SEBI Update: Penal provisions for non-compliance related to continuous disclosures with respect to Listed NCDs & Commercial Papers

✓ SEBI vide circular dated December 29, 2021 (in supersession of the SEBI Circular dated November 13, 2020) prescribed penalty for non-compliances with continuous disclosure requirements by the issuers of listed Non-Convertible Securities (refer Annexure 1) and/ or Commercial Paper (refer Annexure 2).

✓ This circular shall come into force for the due dates of compliances on or after February 01, 2022. Prior to February 01, 2022 period, the circular dated November 13, 2020 would be applicable.

✓ Further,  SEBI clarified that the stock exchanges may deviate from penalty, if found necessary, only after recording reasons in writing.

✓ In case a non-compliant entity is listed on more than one recognized stock exchange, the concerned recognized stock exchange(s) shall take uniform action under this circular in consultation with each other.

✓ The fines specified in Annexure I shall continue to accrue till the time of rectification of the non-compliance and to the satisfaction of the concerned recognized stock exchange. Such accrual shall be irrespective of any other disciplinary/enforcement action(s) initiated by recognized stock exchange(s)/ SEBI.

✓  The recognized stock exchanges may keep in abeyance the action or withdraw

the action in specific cases where specific exemption from compliance with the requirements for continuous disclosures /moratorium on enforcement proceedings has been provided for under any Act, Court/ Tribunal Orders etc.

Company Law Update: Relaxation in additional fees for filing of annual filing forms under the Companies Act after due date.

∆ Ministry of Corporate Affairs vide General Circular dated 14th February, 2022, further extended the last date for filing of Annual Filing forms viz. AOC-4, AOC-4(CFS), AOC-4 XBRL, AOC-4 Non-XBRL relaxed till 15th March, 2022 and for MGT-7/MGT-7A relaxed till 31st March, 2022 for the companies whose FY ended on 31.03.2021.

∆ Additional fees for Annual Filing forms viz. AOC-4, AOC-4(CFS), AOC-4 XBRL, AOC-4 Non-XBRL relaxed till 15.02.2022 and for MGT-7/MGT-7A relaxed till 28.02.2022 for the companies whose FY ended on 31.03.2021.

Listing Update: Amendments to SEBI Regulations relating to IPO and SEBI Listing Regulations among other various Regulations

✓ The SEBI Board at it's meeting on 28.12.2021 approved amendment to various SEBI Regulations, as follows:

(1) SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

(A) Conditions for Objects of the Issue: 

i. Where the issuer company in its offer documents, set out an object for future inorganic growth but has not identified any acquisition or investment target, the amount for such objects and amount for general corporate purpose (GCP) shall not exceed 35% of the total amount being raised.

ii. The amount so earmarked for such objects where the issuer company has not identified acquisition or investment target, as mentioned in objects of the issue in the draft offer document and the offer document, shall not exceed 25% of the amount being raised by the issuer.

iii. Above limits shall not apply if the proposed acquisition or strategic

investment object has been identified and suitable specific disclosures about such acquisitions or investments are made in

the draft offer document and the offer document at the time of filing of offer documents.

(B) Conditions for offer for Sale (OFS) to public in an IPO where DRHP is filed by issuer without track record i.e. under Regulation 6(2) of ICDR Regulations, 2018:

i. Shares offered for sale by selling shareholders, individually or with persons acting in concert, holding more than 20% of pre-issue shareholding of the issuer, shall not exceed more than 50% of their pre-issue shareholding.

ii. Shares offered for sale by selling shareholders, individually or with persons acting in concert, holding less than 20% of pre-issue shareholding of the issuer, shall not exceed more than 10% of pre-issue shareholding of the issuer.

c. Monitoring Agency and reporting on utilization of issue proceeds:

i. Credit Rating Agency (CRAs) registered with the Board, shall permitted to act as Monitoring Agency instead of Scheduled Commercial Banks (SCBs) and Public Financial Institutions (PFI).

ii. Such a monitoring shall continue till 100% utilization of issue proceeds.

iii. Amount raised for GCP shall also be brought under monitoring and utilization of same shall be disclosed in monitoring agency report.

iv. Monitoring agency report shall be placed before audit committee for consideration “on a quarterly basis”.

∆ Price Band: In case of book built issues, a minimum price band of be at least 105% of the floor price shall be applicable for all issues opening on or after notification in the official gazette.

∆ Lock-in for Anchor Investors: The existing lock in of 30 days shall continue

for 50% of the portion allocated to anchor investor and for the remaining portion, lock in of 90 days from the date of allotment shall be applicable for all issues opening on or after April 01, 2022.

∆ Revised allocation methodology for Non Institutional Investors (NIIs):

a. For book built issues opening on or after April 01, 2022, the allocation in the NII category shall be revised as follows:

i. one third of the portion available to NIIs shall be reserved for applicants with application size of more than INR 2 Lakh and up to INR 10 Lakh;

ii. two third of the portion available to NIIs shall be reserved for applicants with application size of more than INR 10 Lakh.

b. Allotment of securities in case of NII category shall be on ‘draw of lots’, as is currently applicable for retail individual investors (RIIs) category.

(2) Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

∆ Following provision shall be inserted:

✓ Appointment or a re-appointment of any person, including as a managing director or a whole-time director or a manager, who was earlier rejected by the shareholders at a general meeting, shall be done only with

the prior approval of the shareholders.

✓ Among others, following regulations were also amended:

(1) SEBI (Alternative Investment Funds) Regulations, 2012

(2) SEBI (Mutual Funds) Regulations, 1996

(3) Securities and Exchange Board of India (Stock Brokers) Regulations, 1992 and SEBI (Depositories and Participants) Regulations, 2018

(4) SEBI (Foreign Portfolio Investors) Regulations, 2019

(5) Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018

✓ To read more about amendments, please click here.

Listing Update: Clarification regarding SEBI Listing Regulations w.r.t. Appointment of Director

∆ National Stock Exchange of India (NSE) vide it's circular dated December 22, 2021 clarified with respect to applicability of amended provisions regarding appointment of director, as follows:

✓  Amendment: As per the amendment effective from January 01, 2022 - the listed entity shall ensure that approval of shareholders for appointment of a person on the Board of Directors is taken at the next general meeting or within a time period of three months from the date of appointment, whichever is earlier [Regulation 17(1C)]. 

✓ Query: Whether the above amendment in  Listing Regulations shall be applicable to directors appointed before the effective date of the amendment i.e. January 01, 2022?

✓ Reply: The stock exchange clarified that, the existing provisions shall be applicable for the directors appointed on or before December 31, 2021. The amended provisions of newly inserted Regulation 17 (1C) shall be applicable for the appointment on or after January 01, 2022. However, the type of resolution (Ordinary or Special) to be passed shall be as per the prevailing provisions of Listing Regulations.

MCA allows companies to hold Annual General Meeting virtually till 30th June, 2022.

✓ Ministry of Corporate Affairs (M(A) through General Circular No. 21/2021 dated 14" December, 2021, allowed companies to conduct Annual Geneal Meeting (AGM) virtually through Video Conlerence or Otherl Audio Visual Means (OAVM) on or belore 30" June, 2022 in accordance with framework provided by MCA in General Circular No. 20/2020 dated 05.05.2020.

# Companies shall mean companes which are proposing to organise AGMs in calendar year 2022 for the financial year ending on/before 31 March, 2022.

✓ Further, it is clarified that this circular shall not be construed as any extension of time for holding AGM. In case where, companies do not adhere to relevant timelines shall be liable to legal action under thel relevant provisions of the Companies Act, 2013.

Company Law Updates: Clarification w.r.t. passing of Ordinary and Special Resolutions & conducting Annual General Meeting

∆ Clarification with respect to passing of Ordinary and Special Resolutions

✓ Ministry of Corporate Affairs (MCA) has through General Circular No. 20/2021 dated 8t December, 2021, allowed Companies to conduct Extra-ordinary General Meeting (EGM) through Video Conference or Other Audio Visual Means (OAVM) or transact through postal ballot upto 30" June, 2022 in accordance with earlier General Circulars provided by MCA.

✓ Refer General Circulars Nos. 14/2020, 17/2020, 22/2020, 33/2020, 39, 2020 and 10/2021 for further details.

∆ Clarification w.r.t. holding of AGM through VC or OAVM Means

✓ MCA has through General Circular No. 19/2021 dated 8th December, 2021, allowed companies to conduct Annual General Meeting (AGM) through Video Conference or Other Audio Visual Means (OAVM) on or before 30th June, 2022 in accordance with framework provided by MCA (please refer earlier General Circular No. 20/2020 for further details).

✓ Companies shall mean companies whose AGMs are due in the year 2021.

✓ It is clarified that this circular shall not be construed as any extension of time for holding AGM. In case where, companies do not adhere to relevant timelines shall be liable to legal action under the relevant provisions of the Companies Act, 2013.