India: COVID-19 Outbreak: SEBI Further Eases LODR Compliance Norms For Listed Entities

1. INTRODUCTION

In a previous news alert, we had discussed the relaxations granted by the Securities Exchange Board of India ("SEBI") to entities which have listed/intend to list non-convertible redeemable preference shares, municipal debt securities and commercial papers, due to the economic upheaval caused by COVID-19.¹ As COVID-19 continues on its rampage, the Government of India and other authorities have been continuously initiating measures to contain the pandemic, including a nationwide lockdown, announced on Tuesday, while also providing for economic relief-plans – most notably, Finance Minister Nirmala Sitharaman's INR 1.7 lakh crore stimulus package announced yesterday.

Further, the capital markets regulator continues to address the potential compliance issues and provide assistance to listed entities, their shareholders and other participants affected by COVID-19. Further to its circular dated March 19, 2020, SEBI had granted relaxation to listed entities (having listed equity shares or convertibles) from compliance with certain provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR"), by its circular dated March 26, 2020 ("Circular").² We discuss below some of the key dispensations granted by SEBI through the Circular.

2. KEY DISPENSATIONS

2.1 Annual General Meetings by top 100 listed companies

The top 100 listed companies³ are required to hold annual general meetings ("AGMs") within five months from the date of closing of the financial year.⁴ For the financial year ended March 31, 2020, the due date for their AGMs would, accordingly, have been August 31, 2020. The Circular extends this deadline till September 30, 2020.

2.2 Certificate on timely issue of share certificates

A listed entity is required to ensure that its share transfer agent/in-house share transfer facility produces a certificate from a practicing company secretary on timely issuance of share certificates within one month of the end of each half year.⁵ For the half-year ended March 31, 2020, the due date of production of such certificate would, accordingly, have been April 30, 2020. The Circular extends this deadline till May 31, 2020.

2.3 Committee meetings

A listed entity is required to conduct meetings of its nomination and remuneration committee, stakeholder relationship committee and risk management committee at least once every year.⁶ for financial year 2020, the due date for conducting these meetings would, accordingly, have been March 31, 2020. The Circular extend this deadline till June 30, 2020.

2.4 Standard operating procedures

On January 22, 2020, SEBI issued a circular revising its standard operating procedures (the "SOP") for imposition of fines and other enforcement actions against listed entities for non-compliances with provisions of the LODR.⁷ The revised SOP superseded those issued by SEBI on May 03, 2018 (the "Erstwhile SOP Circular")⁸ and would have come into effect for compliance periods ending on or after March 31, 2020. However, the Circular stipulates that the revised SOP will now be applicable for compliance periods ending on or after June 30, 2020, and till such time, the Erstwhile SOP Circular will apply.

2.5 Publication of advertisements in the newspapers

The LODR requires a listed entity to publish certain categories of information, including notices of the board meeting where financial results shall be discussed, the financial results and the statement of deviations or variations in newspapers.⁹ Given that certain newspapers have stopped issuing printed versions for limited periods, the Circular exempts companies from publication of such information in newspapers till May 15, 2020.

3. CONCLUSION

The relaxations granted by SEBI will continue to provide much-needed breather to the listed entities and act as a limited cushion to the impact caused by COVID-19. It is pertinent to note that the Circular relaxes compliance requirements for listed entities having specified securities (equity shares and/or convertible securities) and it is likely that SEBI will also exempt similar compliance requirements for companies having other categories of securities listed (such as debt securities). As COVID-19 continues to spread, listed entities should also be watchful of their compliance requirements under LODR and take appropriate steps to fulfil such obligations in a timely manner.

Footnotes