"The Role of SEBI LODR Regulations 2015 in Shaping the

Future of Indian Capital Markets"

Ankit Singh
Dr. D.Y. Patil College of Law

Abstract
The SEBI LODR Regulations 2015 This research paper focuses on the Securities and
Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements
(LODR) Regulations 2015, which have been introduced to enhance transparency and
corporate governance in listed companies in India. The paper examines the legal
framework of SEBI LODR Regulations 2015 and its impact on listed companies in
India. The paper analyzes various provisions of the regulation, including corporate
governance requirements, related party transactions, and disclosure requirements. It
also discusses the challenges faced by listed companies in complying with these
regulations and the measures that can be taken to overcome these challenges. The
findings of the study indicate that SEBI LODR Regulations 2015 have had a positive
impact on corporate governance and transparency in listed companies in India.
Companies still face challenges in complying with the regulations, such as the need for
better systems for monitoring related party transactions and ensuring timely
disclosures.

Introduction
At the end of the 1970s and during the 1980s, capital markets were emerging as the
new sensation among the individuals of India. Many malpractices started taking place
such as unofficial self-styled merchant bankers, unofficial private placements, rigging
of prices, non-adherence of provisions of the Companies Act, violation of rules and
regulations of stock exchanges, delay in delivery of shares, price rigging, etc.

Due to these malpractices, people started losing confidence in the stock market. The
government felt a sudden need to set up an authority to regulate the working and
reduce these malpractices. As a result, the Government came up with the establishment
of SEBI.
This regulatory authority acts as a watchdog for all the capital market participants and
its main purpose is to provide such an environment for the financial market enthusiasts
that facilitate the efficient and smooth working of the securities market. SEBI also
plays an important role in the economy.
To make this happen, it ensures that the three main participants of the financial market
are taken care of, i.e. issuers of securities, investors, and financial intermediaries.

1. Issuers of securities

These are entities in the corporate field that raise funds from various sources in the
market. This organization makes sure that they get a healthy and transparent
environment for their needs.

2. Investor
The markets are kept active by investors. This regulatory authority is responsible for
maintaining an environment that is free from malpractices to restore the confidence of
the general public who invest their hard-earned money in the markets.

3. Financial Intermediaries
These are the people who act as middlemen between the issuers and investors. They
make the financial transactions smooth and safe.

Concept of listing agreement was inserted in the Securities Contract (Regulation) Act,
1956; The section made it mandatory for every listed entity in India to comply with the
Listing Agreement and The Listing Agreement prescribed various initial and continuous
disclosure norms to be made by the listed companies with the stock exchanges. With a
view to consolidate and streamline the provisions of existing listing agreements for
different segments of the capital market, SEBI (LODR) Regulations,2015 was
introduced on September 02,2015.

The SEBI LODR Regulations were introduced in September 2015 to consolidate and
streamline the existing listing agreements for listed companies in India. The regulations
aim to improve corporate governance practices, increase transparency and
accountability, and protect the interests of shareholders and other stakeholders. The
SEBI LODR Regulations apply to all listed companies on Indian stock exchanges and
cover a wide range of areas such as corporate governance, financial reporting,
disclosure requirements, and shareholder rights.

Key Provisions of SEBI LODR Regulations:

The SEBI LODR Regulations contain several key provisions that listed companies
must comply with. Some of the important provisions include:

Disclosure Requirements: SEBI LODR regulations require listed companies to

disclose various information to shareholders and regulators. These include financial
statements, annual reports, material events, related party transactions, and board
composition. The aim of these disclosure requirements is to ensure that shareholders
have access to timely and accurate information about the company.

Corporate Governance: The regulations require companies to have a minimum of six

directors on their board, with at least one woman director and an independent director.
The regulations also mandate the establishment of various committees, such as the
audit committee, nomination and remuneration committee, and stakeholder relationship
committee.

Financial Reporting: The regulations require listed companies to adhere to the Indian
Accounting Standards (Ind-AS) and submit their financial statements on a quarterly and
annual basis. The regulations also mandate the filing of various disclosures, such as
related party transactions, use of proceeds from public issues, and management
discussion and analysis.

Shareholder Rights: The regulations provide several rights to shareholders, such as the
right to vote on important matters such as appointment and removal of directors,
executive remuneration, and related party transactions. The regulations also mandate the
dissemination of information to shareholders through various means such as annual
reports, website disclosures, and stock exchange notifications.
 Disclosure of Material :

Quarterly

Reg 13: Statement of Investor complaints Within 21 days from the end of each quarter.

Reg 27: Corporate Governance Within 21 days from the end of each quarter.

Reg 31: Shareholding Pattern Within 21 days from quarter end.

Reg 29: Intimation of Board Meeting for At least 5 working days in advance excluding
Financial Results date of Intimation & Date of the Meeting.

Reg 33: Financial Results Within 45 days from quarter end

Reg 32: Report of monitoring agency Within 45 days from end of each quarter

Reg 32: Deviation in utilization of Quarterly basis

proceeds

Half Yearly
 Reg 23: Related Party Transactions Within 15 days from the date of publications for
Financial Results for every half year.

Annual

Reg 40: Compliance Certificate Within one month of the end of the financial
year.
certifying maintaining physical
& electronic transfer facility

Reg 33: Financial Results Within 60 days from end of Financial Year

Reg 34: Annual Report Within twenty-one working days of it being approved
and adopted in the annual general meeting.

Reg 44: Voting Results 2 working days from the conclusion of the General
Meeting.

Reg 7: Certificate from Practicing Within one month of the end of the financial year
Company Secretary

Reg 32: Report of monitoring agency Within 45 days from end of each quarter
 Event Based Disclosures

Disclosure of Price-Sensitive Information Within 24 hours of the occurrence of the event.

(Schedule III)

Reg 29: Intimation of Board Meeting At least 2 working days in advance excluding date of
Intimation & Date of the Meeting.

Outcome of Board Meeting (Schedule III Within 30 minutes of the closure of the meeting.
Part A)

Reg 42: Notice for Record Date \ Corporate Advance notice of at least 7 working days (Excluding the
Action date of the intimation and record date/book closure start
date)

Reg 24A: Annual Secretarial Compliance Within 60 days from the end of the FinancialYear
Report
DISCLOSURE AND APPROVAL REQUIREMENTS FOR CERTAIN
TYPES OF AGREEMENTS THAT BIND LISTED ENTITIES

Existing requirements for agreements binding listed entities

The LODR Regulations require disclosure of material events or information to

the Stock Exchanges by listed entities. In terms of regulation 30(6) read with clause 5
of para A of Part A of Schedule III of the LODR Regulations, agreements which are
binding and not in the normal course of business have to be disclosed by a listed
entity

The aforesaid requirement includes disclosure of shareholder agreements, joint

venture agreements, family settlement agreements (to the extent that it impacts
management and control of the listed entity) agreements with media companies etc.
Revisions or amendments and termination of such agreements too have to be
disclose

Shareholder agreements are one of the common types of agreements entered into
and disclosed by listed entities. A shareholder agreement (SHA) is an arrangement that
regulates the relationship between the shareholders, the management of the company,
ownership of the shares, rights, obligations, and protection of the shareholders. SHA
may be entered into between shareholders (without the involvement of the
company) or between the shareholder(s) and the company.

The rights, obligations, protection etc. enshrined in the SHA may be

incorporated in the Articles of Association (AoA) of a company or may not form part
of the AoA of a company. If such aspects in the SHA are proposed to be included
as part of the AoA of a company, it needs the approval of the shareholders of the
company by way of a special resolution

Issues observed with respect to agreements binding listed entities

Disclosure of agreements: In terms of the existing provisions of the LODR

Regulations, agreements binding listed entities and not in the normal course of
business have to be disclosed as material information to the shareholders. Such
agreements, whether entered by the listed entity or any of its promoters or
shareholders,have to be disclosed. However, if the listed entity is not a party to an
agreement, then an obligation must be placed on the parties entering into such
agreements to disclose it to the companyThis would enable the listed
entity to disclose such agreements to the Stock Exchanges.

There have been instances wherein promoters have entered into binding agreements
with third parties having an impact on the management or control of a listed
entity or such agreements have placed certain restrictions on the listed entity however
these facts were not disclosed to the listed entity and its shareholders.
Non-disclosure of material information creates information asymmetry and results in
significant market reaction when it is known to the public at large at a later stage.

While the term ‘normal course of business’ is intended to include agreements that are
entered in connection with the business operations of a listed entity, any
agreement that impacts management or control whether or not entered into in the
normal course of business Operations, is a material information for the shareholder,,
hence needs to be disclosed to the public

Apart from the above, there is a need to mandate disclosure of all agreements that
intend to restrict or create any liability on a listed entity as it is material
information for the shareholders.

Therefore, to overcome the challenges posed by such agreements entered into by

the promoters or controlling shareholders with third parties, with / without the
knowledge or consent of the listed entity, there is a need to modify the existing
provisions in the LODR Regulations for better clarity and adequate disclosures of
such types of agreements

Approval requirements : SHAs which are not part of the AoA but which bind and
place restrictions or create any liability on a listed entity are generally not placed
before the shareholders for approval. Therefore, the shareholders may not have an
opportunity to examine such agreements and express their approval / disapproval
towards the said agreements.

There have been certain recent instances of promoters of listed entities entering
into shareholder agreements with the listed entity and in turn with third parties that
had placed certain restrictions on the listed entity . These restrictions , particularly
when imposed without due process of approval by / within the listed entity, and with no
benefit to the listed entity are not in the interest of the listed entity and its shareholders.
These agreements, apart from not being in the interest of the listed entity, restricted the
ability of its shareholders to take decisions in the best interests of the company. Such
actions on the part of the promoters were against the fundamental principles of
corporate governance and shareholder democracy at listed entities.

Further, no person or an entity can create any liability or obligation on a third party
without its explicit consent. Therefore, existing agreements that were entered without
the consent of the listed entity and / or its shareholders (approval of
shareholders)imposing restrictions on the listed entity were as good as having no effect
on the listed entity. As a result , no restriction or liability would fall upon the listed
entity unless and until ratified by the shareholders.

The aforesaid issues were discussed in the Primary Advisory Committee (PMAC) of
SEBI.Based on the discussions and further internal deliberations, certain proposals to
address the aforesaid issues are discussed in the subsequent paragraphs.

● Proposals with respect to disclosure and approval requirements for

certain types of Agreements

Disclosure of agreements under regulation 30 of the LODR Regulations: In order

to cover disclosure of any agreement that impacts the management or control of a
listed entity or Imposes any restriction or creates any liability on a listed entity, it is
proposed to introduce a New clause 5A in para A of part A of Schedule III of the
LODR Regulations.
Further, agreements whose purpose and effect is to impact the management or control or
impose any restriction or create any liability also needs to be disclosed. However,
agreements entered by a listed entity for the business operations of a company (eg.
supply agreements,purchase agreements etc.) is proposed to be excluded from the scope
of disclosures

The proposed new clause 5A of para A of Part A of Schedule III of the LODR
Regulations would read as given below 5A

(i) Agreements which either directly or indirectly or whose purpose and effect is to
impact the management or control of the listed entity or impose any or create any
liability upon listed entity shall be disclosed to the Stock Exchanges whether or not the
listed entity is a party to such agreements
Provided that revision or amendment and termination of such agreements shall also
be disclosed Provided further that only such agreements which are binding and
entered into by the shareholders, promoters, promoter group, related parties,
directors, key managerial Personnel any other officer of a listed entity or of its
holding, subsidiary, associate company, solely or jointly with the listed entity or a
third party shall be disclosed

ii) Notwithstanding The above,agreements entered in the normal course of

business shall be disclosed if they are required to be disclosed otherwise in terms
of the provisions of these regulations.”

Disclosures in the Annual Report of a listed entity:From April 1, 2023, the details of
the aforesaid agreements entered during the financial year shall be disclosed, in
addition to disclosure requirements under regulation 30 read with Schedule III of the
LODR Regulations, in the Annual Report of the listed entity(i.e.,from FY 2023-24
onwards). This shall ensure availability of information about all such agreements at a
single place for the shareholders and provides continuity of information to the
shareholder

Obligation to inform the listed entity: If the listed entity is not party to any
agreement specified above , it shall be obligatory on the part of the shareholders,
promoters, promoter group, related parties, directors, key managerial personnel or
any other officer of a listed entity or of its holding, subsidiary, associate company
who are parties to such agreements to inform the listed entity about such agreements
within 2 working days from the date entering into such an agreement. The listed
entity, in turn, shall disclose the said details to the Stock Exchanges within the
timelines for disclosure of events specified in para A of Part A of Schedule III of the
LODR Regulations

Board’s opinion and Shareholder approval: After notification of the amendments

to the LODR Regulations, if any future agreement, whether or not the listed entity
is party to such an agreement but excluding agreements entered into the normal
course of business by a listed entity,imposes or has the effect of imposing any
restriction or liability on a listed entity, the Board of Directors shall provide its
opinion,along with detailed rationale,as to whether such an agreement is in the
economic interest of the listed entity. The directors of the listed entity in
consonance with their obligations of fiduciary nature are duty bound to assess the
agreement for ensuring that such an agreement is in the economic interest of the listed
entity. Further, in order to provide an opportunity to the shareholders to evaluate the
impact of such agreements, it is proposed that such agreements that have been entered
or are proposed to be entered shall not be effective unless and until approved by the
shareholders of the listed entity (approval through special resolution and ‘majority of
minority’).

Existing and subsisting agreements, including whose purpose and effect is to

impact management or control or impose any restriction or create any liability upon
a listed entity

Disclosure of existing and subsisting agreements: If there is any existing and

subsisting agreement as specified in para 4.2 above,as on March 31, 2023, the same
shall be disclosed to the Stock Exchanges,under regulation 30 of the LODR
Regulations, on or before June 30, 2023. Further, details of all such agreements shall
also be disclosed in the Annual Report of the listed entity for FY 2022-23

Obligation to inform the listed entity: If the listed entity is not party to any existing
and subsisting agreement specified at para 4.2 above, it shall be obligatory on the part
of the shareholders, promoters, promoter group, related parties, directors, key
managerial personnel or any other officer of a listed entity or of its holding,
subsidiary, associate company,who are parties to such agreements,to inform the listed
entity about such agreements on or before May 31, 2023

Board’s opinion and ratification of existing and subsisting agreements: If the listed
entity is not a party to any existing and subsisting agreement imposing or having the
effect of imposing any restriction or liability on a listed entity, the same shall be placed
before the Board of Directors for consideration.The Board of Directors shall provide its
opinion along with detailed rationale as to whether such an agreement is in the
economic interest of the listed entity. All such existing and subsisting agreements
have to be placed before the shareholders in the first general meeting (AGMor EGM)
of the listed entity held after April 1, 2023, for ratification and the future
obligations arising out of such agreements shall be contingent upon ratification by the
shareholders

Challenges faced by Companies in Compliance:

While the SEBI LODR Regulations have brought several benefits to listed companies,
compliance with the regulations has posed significant challenges. Some of the
challenges faced by companies include the high cost of compliance, the need for
additional resources, and the complexity of the regulations. Smaller companies have
particularly struggled to comply with the regulations due to their limited resources and
infrastructure.

Impact of SEBI LODR Regulations:

SEBI LODR (Listing Obligations and Disclosure Requirements) Regulations, 2015 are
designed to improve transparency and corporate governance practices in listed
companies in India. The regulations were introduced in order to align Indian corporate
governance practices with international best practices, and to address concerns about
related party transactions, board independence, and accountability.

The impact of SEBI LODR Regulations 2015 can be summarized as follows:

1. Improved Corporate Governance: The SEBI LODR Regulations 2015 have

led to significant improvements in corporate governance practices in Indian
listed companies. The regulations have strengthened the role of independent
directors, made the board of directors more accountable, and enhanced
transparency in financial reporting.
2. Disclosure Requirements: The regulations have also introduced more stringent
disclosure requirements for listed companies. This has led to greater
transparency in the operations of companies and has helped investors to make
informed investment decisions.
3. Related Party Transactions: SEBI LODR Regulations 2015 have introduced
stricter rules for related party transactions. The regulations require listed
companies to disclose all related party transactions and to obtain prior
approval from the audit committee for such transactions. This has helped to
prevent potential conflicts of interest and protect the interests of minority
shareholders.
4. Board Composition: The regulations have introduced stricter rules for board
composition. For instance, the regulations mandate that at least 50% of the
board of directors should consist of independent directors.
5. Investor Protection: The SEBI LODR Regulations 2015 have helped to
protect the interests of investors by ensuring that listed companies are more
transparent
 and accountable. The regulations have also made it easier for investors to
exercise their voting rights and participate in decision-making processes.

Challenges in Implementation:

While the SEBI LODR Regulations 2015 have had a positive impact on the Indian
capital markets, there have been challenges in their implementation. Some of the key
challenges are as follows:

1. Lack of Awareness: One of the main challenges in the implementation of the

regulations is the lack of awareness among companies and investors. Many
companies are not aware of the full extent of their obligations under the
regulations, and investors may not be fully aware of the information that they are
entitled to.

2. Compliance Burden: The regulations have increased the compliance burden on

listed companies, particularly smaller companies. This can be a significant
challenge, especially for companies that do not have the resources to hire
dedicated compliance teams.

3. Enforcement: While the SEBI LODR Regulations 2015 have introduced

stricter rules for listed companies, enforcement has been a challenge. There have
been instances where companies have violated the regulations but have not faced
any penalties. This can undermine the credibility of the regulations and erode
investor confidence.

4. Interpretation: The regulations are complex and open to interpretation. This

can lead to differences in interpretation among companies and investors, which
can create confusion and uncertainty.
 Conclusion:

In today's scenario, the SEBI LODR Regulations 2015 continue to play a crucial role in
ensuring transparency and accountability in Indian listed companies. The COVID-19
pandemic has highlighted the importance of good corporate governance practices, and
the SEBI LODR Regulations 2015 have helped to ensure that Indian-listed companies
adhere to these practices.The pandemic has had a significant impact on the Indian
capital markets, with the BSE Sensex and NSE Nifty 50 experiencing significant
volatility. In this scenario, the SEBI LODR Regulations 2015 have helped to maintain
investor confidence by ensuring that listed companies provide accurate and timely
disclosures to investors.

The regulations have also been instrumental in ensuring that listed companies maintain
a high level of corporate governance. The pandemic has highlighted the importance of
strong leadership and risk management practices, and the SEBI LODR Regulations
2015 have helped to ensure that Indian-listed companies adopt these practices.The
SEBI LODR Regulations 2015 have also been critical in ensuring that listed companies
maintain the highest standards of ethics and integrity. With the pandemic highlighting
the importance of responsible corporate citizenship, the regulations have helped to
ensure that listed companies act in the best interests of all stakeholders, including
employees, customers, and society at large.However, the pandemic has also presented
new challenges in the implementation of the SEBI LODR Regulations 2015. The
sudden and unprecedented nature of the pandemic has created significant uncertainties,
and companies have had to adapt quickly to the changing circumstances. This has
created challenges in compliance with the regulations, particularly with respect to
disclosures.

SEBI has recognized the challenges faced by listed companies during the pandemic and
has provided certain relaxations in compliance with the SEBI LODR Regulations 2015.
For example, SEBI has extended the deadline for submission of financial results,
allowed listed companies to hold virtual annual general meetings, and provided
relaxations in the disclosure requirements.However, SEBI has also emphasized the
importance of maintaining transparency and disclosure during the pandemic. In a
circular issued in April 2020, SEBI stated that listed companies must make disclosures
about the impact of COVID-19 on their business operations, financial position, and
future prospects. SEBI has also emphasized the importance of accurate and timely
disclosure of information, particularly in the current scenario.

Way Forward:

The SEBI LODR Regulations 2015 have been instrumental in improving corporate
governance practices and increasing transparency in Indian listed companies.
However, there is still scope for improvement in the implementation of the regulations.
To ensure the effective implementation of the regulations, the following steps can be
taken:

1. Continued Awareness Programs: SEBI can continue to conduct awareness

programs for listed companies and investors to increase their understanding of
the regulations.
2. Simplification: SEBI can simplify the regulaed companies, particularly
smaller companies.
3. Strengthened Enforcement Mechanisms: SEBI can further strengthen the
enforcement mechations further to make them easier to understand and
implement. This can help to reduce the compliance burden on listnisms to
ensure that companies that violate the regulations are penalized appropriately.
This can help to deter non-compliance and maintain investor confidence.
4. Technology Adoption: SEBI can encourage listed companies to adopt
technology to automate compliance processes. This can help to reduce the
compliance burden on companies and improve the accuracy of
disclosures.
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