Module 6: Corporate Governance & LODR Compliance

SEBI LODR Regulations 2015 came into effect on December 1, 2015, replacing the erstwhile Listing Agreement with stock exchanges.

Regulation 4 lays down the principles of corporate governance including disclosure, transparency, equitable treatment of shareholders, and board responsibilities.

Regulation 15(2) provides relaxations for SME listed companies regarding board composition, committee requirements, and reporting frequency.

Chapter V (Regulations 50-61) contains obligations specifically applicable to entities with listed debt securities.

The 2023 amendments revised the material RPT threshold to the lower of 10% of annual consolidated turnover or Rs. 1000 crore.

Risk Management Committee under Regulation 21 is mandatory for top 1000 listed entities (extended from top 500).

Schedule III lists events/information that must be disclosed under Regulation 30. Schedule II covers corporate governance, Schedule V covers annual report, and Schedule VI covers secretarial compliance report.

Market capitalization thresholds are determined as of March 31 of the preceding financial year.

Under SEBI Act, non-compliance can attract penalty up to Rs. 25 crore or three times illegal gains, whichever is higher.

Clause 49 of the Listing Agreement was the famous corporate governance clause, now incorporated primarily in Regulations 17-27 and Schedule II of LODR.

For top 500 listed companies (from April 2020), at least 50% of the board must be independent directors regardless of Chairman status.

Top 500 companies require at least one woman independent director, not just any woman director.

Regulation 18 requires at least two-thirds of Audit Committee members to be independent directors.

Under Regulation 17(2), gap between two consecutive board meetings shall not exceed 120 days.

Under Regulation 25(3), independent directors must meet at least once a year without non-independent directors and management to review performance.

Maximum tenure is 10 years - two consecutive terms of 5 years each. After this, 3-year cooling-off period before reappointment as ID.

Audit Committee must meet at least 4 times a year with gap not exceeding 120 days between two meetings.

Under Regulation 19, the Chairperson of NRC must be an independent director.

Director changes including resignation must be disclosed within 30 minutes of receipt of resignation letter.

An independent director cannot hold ID position in more than 7 listed entities. If whole-time director elsewhere, max 3 ID positions.

Regulation 30 deals with disclosure of material events and information. Schedule III lists specific events requiring disclosure.

Outcome of board meeting must be disclosed within 30 minutes of closure of the meeting.

Quarterly financial results (Q1-Q3) must be submitted within 45 days from quarter end. Annual results within 60 days.

Under Regulation 31, shareholding pattern must be submitted within 21 days from quarter end.

Under Regulation 27, quarterly CG compliance report must be submitted within 15 days from quarter end.

As per 2023 amendments, outcome of litigations must be disclosed within 12 hours.

Under Regulation 31(1), change in pledge of promoter shares must be disclosed within 7 days.

Schedule III Part A events are deemed material and must be disclosed mandatorily without any materiality assessment.

Annual financial results must be submitted within 60 days from end of financial year (by May 30).

Quarterly results (Q1-Q3) require Limited Review by statutory auditors, not full audit.

LODR includes persons/entities belonging to promoter group holding 20% or more shareholding as related parties.

Post 2023 amendments, ALL RPTs require prior approval of Audit Committee. Post-facto approval is no longer permitted.

Omnibus approval is valid for one financial year only and requires renewal at start of each year.

Related parties interested in the transaction must abstain from voting on the resolution as per Regulation 23(4).

Transactions with WOS are exempt from shareholder approval but still require Audit Committee approval.

Audit Committee must review all omnibus approvals every quarter as per Regulation 23(3).

RPT Policy must be disclosed on company website as per Regulation 46 read with Schedule V.

Material pecuniary relationship is defined as exceeding 2% of gross turnover or Rs. 50 lakhs, whichever is lower.

Material RPT requires shareholder approval through ordinary resolution (simple majority of disinterested shareholders).

Material threshold is based on annual consolidated turnover of the preceding financial year.

Annual report must be circulated at least 21 days before the AGM.

Secretarial Audit must be conducted by a Practicing Company Secretary (PCS) and reported in Form MR-3.

ASCR under Regulation 24A(2) must be submitted to stock exchanges within 60 days from end of financial year.

AGM must be held within 6 months from end of financial year (by September 30).

Annual report must be submitted to stock exchanges within 24 hours of AGM.

BRSR under Regulation 34(2)(f) is mandatory for top 1000 listed entities by market capitalization.

Secretarial Audit is mandatory for material unlisted Indian subsidiaries of listed entities as per Regulation 24A.

Reconciliation of Share Capital Audit under Regulation 76 must be submitted within 30 days from quarter end.

Delayed filing attracts Rs. 1,000 per day for first 5 days, Rs. 10,000 per day thereafter.

CG compliance certificate for annual report must be issued by a Practicing Company Secretary as per Schedule V.