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May 2023

Major Changes in the Functioning of Listed Companies Imminent

By Jayant Thakur, Chartered Accountant
Reading Time 9 mins

BACKGROUND

SEBI has recently, on 21st February, 2023, circulated a consultation paper (“the Paper”) proposing amendments relating to topics that fall under what is commonly understood as corporate governance. These have also been approved by SEBI at its Board meeting on 29th March, 2023. The actual amendments have not yet been notified, and hence the text of the new provisions is awaited.

The amendments are proposed to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“the LODR Regulations”). These can be categorised into four broad areas:

a.    Agreements binding the listed entity, directly or indirectly.

b.    Special rights to certain shareholders.

c.    Sale, disposal or lease of assets outside the “scheme of arrangement route.”

d.    Certain directors having a tenure which does not require them to put themselves up for reappointment from time to time, which the Paper calls Board Permanency.

Other than (c), the remaining three effectively give some shareholders special rights, thus creating a category of shareholders that has more rights than others. This is against the principles of shareholder's democracy where all t

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