Key Takeaways from SEBI’s Board Meeting

Press Release No. PR No. 5/2022, Dated 15-02-2022

The Securities market regulator SEBI in its meeting held on 15. 02.2022 has approved various amendments such as making segregation of roles of chairperson and MD/ CEO for listed entities voluntary, Approval of amendments in SEBI (Debenture Trustee) Regulations, 1993, SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 and SEBI (Listing Obligations and Disclosure Requirements), 2015 to align the regulatory framework. Key highlights of the meeting are discussed hereunder:

1. SEBI makes segregation of roles of chairperson and MD/ CEO for listed entities voluntary

SEBI (LODR) was amended in May 2018 mandated the separation of the role of chairperson and MD/CEO for top 500 listed companies w.e.f April 01, 2022. The top 500 listed entities to ensure that the Chairperson of the board shall –

(a) be a non-executive director;

(b) not be related to the Managing Director or the Chief Executive Officer as per the definition of the term “relative” defined under the Companies Act, 2013.

Considering the various representations received from the industry the deadline to comply with this mandate was extended by two years in January 2020 i.e. till April 1, 2022.

SEBI in its meeting held today has reviewed the compliance status and found that the compliance level stood at only 54%. Expecting the remaining about 46% of the top 500 listed companies to comply with these norms by the target date i.e. April 1, 2022, would be a tall order. SEBI also received various representations from industry bodies and corporates regarding the difficulties and challenges faced by them to comply with this mandate.

Considering various representations received and constraints posed by the prevailing pandemic situation the SEBI decided the requirement for listed Cos to separate roles of chairperson and MD & CEO is voluntary. Now the mandatory requirement is set aside. It is their choice to separate the role of chairperson and MD/CEO or not.

2. Flexibility provided to Category -III Alternative Investment Funds (AIFS)

SEBI in its meeting also approved the amendment to SEBI (Alternative Investment Funds) Regulations, 2012. The amended provisions will provide flexibility to cat-III AIFs to calculate the investment concentration while investing in listed equity of Investee Company either on investable funds or net asset value of the fund. This will be subject to the conditions issued by the SEBI on a time to time basis.

3. Alignment of the regulatory framework for ‘security cover’, disclosure of credit ratings and due diligence certificate

The Board also approved the amendments to the following regulations:

(a) SEBI (Debenture Trustee) Regulations, 1993,

(b) SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021

(c) SEBI (Listing Obligations and Disclosure Requirements), 2015

In order to align the regulatory framework for ‘security cover’ the term ‘ asset cover’ has been substituted with the term ‘security cover’ in SEBI (Debenture Trustee) Regulations, 1993, and SEBI (Listing Obligations and Disclosure Requirements), 2015.

The SEBI has approved the amendments in SEBI (LODR), 2015 for prescribing the maintenance of security cover sufficient to discharge both principal and interest thereon.

SEBI has also given its approval for rationalising the disclosure requirement with regard to Credit Ratings. SEBI has decided to put in place the requirement of due diligence certificate for unsecured debt securities in the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

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