Sebi proposes new disclosure norms for governance by HVDLEs in India

Markets regulator Sebi on Friday proposed tweaking its format for disclosure of corporate governance framework by High Value Debt Listed Entities (HVDLE).

An entity having outstanding value of listed non-convertible debt securities of Rs 1,000 crore are referred to as 'High Value Debt Listed Entities'.

Under the proposal, an HVDLE should submit a secretarial compliance report in such form as specified by Sebi, to stock exchanges, within 60 days from end of each financial year, the regulator said in its consultation paper.

Further, the HVDLE should submit a periodic compliance report on corporate governance to the recognized stock exchanges within 21 days from the end of the period along with details of all material transactions with related details of all material transactions with related parties.

With regard to the disclosure and obligations of HVDLEs in relation to Related Party Transaction (RPT) , it has been suggested to specify the information should be placed before the audit committee, debenture trustee and the shareholders for consideration of RPTs.

It has been proposed that information be reviewed by the audit committee for approval of RPTs and by debenture trustee for providing no-objection certificate for RPTs.

"The audit committee shall also review the status of long-term (more than one year) or recurring RPTs on an annual basis. Further, an RPT for which the audit committee has granted omnibus approval shall continue to be placed before the shareholders if it is material in terms of ... the LODR (Listing Obligations and Disclosure Requirement) Regulations," Sebi suggested.

The notice being sent to the shareholders seeking approval for any proposed RPT should, in addition to the requirements under the Companies Act, include certain information as a part of the explanatory statement.

These include a summary of the information provided by the management of the listed entity to the audit committee, justification for why the proposed transaction is in the interest of the listed entity and where the transaction relates to any loans, inter-corporate deposits, advances or investments made or given by the listed entity or its subsidiary.

"The explanatory statement contained in the notice sent to the shareholders for seeking approval for an RPT shall provide relevant information so as to enable the shareholders to take a view whether the terms and conditions of the proposed RPT are not unfavourable to the listed entity, compared to the terms and conditions, had similar transaction been entered into between two unrelated parties," Sebi said.

"Transparency, accountability and shareholder empowerment are the bedrock of robust corporate governance, therefore listed entities shall ensure compliance with the spirit of the law and endeavour to provide relevant and detailed information to the shareholders in order to enable and empower the latter for taking an informed decision," it added.

The regulator proposed that omnibus approval granted by the audit committee should be valid for one year.

In order to align the processes to conduct AGMs for HVDLEs which are companies, the regulator suggested that the shareholders' approval of omnibus RPTs approved in an AGM should be valid up to the date of the next AGM for a period not exceeding 15 months.

In case of omnibus approvals for material RPTs, obtained from shareholders in general meetings other than AGMs, the validity of such omnibus approvals should not exceed one year.

The Securities and Exchange Board of India (Sebi) has sought public comments till May 26 on the proposals.