Recent Relaxation by SEBI due to the COVID-19

Recent Circulars/ Amendment due to the COVID-19

Relaxation from compliance certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 due to the COVID -19 virus pandemic
 
Circular No.: SEBI/HO/CFD/CMD1/CIR/P/2020/38 dated March 19, 2020

The COVID-19 virus has hit populations around the world and has resulted in many restrictions, including free movement of people, thereby hampering businesses and day to day functioning of companies. It has been declared a ‘pandemic’ by the World Health Organization (WHO).
Due to the spread of the virus warrant the need for temporary relaxations in compliance requirements for listed entities. Accordingly, SEBI has decided to grant the following relaxations from compliance stipulations specified under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’) to listed entities:
 
A.    Extension of the timeline for filings:
 
The timelines for certain filings as required under the provisions of the LODR are extended, as follows:
 

Sl. no.		Regulation and associated filing	Filing				Relaxation w.r.t. the quarter / financial year ending March 31, 2020
			Frequency		Due within		Due Date		Extended date		Period of relaxation
1.		Regulation 7(3) relating to compliance certificate on share transfer facility		Half-yearly		One month of the end of each half of the financial year		April 30, 2020		May 31, 2020	1 month
2.		Regulation 13(3) relating to Statement of Investor complaints		Quarterly		21 days from the end of each quarter		April 21, 2020		May 15, 2020	3 weeks (appx.)
3.		Regulation 24A read with circular No CIR/CFD/CMD1/27/2019 dated February 8, 2019 relating to Secretarial Compliance Report		Yearly		60 days from the end of the financial year		May 30, 2020		June 30, 2020	1 Month
4.	Regulation 27(2) relating to Corporate Governance report			Quarterly		15 days from the end of the quarter		April 15, 2020		May 15, 2020	1 Month
5.	Regulation 31 relating to Shareholding Pattern			Quarterly		21 days from the end of the quarter		April 21, 2020		May 15, 2020	3 weeks (appx.)
6.	Regulation 33 relating to Financial Results			Quarterly / Annual		45 days from the end of the quarter for quarterly results   60 days from the end of Financial Year for Annual Financial		May 15, 2020   May 30, 2020		June 30, 2020   June 30, 2020	45 days     1 month

 
B. Relaxation of time gap between two board / Audit Committee meetings:

Regulatory provision	Relaxation
Regulation 17(2): The board of directors shall meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings.	The board of directors and Audit Committee of the listed entity are exempted from observing the maximum stipulated time gap between two meetings for the meetings held or proposed to be held between the period December 1, 2019 and June 30, 2020.   However the board of directors / Audit Committee shall ensure that they meet atleast four times a year, as stipulated under regulations 17(2) and 18(2)(a) of the LODR
Regulation 18(2)(a): The audit committee shall meet at least four times in a year and not more than one hundred and twenty days shall elapse between two meetings

 
This Circular shall come into force with immediate effect. The Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed entities that have issued specified securities and their material subsidiaries and also disseminate on their websites.

The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with regulations 101 and 102 of the LODR and the relaxations contained herein are subject to the provisions of the Companies Act, 2013 and rules made thereunder.

 

Additional relaxations / clarifications in relation to compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’) due to the COVID – 19 pandemic
 
Circular No.: SEBI/HO/CFD/CMD1/CIR/P/2020/63 dated April 20, 2020
 
SEBI, vide Circular no. SEBI/HO/CFD/CMD1/CIR/P/2020/38 dated March 19, 2020 and SEBI/HO/CFD/CMD1/CIR/P/2020/48 dated March 26, 2020 had provided relaxations from compliance with certain provisions of the LODR and circulars issued thereunder. It has been decided to grant the following further relaxations / issue clarifications regarding provisions of the LODR in the face of challenges faced by listed entities due to the COVID-19 pandemic:
 
A. Prior intimation to stock exchanges about meetings of the board:

Regulation 29 (2) of LODR specifies that stock exchanges need to be provided prior intimation about meetings of the board (excluding the date of the intimation and date of the meeting) as follows:
·         at least 5 days before the meeting if financial results are to be considered;
·         2 working days in other cases.

It has been decided that the above requirement under Regulation 29 (2) of LODR of prior intimation of 5 days / 2 working days shall be reduced to 2 days, for board meetings held till July 31, 2020.
 
B. Intimation to Stock Exchanges regarding loss of share certificates and issue of the duplicate certificates:

Regulation 39 (3) of LODR requires listed entities to submit information regarding loss of share certificates and issue of the duplicate certificates, to the stock exchange within two days of its getting information. It has been decided that any delay beyond the stipulated time will not attract penal provisions laid down vide SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/2018/77 dated May 3, 2018. This relaxation is for intimations to be made between March 1, 2020 to May 31, 2020.
 
C. Clarification regarding the use of digital signatures:

It is hereby clarified that authentication / certification of any filing / submission made to stock exchanges under LODR may be done using digital signature certifications until June 30, 2020.
SEBI, vide circular no. SEBI/HO/CFD/CMD1/CIR/P/2020/48 dated March 26, 2020 had relaxed the requirements relating to publication of advertisements in newspapers as required under Regulation 47 of LODR Regulations till May 15, 2020. A similar requirement that exists in regulation 52(8) and applies to entities which have listed their NCDs and NCRPS’ as required under Regulation 52(8) of LODR Regulations is also exempt till May 15, 2020.

This Circular shall come into force with immediate effect. The Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed entities and also disseminate the content on their websites.

The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with regulations 101 and 102 of the LODR and the relaxations contained herein are subject to the provisions of the Companies Act, 2013 and rules made thereunder.
This Circular is available at www.sebi.gov.in under the link “Legal-Circulars.
 
Relaxation in relation to Regulation 44(5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’) on holding of Annual General Meeting (AGM) by top 100 listed entities by market capitalization, due to the COVID –19 pandemic
 
 
Circular No.: SEBI/HO/CFD/CMD1/CIR/P/2020/71 dated 23 April 2020
 
Regulation 44(5) of the LODR requires top 100 listed entities by market capitalization to hold their Annual General Meeting (AGM) within a period of five months from the date of closing of the financial year. SEBI vide Circular dated March 26, 2020 (SEBI/HO/CFD/CMD1/CIR/P/2020/48) had relaxed this requirement by one month for listed entities whose financial year ends on March 31, 2020.
Subsequently, the Ministry of Corporate Affairs (MCA) vide Circular No.18/2020 dated April 21, 2020 has clarified that “…if the companies whose financial year (other than the first financial year) has ended on December 31, 2019 hold their AGM for such financial year within a period of nine months from the closure of the financial year (i.e., by September 30, 2020), the same will not be treated as a violation.”

Accordingly, regulation 44(5) of the LODR is relaxed whereby the top 100 listed entities by market capitalization whose financial year ended on December 31, 2019 may hold their AGM within a period of nine months from the closure of the financial year (i.e., by September 30, 2020).

This Circular shall come into force with immediate effect. Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed entities that have issued specified securities and also disseminate on their websites.

The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulations 101 and 102 of the LODR and the relaxations contained herein are subject to the provisions of the Companies Act, 2013 and rules made thereunder.

 
Advisory on disclosure of material impact of COVID-19 pandemic on listed entities under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
 
Circular No.: SEBI/HO/CFD/CMD1/CIR/P/2020/84 dated 20^th May 20
 
The COVID–19 pandemic and the consequent lockdown restrictions imposed by national governments has impacted businesses not only in India but all over the world. In view of the same, SEBI has granted several relaxations to the listed entities in terms of timelines for filing of various reports/disclosures under LODR Regulations.

While such a lockdown and disruption is unforeseen and beyond the control of the entities, such events can lead to distortions in the market due to the gaps in information available about the operations of a listed entity. Hence, it is important for a listed entity to ensure that all available information about the impact of these events on the company and its operations is communicated in a timely and cogent manner to its investors and stakeholders.
 
Various provisions under the LODR Regulations already require listed entities to disclose material events which have a bearing on its performance / operations. These provisions are reiterated below:

a. Regulation 30(3) of the LODR specifies that a listed entity shall make disclosures of events specified in Para B of Part A of Schedule III of LODR, based on application of the guidelines for materiality. Clause 6 of Para B of Part A of Schedule III of LODR specifies events such as “Disruption of operations of any one or more units or division of the listed entity due to natural calamity (earthquake, flood, fire etc.), force majeure or events such as strikes, lockouts etc.” that shall be disclosed upon application of the guidelines for materiality referred in Regulation 30(4).

b. SEBI vide Circular No. CIR/CFD/CMD/4/2015 dated September 9, 2015, has provided further guidance to the listed entities on such disclosures. Annexure I to the circular, specifically, provides the details to be disclosed in cases of disruptions of operations due to natural calamity, force majeure and other events.

c. Similarly, for non-convertibles, Regulation 51(1) of the LODR requires prompt dissemination to the stock exchange(s) of all information having bearing on the performance/operation of the listed entity, price sensitive information or any action that shall affect payment of interest or dividend. As per Clause 16 of Part B of Schedule III read with Regulation 51(2) of the LODR, a listed entity shall promptly inform to the stock exchange(s) of any other information having bearing on the operation/performance of the listed entity.

It is observed that many listed entities have made disclosures under LODR Regulations, primarily intimating shutdown of operations owing to the pandemic and resultant lockdowns. Some listed entities have provided information relating to actions taken towards sanitation, safety etc.; the number of entities that have disclosed the financial impact, however, is small.

Listed entities around the world have been making disclosures regarding the impact of the pandemic, including that on financial condition and results of operations, future operations, capital and financial resources, liquidity, assets, internal financial control over financial reporting and disclosure controls and procedures, demand for products/services etc. Regulators have encouraged timely reporting as well as complete and accurate disclosure of the impact, as far as possible.

Listed entities should endeavour to ensure that all investors have access to timely, adequate and updated information. Towards this end, entities are encouraged to evaluate the impact of the CoVID-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible and disseminate the same. An illustrative list of information that listed entities may consider disclosing, subject to the application of materiality, is given below:
• Impact of the CoVID-19 pandemic on the business;
• Ability to maintain operations including the factories/units/office spaces functioning and closed down;
• Schedule, if any, for restarting the operations;
• Steps taken to ensure smooth functioning of operations;
• Estimation of the future impact of CoVID-19 on its operations;
• Details of impact of CoVID-19 on listed entity’s –
Ø  capital and financial resources;
Ø  profitability;
Ø  liquidity position;
Ø  ability to service debt and other financing arrangements;
Ø  assets;
Ø  internal financial reporting and control;
Ø  supply chain;
Ø  demand for its products/services;
• Existing contracts/agreements where non-fulfilment of the obligations by any party will have significant impact on the listed entity’s business;
• Other relevant material updates about the listed entity’s business.

The above list is only illustrative and not exhaustive. Further, to have continuous information about the impact of CoVID-19 on operations, listed entities may provide regular updates, as and when there are material developments.

Additionally, while submitting financial statements under Regulation 33 of the LODR, listed entities may specify/include the impact of the CoVID-19 pandemic on their financial statements, to the extent possible.

When listed entities disclose material information related to the impact of CoVID-19, they should not resort to selective disclosures, keeping in mind the principles governing disclosures and obligations of a listed entity as prescribed in LODR Regulations, more specifically, having regard to the requirements of Regulation 4(2)(e) of the LODR on disclosure and transparency. Depending on circumstances peculiar to a listed entity and on account of passage of time, the listed entity shall revisit, refresh, or update its previous disclosures.

This Circular shall come into force with immediate effect. The Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed entities and also disseminate the same on their websites.

The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 101 of the LODR Regulations.

This Circular is available at www.sebi.gov.in under the link “Legal→Circulars”.