, notes,
MD&A, quantitative and qualitative disclosures about market risk, an outline of controls and
procedures, and any disclosure changes or disagreements with the auditors. It also includes a
link to the relevant company website where additional information can be found. Part III covers
the director, executive, and professional advisor matters.

The deadlines for filing a 10-K report depend on the size of the company and whether it is
classified as a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller
reporting company. These classifications are determined according to the size of the company’s
public float. Large accelerator companies with a public float of $700 million or more are
required to file the 10-K within sixty days, accelerated companies with a float of more than
$75 million but less than $700 million have seventy-five days to file, and all other companies
(including a non-accelerated filer or smaller reporting company) with a float below $75 million
have ninety days.

Listed companies previously had some discretion over the content of annual reports provided
to shareholders. However, the SEC has gradually standardized the disclosure framework and
the differences in the two full year reports are now minimal. The annual reports must contain
certified financial statements and specified items. The certified financial statements include
audited balance sheets for two years and audited statements of income and cash flow for three
years. The annual reports must also provide five-year summary financial data, including net
sales or operating revenues, income or loss from continuing operations, total assets, long-term
obligations, and cash dividends declared and paid.

Continuous disclosures in USA

Continuous disclosure obligations in the United States are imposed on listed companies under
exchange listing rules. As the NYSE is the largest and most prominent global exchange, its
rules are outlined in more detail than those in subsequent country profiles. Section 2 of the
NYSE Listing Manual governs the disclosure and reporting of material information.

NYSE Listing Rule 202.05 requires timely disclosure of material news developments. It
provides that: A listed company is expected to release quickly to the public any news or

Page | 8
information which might reasonably be expected to materially affect the market for its
securities. . . . A listed company should also act promptly to dispel unfounded rumors which
result in unusual market activity or price variations.

The Listing Rule 202.05 commentary confirms that this is one of the most important and
fundamental purposes of the listing agreement which the company enters into with the
Exchange. Importantly, the wording of Listing Rule 202.05 and the introduction to section 2
of the NYSE Listing Manual indicate that the audience of listed company disclosures includes
“the public”, thereby acknowledging the breadth of persons with a warrantable interest.
Additionally, the NYSE Listing Rule 202.06 notes that:

Unfavorable news should be reported as promptly and candidly as favorable news. Reluctance
or unwillingness to release a negative story or an attempt to disguise unfavorable news
endangers management’s reputation for integrity. Changes in accounting methods to mask
such occurrences can have a similar impact.

The explicit wording of Listing Rule 202.06 indicates that the NYSE is fully aware of the
practical challenges and difficulties in obtaining balanced and frank public disclosure of
negative corporate developments. Listing Rule 202.06 discourages the use of financial
measures within the company reports and disclosures that exclude negative components in an
attempt to present the events or results in a positive light. In practice, this exhortation generally
refers to the use of financial measures within the company reports and disclosures that are not
prepared in accordance with relevant accounting standards.

CASE ANALYSIS

Name of the case: Re: Oregon Commercial Limited9

Facts:

i) Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), pursuant

to investigation of a alleged irregularity in the trading of the shares of Oregon
Commercial Limited (hereinafter referred to as "OCL/company/Noticee") had
observed that there was no corporate announcement made by the Noticee to the
exchange regarding the Board meeting wherein resolution for the change in
management was discussed. This is allegedly in violation of clause 36 of listing

9
MANU/SB/0301/2018

Page | 9
 agreement read with regulation 30(4) of SEBI (Listing Obligations and Disclosures
Requirements) Regulation, 2015 read with read with section 21 of Securities
Contracts (Regulation) Act, 1956 (hereinafter referred to as "SCRA").
ii) The AO had given a show cause notice, in reply on which the notice had agreed that
the no disclosure was given for the said meeting. The Company however contended
that the meeting the postal ballot mechanism was adopted, and notice was given to
each and every shareholder of the company regarding the affairs of the meeting.
The Company also contended that no gain was caused to the company as a result of
the non-disclosure.
iii) Legal provision:

“The listed entity shall consider the following criteria for determination of materiality of
events/information:
(a) the omission of an event or information, which is likely to result in discontinuity
or alteration of event or information already available publicly; or
(b) the omission of an event or information is likely to result in significant market
reaction if the said omission came to light at a later date;
(c) In case where the criteria specified in sub-clauses (a) and (b) are not applicable,
an event/information may be treated as being material if in the opinion of the
board of directors of listed entity, the event/information is considered material.”

iv) SEBI’s order

SEBI, in its proceedings, considered that the company had accepted that no
disclosure in this regard was given. SEBI noted that change in management is a
material information which may have significant market reaction. With the change
in management, the working of the company is expected to change. The market, at
large has the right to know about the change in management of a particular
company. It is for this reason, there is a requirement of making corporate
announcement by the company to the stock exchange. Change in management
definitely has a bearing on the performance of the company. By not making the
corporate announcement to the stock exchange, the company has deprived the
market from taking a conscious decision. SEBI noted that the Company had
submitted that it was an inadvertent error and Form 32 was filed along with notice
being sent to all shareholders for transacting business through postal ballot and
containing details of the change in management. The contents of Form 32 cannot
be accessed by all and the notice was sent only to the shareholders. Hence, it defeats

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 the main purpose of making the corporate announcement regarding change in
management of the company to the stock exchange.
SEBI noted that the Hon'ble Supreme Court of India in the matter of SEBI Vs. Shri
Ram Mutual Fund10 held that "In our considered opinion, penalty is attracted as
soon as the contravention of the statutory obligation as contemplated by the Act
and the Regulations is established and hence the intention of the parties committing
such violation becomes wholly irrelevant...".
However, while deciding upon the penalty the following factors were considered
by SEBI:
a) the amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default;
b) the amount of loss caused to an investor or group of investors as a result of the
default;
c) the repetitive nature of the default.

SEBI noted that the action of the Noticee did not bring out the disproportionate gain
or unfair advantages to the Noticee and loss caused to investors as a result of not
making the corporate announcement. Thereby, in view of the charges established
under the provisions of the SEBI Act, SEBI imposed monetary penalty under
section 23A(a) of SCRA of ' 2,00,000/- (Rupees Two Lakh only) for violation of
regulation 30(4) of LODR Regulations read with clause 36 of the listing agreement
read with section 21 of SCRA.

10
MANU/SC/8185/2006 : [2006] 68 SCL 216 (SC)

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CONCLUSION

Public company governance and accountability concerns that existed when company disclosure
regulation was first established are more compelling than ever given the immense scale and
importance of financial markets and large corporations within modern economies and
communities. Comprehensive and effective listed company reporting is critical in the twenty-
first century to ensure that established checks and balances can fully operate, discourage
managerial, institutional, and individual excesses that inevitably arise in financial markets, and
promote genuinely competitive markets.

The Principles for ongoing disclosures and the Material Development Reporting by Listed
entities have been recognised by the International Organisation of Securities Commissions and
worldwide by various Securities Exchange Commissions for example USA, Japan , Australia
etc. The fundamental basis for recognising such principles is to ensure fair and full disclosure
to safeguard the interest of the investors trading at the securities markets and its investment
decisions. This principle ensures timely disclosure of the information in connection with the
Listed Entities. Thus to bring it in sync with the IOSCO’s Principles for ongoing disclosures
and the Material Development Reporting by Listed Entities, the SEBI has also included such
disclosures in the Listing Regulations, 2015.

Through regular amendment SEBI ensures that the listed companies do not evade their
responsibility of disclosing information to the shareholders and public in general. However,
time and again companies have been seen to default on such provisions. It is important that
SEBI continues to put penalties upon such companies to ensure that all listed companies do not
take the disclosure requirements lightly. In certain areas, the laws of our country still lag behind
that of developed nations. To bridge this gap, it will be important for SEBI to bring in new
amendments to ensure the efficient and continuous disclosure of information to the public.

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