EY Sebi Listing Obligations and Disclosure Requirements Amendment Regulations 2018

Issue 5: June 2018
Reporting Insights
India
SEBI Listing Obligations and
Disclosure Requirements
(Amendment) Regulations,
2018
The Kotak Committee enhances
corporate governance
June 2018
Content
04 06 10
Executive summary Composition and role of The institution of
the board of directors Independent Directors (ID)
14 18 22
Board Committees Enhanced monitoring of Promoters / Controlling
group entities shareholders and RPTs
26 32 36
Disclosures and transparency Accounting and audit Investor participation in
related issues meetings of listed entities
38 44 46
Recommendations referred Appendix A – Amendments Appendix B – Amendments
to other agencies effective from 1 October 2018 currently applicable, with reporting
(half-year ended March 31, 2019) for year ended March 31, 2019
50 59
Appendix C - Recommendations Glossary
not notified by SEBI
Executive Summary
4 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

The Securities and Exchange Board of India (SEBI) released SEBI’s Corporate Governance Amendments reflects SEBI’s
on 9 May 2018, the SEBI (Listing Obligations and Disclosure acceptance of 42 recommendations made by the Kotak
Requirements) (Amendment) Regulations, 2018 (SEBI (LODR) Committee, out of which 14 recommendations were accepted
(Amendment) Regulations, 2018 or Corporate Governance with modifications either to scope of its application, or expected
Amendments or the Amendments) in order to adopt and give timeline for its implementation. SEBI decided to refer eight
effect to several recommendations that were proposed in a recommendations to various agencies (i.e., government,
Report given on 5 October 2017 by the SEBI Committee on professional bodies, other regulators, etc.), considering
Corporate Governance formed on 2 June 2017 under the that the matters involved relate to them. Remaining 31
Chairmanship of Mr. Uday Kotak (Kotak Committee). The SEBI recommendations were not accepted.
also issued a circular on 10 May 2018 for implementation of
The current corporate governance practices of the Indian listed
certain recommendations of the Kotak Committee.
corporate entities, where still a sizeable number of such entities
The Kotak Committee made a set of 81 recommendations are promoter-led, are on the verge of evolution with these
to the SEBI on the following issues with an aim to support Corporate Governance Amendments. These amendments pave
in improving standards of corporate governance of listed a way for aligning with some of the best practices followed
companies in India: globally and bring in a renewed focus on improved corporate
governance by way of better structure, more rigorous checks
1. Improving the role, composition and effectiveness of the
and balances and greater independence of all key gate-keepers
board and its committees, including evaluation practices
including boards and auditors.
2. Ensuring independence in the spirit of Independent
Directors and their active participation in the functioning of Though the SEBI aims to put into effect these Corporate
the company Governance Amendments from 1 April 2019, it has provided a
phased timeline from 1 October 2018 to 1 April 2020 for most
3. Improving safeguards and disclosures pertaining to Related
of the amendments, so that the companies are able to adjust
Party Transactions
to new governance requirements as well as overcome any
4. Improving transparency in accounting and auditing practices implementation challenges.
by the listed companies
We explore more in this publication about how these Corporate
5. Addressing issues faced by investors on voting and
Governance Amendments provide a mechanism to the listed
participation in general meetings
companies in creating long-term value and at the same time,
6. Enhanced monitoring of group entities protect shareholders’ interest by applying proper care, skills
7. Disclosure and transparency related issues, if any and diligence to business decisions.
SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 5

Composition and role of
the board of directors

Timeline indicating when the requirements kick-in pursuant to the amendments in this chapter
Time remaining 4 months 10 months 22 months
9 May 2018 1 Oct 2018 to 31 Mar 2019 1 Apr 2019 1 Apr 2020
June 2018
Notification of the SEBI For all listed entities: For all listed entities: For all listed entities:
(LODR) (Amendment) •• Disclosure of expertise/ •• Approval by special resolution •• Person must not be a director in
Regulations, 2018 skills overall of the for non-executive directors on more than seven listed entities
board* attaining the age of 75
For top 500 listed entities:
•• Person must not be a director
•• Separate roles of non-executive
in more than eight listed
Chairperson and MD / CEO
entities
•• Disclosure of expertise / skills For top 1,000 listed entities:
along with the name of each •• At least one independent woman
board member^ director on the board
For top 500 listed entities: For top 2,000 listed entities:
•• At least one independent •• Min. six directors on the board
woman director on the board •• Quorum higher of 1/3 of total
board strength of three directors
For top 1,000 listed entities:
•• Min. six directors on the board
•• Quorum higher of 1/3 of
total board strength or three
directors
* Currently applicable, with reporting from the year ended 31 March 2019
^ With effect from the year ended 31 March 2020
The board of directors is responsible to all the stakeholders for meeting the corporate governance standards
since they are responsible for the control and direction of the business decisions. These Amendments seek to
address aspects relating, inter-alia, to the size of the board and its diversity, disclosure of expertise / skills of
the directors, separation of the roles of chairperson and executive management and the maximum number
of directorships.
Minimum number of directors on the board Disclosure of expertise / Skills of directors

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(i)(2)] [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x)(c)(i)
(2)]
The Amendments propose to increase the minimum number
of directors on the Board to six as against three under the The Companies Act and SEBI (LODR) Regulations require
Companies Act. This will be in phased manner where it will the disclosure of a brief profile of a director on his/her
come into effect from 1 April 2019 for top 1,000 listed entities appointment, including expertise in specific functional areas,
and from 1 April 2020 for top 2,000 listed entities. without providing any matrix of skills / expertise / competence
of the board on a regular basis. The Amendments now require
Gender diversity on the board to disclose the following, in a phased manner:
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(i)(1)]
•• List of core skills / expertise / competencies identified by
The Amendments require at least one independent woman the board as required in the context of its business(es)
director on the board of the top 500 listed entities by 1 April and sector(s) for an efficient functioning. It also requires
2019 and for the top 1000 listed entities by 1 April 2020. The disclosure of those skills / expertise / competencies that
Companies Act and SEBI (LODR) Regulations require at least its board members actually possess, without disclosing the
one woman director to be on the board of listed entities who names of the directors. This is to be made effective from
may be either an independent or a non-independent director. the financial year ending 31 March 2019

•• Skills / expertise / competencies of each and every member including at least one independent director. The participation
of the board along with their names is required from the of the directors by video conferencing or by other audio-visual
financial year ending 31 March 2020 means shall also be counted for the purposes of such quorum.
The above amendment for top 1,000 listed entities shall come
Approval for non-executive directors on attaining into effect from 1 April 2019 and for top 2,000 listed entities
a certain age shall come into effect from 1 April 2020.
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(ii)]
The Amendments introduce a requirement to obtain Separation of the roles of non-executive

shareholders’ approval under a special resolution by a listed chairperson and managing director / CEO
entity for the appointment of a person or continuation of any [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(iii)
person as a non-executive director on attaining the age of 75 and Para 3(u)(c)]
years for the relevant term. Explanatory statement annexed to
The Amendments introduce a requirement to have the
the notice for such motion should indicate the justification for
chairperson of the board as a non-executive director and not
appointing such a person. While it is recognized that age itself
be related to the managing director or the chief executive
may not be a determinant of efficiency or capability of a person
officer as per Companies Act, 2013. The separation of powers
or the basis for disqualification, a higher level of shareholder
of the chairperson and MD/CEO would enable better and more
endorsement may be required for directors to continue in
balanced governance structure by enabling more effective
their position beyond a certain age. The Companies Act has a
supervision of the management.
similar requirement only for the managing director, whole-time
director, or managers attaining the age of 70 years. This amendment shall come into effect from 1 April 2020
for top 500 listed entities. However, this requirement is
Quorum for board meetings not applicable to the listed entities, which do not have any
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(iv)] identifiable promoters as per the shareholding pattern filed with
stock exchanges.
The Companies Act requires a quorum of one-third of the total
strength of the board of directors or two directors, whichever Maximum number of directorships
is higher, for every board meeting. SEBI (LODR) Regulations [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(e)]
do not prescribe any quorum for meetings of the board of The Amendments restrict maximum directorships to eight listed
directors. The Amendments require the quorum for every entities and seven listed entities with effect from 1 April 2019
meeting of the board of directors of the listed entity to be 1/3 and 1 April 2020 respectively. Directorship as independent
of its total strength or three directors, whichever is higher, director is restricted to seven listed entities, except where a

How we see it
•• The board’s role is to oversee the management and
governance of the company and to monitor senior
management’s performance. 155 of the top 500
NSE listed entities by market capitalization will have
to appoint a woman independent director by 1 April
2019, while 336 of the top 1,000 NSE listed entities
by market capitalization will have to do so by 1 April
2020*.
•• Gender diversity on the board will result in
introduction of new perspectives to the companies. At
the same time availability of directors with expected
degree of experience can be challenging and requires
person who is serving as a whole time director / managing time to enact.
director in any listed entity, shall serve as an independent •• Increasing the quorum of the meeting and the
director in not more than three listed entities. presence of at least one independent director will
The count for the number of listed entities on which a person result in better corporate governance. Independent
is a director / independent director shall be only those whose directors play a critical role in voicing on the actions
equity shares are listed on a stock exchange. of the board, flag non- promoter group issues,
assessing related party transactions and thus, result
References to top 500, top 1,000 and top 2,000 listed entities in balancing the powers of the board.
above shall be determined on the basis of market capitalization,
•• Separation of the roles of non-executive chairperson
as at the end of an immediate previous financial year.
and MD / CEO will result in improving Corporate
Governance standard in the listed entities and provide
Disclosure of board evaluation structural advantage to the company’s board to act
[SEBI Circular: SEBI/HO/CFD/CMD/CIR/P/2018/79, dated May independently. There are 640 NSE listed entities
10, 2018] where the same person holds both, the role of a
chairman and the managing director*
The Companies Act and SEBI (LODR) Regulations contain
broad provisions on board evaluation, i.e., evaluation of the •• Multiple directorships beyond a reasonable limit
performance of: (i) The board as a whole, (ii) Individual directors may lead to a director to not being able to allocate
(including Independent Directors and chairperson) and (iii) sufficient time to a particular company, and thus
Various committees of the board. The provisions also specify hindering their ability to play an effective role.
responsibilities of various persons/committees for the conduct Accordingly, such restriction is a welcoming move
of such evaluation and the disclosure requirements that are a •• Increasing the number of directors on the board
part of the listed entity’s corporate governance obligations. may result in increase in the cost of governance and
shareholders should appoint directors after careful
In order to strengthen disclosures on board evaluation, SEBI’s
consideration of who can add value to the whole
circular specifies that every listed entity may consider the
governance process
following as a part of its disclosures on board evaluation:
i. Observations of board evaluation carried out for the year

ii. Previous year’s observations and actions taken *Source: http://indianboards.com/pages/resource.aspx#
iii. Proposed actions based on current year observations

The institution of
Independent Directors (ID)

Time remaining 4 months 10 months 22 months
June 2018
Notification of the SEBI For all listed entities: For all listed entities:
(LODR) (Amendment) •• Definition of ID exclude persons who •• Evaluation of IDs by the board
Regulations, 2018 constitute the “promoter group” •• Disclosure of IDs independence
•• Resolution of board inter-locks in Corporate Governance Report
•• Alternate director cannot continue or be •• Declaration of independence to
appointed as ID be submitted by ID
•• Confirmation by the board regarding •• Disclosure on resignation of IDs
fulfilment of specified conditions by IDs* to stock exchanges
•• Disclosure on resignation of IDs in annual
report*
For top 500 listed entities:

•• Director and Officers Insurance for all
the IDs
* Currently applicable, with reporting from the year ended 31 March 2019
The institution of Independent Directors is vital for an efficient and effective functioning of the corporate
governance framework in any company. Given the importance of the role of an ID, these Amendments seek
to lay greater emphasis on the aspects, such as the definition and scope of independent directors, eligibility
criteria, their reasons for resignation and addressing the fear of disproportionate liability.
Eligibility criteria for Independent Directors Eligibility criteria

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(vi), The Amendments have modified the criteria for evaluation of
Para 3(c)(i), Para 3(l)(ii), Para 3(x)(c)(i)(2)] IDs by the board by specifically requiring an evaluation of:
Definition of Independent Directors a. Performance of the directors
The Amendments extend the definition of an “Independent b. Fulfilment of the independence criteria as specified in the
Director” to exclude even those persons who are members SEBI (LODR) Regulations and their independence from the
of the “promoter group” of a listed entity. The Amendments management
are also made to the definition in order to exclude the
In addition to above, the Amendments introduce a new
possibilities of “board inter-locks” that arise due to common
requirement for independent directors to submit a declaration
non-independent directors on the boards of listed entities. The
stating that they meet the criteria of independence as specified
definition would now exclude persons who are non-independent
in the amended definition of an “Independent Director”,
directors of another company on the board of which any non-
followed with a confirmation that they are not aware of any
independent director of the listed entity is an independent
circumstance or situation, which exists or may be reasonably
director.
anticipated, that could impair or impact their ability to
Companies will need to comply with the amended definition of discharge duties with objective independent judgements and
Independent Directors with effect from 1 October 2018. without any external influence.
Example of a “board inter-lock” situation Such declaration and confirmation needs to be given by every
ID at the board meeting in which they first participate and
If Mr. A is an executive director on company A (being a listed
thereafter, at the first board meeting held in every financial
company) and is also an independent director on the board of
year or whenever there is any change in the circumstances
company B, then no non-independent director of company B
affecting their independence status.
can be an independent director on the board of company A.
The Amendments also cast an onus on the board of directors
of the listed entity to assess the veracity of the declaration and
confirmation given by ID before taking the same on record.

How we see it
•• Independent Directors have emerged as the
cornerstones of the worldwide Corporate Governance
movement. Their increased presence in the board room
has been hailed as an effective deterrent to fraud and
Further, in the Corporate Governance Report, the board is
mismanagement, inefficient use of resources, inequality
required to state their confirmation that independent directors
and unaccountability of decisions and as a harbinger for
fulfill the conditions specified in SEBI (LODR) Regulations and
striking the right balance between individual, economic
are independent of the management.
and social interests.
•• Changes brought in will ease the burden of ensuring
Disclosures on resignation of Independent independence of companies as well as their IDs.
Directors However, these changes would not relieve the highly
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(v) and onerous obligations on IDs including pursuance of
Para 3(x)(c)(i)(2)] several executive responsibilities. Moreover, the reason
The Amendments introduce a new requirement for the listed for resignation for IDs need to be disclosed in the Annual
entities to disclose to the stock exchanges and also as a part Report for the year ended 31 March 2019 and with
of the Corporate Governance Report, the detailed reasons for effect from 1 April 2019 stock exchanges need to be
resignation of the Independent Directors before the expiry of intimated. This will require that companies be prepared
their tenure along with a confirmation given by such director(s) with an effective reporting mechanism in place.
that there are no other material reasons other than those
provided.
Directors and Officers Insurance for Independent Interplay with Companies (Amendment)
Directors Act, 2017
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(l)(ii)]
The Companies (Amendment) Act, 2017 introduces
The Amendments introduce a new requirement for top 500
the concept of materiality in section 149(6) of
listed entities to undertake Directors and Officers (D and O)
the Companies Act, 2013, when determining
Insurance for all their independent directors of such quantum
independence arising from pecuniary relationships
and for such risks as may be determined by its board of
between IDs and the company, its holding, subsidiary
directors.
or associate company, or company’s promotors or
Market capitalization would be calculated as on 31 March of the directors. Accordingly, the amendments state that
preceding financial year for determining top 500 listed entities. the remuneration as a director or transaction not
Companies will need to comply with the D and O Insurance exceeding to 10% of the director’s total income or
requirement with effect from 1 October 2018. such amount as may be prescribed will not impair
independence.
Alternate directors for Independent Directors This move is with a view to align with the concept
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(l)(i)] under SEBI (LODR) Regulations that only “material”
pecuniary relationships disqualify a person for
The Amendments prohibit an alternative director from being
appointment as an ID.
appointed or continue as an independent director of a listed
entity. This shall take effect from 1 October 2018.

Board
Committees

Time Remaining 4 months 10 months 22 months
June 2018
Notification of the SEBI For all listed entities:

(LODR) (Amendment) •• SRC chairperson to be present in AGM
•• Audit committee review of utilization of
Regulations, 2018 •• NRC quorum higher of 1/3 of total strength
loans / advances / investments
or two directors
•• Definition of senior management widened
•• SRC and NRC to meet at least once a year
and Nomination and Remuneration
Committee (NRC) to recommend board on For top 500 listed entities:
remuneration of senior management •• Mandatory set-up of Risk Management
•• Min. three directors of which at least Committee (RMC) and to specifically cover
one ID on the Stakeholders Relationship cyber security
Committee (SRC) •• RMC to meet at least once a year
•• SRC’s roles and responsibilities widened
The board of directors is responsible for acting on behalf of and in the interest of the stakeholders. The
constitution of committees enables the board to effectively govern and make decisions on various aspects
through small-group discussions, focus and diligence. While the Companies Act and the SEBI (LODR)
Regulations require several mandatory board committees with distinct roles and responsibilities, these
Amendments not only widen the role of the committees but also address the fundamentals such as balanced
representation in board committees and a quorum for each such committee.
Role of audit committee Amendment to the role

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(u)(a)] The role of the NRC of the board of a listed entity is amended
The Amendments widen the role of audit committee by to include recommendations to be made to the board on
requiring a review of utilization of loans and / or advances from all the payments made, in whatsoever form, to the senior
investment by the holding company in the subsidiary exceeding management.
INR100 crore or 10% of the asset size of the subsidiary,
whichever is lower. This requirement is also applicable to loans / Composition and Role of Stakeholders
advances / investments existing as on 1 April 2019.
Relationship Committee
Role of Nomination and Remuneration Committee [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(g) and
Para 3(u)(b)(ii)]
(NRC)
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(c)(iii) The Amendments introduce the requirement to have at least
and Para 3(u)(b)(i)] three directors, with at least one independent director, as
members of the Stakeholders Relationship Committee (SRC).
Definition of senior management
Also, it requires the SRC to meet at least once in a year.
The Amendments modify the definition of “senior
The current role of the SRC comprises considering and
management” by specifying that it comprises all members of
resolving the grievances of the security holders of the listed
the management one level below the chief executive officer /
entity including complaints related to transfer of shares, non-
managing director / whole time director / manager (including
receipt of annual report and non-receipt of declared dividends.
chief executive officer / manager, in case they are a not part
The Amendments modify and widen the role and responsibilities
of the board) as well as the company secretary and the chief
of SRC to include the following:
financial officer.

4. Review of the various measures and initiatives taken by
the listed entity for reducing the quantum of unclaimed
Interplay with Companies (Amendment) Act, dividends and ensuring timely receipt of dividend warrants
2017 / Annual Reports / statutory notices by the shareholders of
the company
The Companies (Amendment) Act, 2017 requires that the Further, the Chairperson of the SRC will now be required to be
remuneration policy for directors, key managerial personnel present at the AGMs to answer queries of the security holders.
and other employees should be placed on the website of the
company, if any. The salient features of the policy and any
changes, therein along with the web address of the policy, if Quorum for Nomination and Remuneration
any, will be disclosed in the board’s report. Committee Meetings
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(f)(a) and
The interplay of these amendments imply that the
Para 3(f)(b)]
remuneration policy for directors, key managerial personnel
and other employees would also cover the increased scope The Amendments specify that the quorum for a meeting of the
of the senior management’s remuneration, which should be NRC shall be either two members or one third of the members
disclosed on the website and also be disclosed as a part of the of the committee, whichever is greater, including at least
board’s report. one independent director in attendance. Further, the NRC is
required to meet at least once in a year.
Applicability and Role of Risk Management

Committee
1. Resolving the grievances of the security holders of the listed
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(h)(a) and
entity including complaints related to transfer/transmission
Para 3(h)(b)]
of shares, non-receipt of annual report, non-receipt of
declared dividends, issue of new/duplicate certificates, The Amendments widen the requirements of Risk Management
general meetings, etc. Committee (RMC) to top 500 listed entities by market
2. Review of measures taken for effective exercise of voting capitalization determined as at the end of the immediate
rights by the shareholders previous financial year. It introduces as a function of the RMC
to also specifically cover cyber security, given the increase
3. Review of adherence to the service standards adopted
in the use of cyber and digital technology. In addition, the
by the listed entity in respect of various services being
Amendments require the RMC to meet at least once in a year.
rendered by the Registrar & Share Transfer Agent

How we see it
•• Scrutinizing the purpose of lending funds, overseeing performance of proper analysis and credit
evaluation, sufficiency of the subsidiary’s internal cash generating ability to repay these amounts and
other similar factors will be required to be assessed by the audit committee for mitigating any risks to the
Group. Companies will need to devise systems and processes to accurately and efficiently capture this
information.
•• Widening the roles and responsibilities of the SRC is a move towards providing prompt and high quality
investor services to those shareholders who hold a non-controlling interest or are other security holders
(including preference holders and debenture holders). Inclusion of an independent director as a part of
this committee and presence of the Chairperson of the Committee would help in building an effective
Corporate Governance practice.
•• As a part of the increased roles and responsibilities of the RMC, it should oversee techniques to protect
the integrity of networks, software, programs and data from attack, damage and unauthorized access.

Enhanced monitoring
of group entities

June 2018
(LODR) (Amendment) •• Secretarial audit to be •• Wider ambit of definition of
Regulations, 2018 performed for every material subsidiary
listed entity and its •• Appoint at least one ID on
material unlisted Indian the board of unlisted material
subsidiary* subsidiary including foreign
•• Group Governance subsidiaries
Unit/Committee set-up
* Currently applicable, with reporting from the year ending 31 March 2019
Complexities in businesses increase as companies grow in scale and size with increased cross-border flow
of capital. Globalization has led to blurring of the lines of businesses of any single company. The operations
of globalized companies have created significant presence across different geographies which add to legal,
financial as well as structural complexities that has necessitated the creation of holding and operating
network of entities (i.e., subsidiaries, associates and joint ventures).
To keep a track and manage operations at the group level, it is important for the boards to ensure that good
governance trickles down to the entire structure. These Amendments provide for better transparency on the
governance levels of downstream investee entities of the listed entity and to improve the monitoring of the
listed entity at a consolidated level.
Obligation on the board of the listed entity with Corporate Governance requirements for subsidiary of
respect to subsidiaries listed entity
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(c)(ii), The requirement to appoint at least one independent director of
Para 3(j)(a) and Para 3(j)(b)] a listed entity as a director on the board of an unlisted material
Definition of “material subsidiary” subsidiary has been expanded to those material subsidiary
entities, which are incorporated outside India.
The Amendments widen the ambit of material subsidiary to
mean a subsidiary whose income or net worth exceeds 10% Further, the Amendments require the board of a listed entity
(from the current 20%) of the consolidated income or net to have under its purview all significant transactions and
worth, respectively, of the listed entity and its subsidiaries in arrangements entered into it by all its unlisted subsidiaries (as
the immediately preceding accounting year. compared to the current applicability to only material unlisted
subsidiary). This would be brought to the notice of the board of
However, material subsidiary is considered based on the 20% the listed entity by the management of the unlisted subsidiary
threshold for the purpose of appointment of an independent on a periodic basis.
director of a listed entity as a director on the board of an
unlisted material subsidiary, whether incorporated in India SEBI (LODR) Regulations specify that “significant transaction or
or not. arrangement” means all individual transaction or arrangement
that exceeds or is likely to exceed 10% of the total revenues
or total expenses or total assets or total liabilities, as the case
may be, of the unlisted subsidiary for immediately preceding
accounting year.

The Amendment has extended this requirement to all unlisted
subsidiaries instead of only “material” subsidiaries. This is
based on the perspective that transactions which could be
higher than the prescribed limits of even those companies
which are not material subsidiaries should also be covered.
Group Governance Unit / Committee and Policy

[SEBI Circular: SEBI/HO/CFD/CMD/CIR/P/2018/79, dated May
How we see it 10, 2018]
There are currently no provisions under the Companies Act or

•• Companies with a large number of subsidiaries will SEBI (LODR) Regulations with respect to group governance
need to put in place a strong monitoring mechanism unit/governance committee or a group governance policy.
so that directors of the holding company are aware of
all significant transactions on a timely basis. In order to improve monitoring of group entities, SEBI’s circular
does not amend the SEBI (LODR) Regulation but rather
•• In addition, companies will also need to have an
specifies that where a listed entity has a large number of
effective governance program in place even for its
unlisted subsidiaries:
subsidiaries, such that it aligns with the governance
program at the listed parent entity’s board, which i. The listed entity may monitor their governance through a
results in same values, ethics, controls and processes dedicated group governance unit or Governance Committee
being reflected across the Group. Appointing at least comprising the members of the board of the listed entity
one independent director to the board of all unlisted ii. A strong and effective group governance policy may be
material subsidiary is a step in this direction to build established by the entity
an effective oversight role.
iii. However, the decision of setting up of such a unit/committee
•• Governance practices for all unlisted subsidiaries, and having such a group governance policy may be left to
whether in India or overseas, need to be such that it the board of the listed entity
recognizes the differences in legal environment, tax
regimes and local business cultures. With an increase
in complexity of transactions, increased risks and Secretarial audit
responsibilities of directors, having all significant [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(k)]
transactions and arrangements of all unlisted The Amendments extend the requirement of a secretarial
subsidiaries under the purview of the listed parent audit to every listed entity and its material unlisted Indian
entity’s board creates a strong group governance subsidiaries along with the requirement to annex with its annual
framework that can prevent costly financial and report, a secretarial audit report given by a practicing company
reputational damage. secretary. The SEBI is required to prescribe the form of the
secretarial audit report and these Amendments shall take
effect from the year ending 31 March 2019.

Interplay with Companies (Amendment) Act, 2017
The definition of subsidiary in section 2(57) of the Companies Act, 2013 has been amended to state that the control
should be over more than half of “total voting power” instead of “total share capital”, which now becomes consistent
with AS 21 that defines control based on voting power. Such an amendment narrows down the control criteria to merely
those instruments issued by an entity which contains voting rights (for e.g., different classes of equity shares would be
considered, but only optionally convertible preference shares will be excluded if they do not have voting rights).
This amendment is in contrast with the definition of control under Ind AS 110, which requires considering even the
potential voting rights (which are substantive and exercisable at the time of relevant decision-making) are to be
considered as well as in contrast with the definition of “material subsidiary” above. Accordingly, listed entities will have
to apply three different definitions of subsidiary / material subsidiary for the purpose of legal and regulatory compliance
under the Companies Act, SEBI (LODR) Regulations and for preparing Consolidated Financial Statements as per the
applicable accounting standards viz., Indian GAAP or Ind AS.

Promoters / Controlling
shareholders and RPTs

June 2018
(LODR) (Amendment) •• Disclosure of RPTs on a •• Definition of related party is
Regulations, 2018 consolidated basis to stock widened and disclosure required
exchanges and on website* in annual report
•• Related parties allowed to cast a •• Shareholder approval required
negative vote on RPTs* for payment of remuneration to
•• Threshold specified for Royalty executive promoter directors/
and Brand payments to related non-executive directors
parties* exceeding threshold
•• Disclosure of board approved
thresholds for material RPTs*
* Applicable from 1 October 2018, with effect from the half-year ending 31 March 2019
A majority of Indian listed entities continue to be promoter driven, with significant shareholding held by
promoter/promoter group. Accordingly, checks and balances on interactions and relationships between
listed entities and the promoters/significant shareholders is crucial for good governance. Therefore, these
Amendments focus on approval and disclosure of related party transactions including the materiality
thresholds as well as remuneration policy for executive / non-executive directors.
Disclosure of Related Party Transactions (RPTs) by the listed entity.

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(a), Para All listed entities will need to comply with this amendment from
3(i)(e) and Para 3(x)(a)] the half-year ending 31 March 2019.
Definition of “Related Party” Further, the Amendments have introduced, as a part of the
The definition of “related party” has been modified to include “Related Party Disclosure” in the annual report, disclosures
any person or entity belonging to the promoter or promoter of transactions of the listed entity with any person or entity
group of the listed entity and holding 20% or more shareholding belonging to the promoter or promoter group which hold(s) 10%
in the listed entity. This follows on from Kotak Committee’s or more shareholding in the listed entity. This disclosure should
observations that certain promoters / promoter group entities also be in the format prescribed in the relevant accounting
were not getting categorized as related parties under SEBI standards for annual results.
(LODR) Regulations, as these did not strictly fall under the
definition of “related parties” under the relevant accounting
standards.
How we see it
Amendment to disclosures
Amending the definition of related party is a move
The Amendments introduce a new requirement for a listed
in the right direction for identifying the “related
entity to submit disclosures of related party transactions on a
party” relationships in true spirit of the definition
consolidated basis as per the format specified in the relevant
given in the relevant accounting standards as well
accounting standards for annual results to stock exchanges and
as resulting in the disclosure of such related party
to publish the same on its website. This requirement needs to
transactions as a better corporate governance
be complied within 30 days from the date of publication of the
practice.
standalone and consolidated financial results for the half-year

Interplay with Companies (Amendment) Act,
2017 How we see it
Negative voting by related party on a related party
The definition of related party in section 2(76) of the transaction enables those related party individuals or
Companies Act, 2013 used the word ‘company’, e.g., it used entities to express their dissenting opinion when they
the words “holding”, “subsidiary” or “associate’ company”. are not in favor of the transaction even if they are a
Foreign company is not a company under the Companies party to such a transaction, thereby providing more
Act, 2013; rather, it is a body corporate. Thus, some may commercial substance to it.
have interpreted the definition of the term “Related Party” to
include only companies / entities incorporated in India within its
purview. Such an interpretation will have a consequence that
companies / entities incorporated outside India, such as foreign
holding / subsidiary / associate / fellow subsidiary of an Indian
company, were excluded from the purview of related party Interplay with Companies (Amendment) Act,
requirements for an Indian company. This was not the intention 2017
of the government and such an interpretation may have
seriously diluted compliance with related party requirements Section 47 of the Companies Act, 2013 dealing with members’
under the 2013 Act. To address this issue beyond any doubt, right to vote has been amended to align with section 188(1) of
the Companies (Amendment) Act, 2017 substitutes the word the Companies Act, 2013 thereby restricting related parties’
“company” with the word “body corporate”. Hence, upon right to vote on ordinary/special resolution to approve related
enactment of the Companies (Amendment) Act, 2017, it is party transactions.
now clear that a body corporate that is a holding/subsidiary/
Further, the amendment also provides the flexibility of
associate/fellow subsidiary of an Indian company should be
contracts being voidable at the option of the shareholders in
treated as a related party.
addition to contracts being voidable at the option of the board.
Further, the associate company and its investor should be These contracts/arrangements are those that are entered
treated as related parties for each other, instead of only an by a director or any other employee without obtaining board
associate company considered as the “Related Party” of its consent and/or approval by an ordinary resolution in the AGM.
investor.
Approval of RPTs
Royalty and brand payments to related parties
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(i)(c) and
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(i)(b)]
Para 3(i)(d)]
Many companies make payment towards royalty / brand usage
The Amendments in the clauses pertaining to the approval
as a part of recognizing value in brand strength and product
of related party transaction allows related parties to cast a
technology. For shareholders to be able to comprehend the
negative vote, as the Kotak Committee believes that such a
terms and conditions of such payouts, the Amendments intend
vote cannot be considered to be in conflict of interest.
that all companies make better disclosures on the value a
Such an amendment has been made in order to plug the gap company derives from a brand or technology, for which it has
in the legal framework, wherein, Companies Act allows related agreed to pay royalty, brand, or technical fees to the parent
parties to vote on (but not in favor of) a transaction in which company / promoters.
they are interested. On the other hand, currently, SEBI (LODR)
Regulations require all related parties to abstain from voting
on a transaction in which they are interested. This brings
consistency between the two legislations and aligns the SEBI
(LODR) Regulations with the Companies Act.
This amendment shall come into effect from the half-year

ending 31 March 2019.

2017
Sections 197 and 198 of the Companies Act, 2013 dealing with
managerial remuneration have been amended. Amendment
to section 197 removes the requirement to seek the central
government’s approval for paying remuneration exceeding 11%
of the net profit of the company, but requires the following:
•• Prior approval of the bank or public financial institution

concerned, or non-convertible debenture holders or other
secured creditors, as the case may be, whose dues have
The Amendment specifies a threshold of 2% of the annual been defaulted in payment by the company. Such prior
consolidated turnover of the listed entity as per its last audited approval to be obtained by the company before its general
financial statements for transactions involving payment made meeting
to a related party with respect to brand usage or royalty, •• For exceeding the limits of remuneration payable to each
either transacted individually or taken together with previous managerial personnel / director and total remuneration
transactions during a financial year. payable which are prescribed in the second proviso to
This amendment shall come into effect from the half-year Section 197(1), a special resolution will be required instead
ending 31 March 2019. of an ordinary resolution at the shareholder’s meeting
These amendments align with the amendments in SEBI (LODR)
Remuneration to executive promoter directors Regulations that require only shareholder approval for paying
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(v)(2)] managerial remuneration in excess of the specified limits.
The Amendments introduce a new requirement to obtain Further, section 198 has been amended to clarify the following
a shareholder approval by a special resolution for the total in calculating the profits for managerial remuneration:
remuneration paid to the executive directors who are promoters •• Profit on sale of investments will not be excluded for
or members of the promoter group, if: investment entities since that is their principal business
•• The annual remuneration payable to such executive activity
director exceeds INR5 crores or 2.5% of the net profits of •• Deduct brought forward losses relating to any year
the listed entity, whichever is higher beginning on or after the commencement of Companies
•• In case if there is more than one such director, the Act, 2013 insofar as such losses have not been deducted in
aggregate annual remuneration to such directors exceeds any subsequent year
5% of the net profits of the listed entity
Shareholders’ approval shall be valid only till the expiry of the

Materiality policy
term of such director and the calculation of net profit should be
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(i)(a)]
as per section 198 of the Companies Act.
Currently, SEBI (LODR) Regulations require listed entities to
formulate a policy on materiality of related party transactions
Remuneration to non-executive directors
and on dealing with related party transactions. The
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(d)(v)(1)]
Amendments intend that companies also disclose, as a part of
The Amendments introduce a new requirement to obtain their materiality policy, a clear threshold limits duly approved
shareholder approval by a special resolution every year, in case by the board of directors. Such materiality policy is required to
the annual remuneration payable to a single non-executive be reviewed and updated by the board of directors at least once
director exceeds 50% of the total annual remuneration payable every three years.
to all non-executive directors, giving details of the remuneration
This amendment shall come into effect from the half-year
thereof.
ending 31 March 2019.

Disclosures and
transparency

June 2018
Notification of the SEBI For all listed entities (from 1 Oct. 2018): For all listed entities:
(LODR) (Amendment) •• Disclosure of credit ratings of all •• Disclosure of subsidiary
Regulations, 2018 outstanding instruments accounts separately on website
•• Prior intimation to stock exchange of
board meeting to discuss bonus issue
For all listed entities:

•• Searchable format of disclosures to
stock exchanges and on website
For all listed entities:
•• Timeline for annual report submission to stock exchanges and sending to shareholders
aligned*;
•• Sending soft copy of annual report to shareholders with registered email id*;
•• Disclosures of Key Changes in Financial Indicators*;
•• Disclosure of utilisation of Proceeds of Preferential Issue and Qualified Institutional
Placement (QIP)*;
•• Disclosure of no. of other boards or committees on which director is a member or
chairperson*;
•• Disclosure of CS certificate that no director is a disqualified director*;
•• Disclosure of board committee recommendations not accepted by the board*
Disclosure and transparency underpin good governance and the efficient functioning of the markets. A
corporate governance framework should ensure that timely and accurate disclosure is made on all material
matters regarding the corporation, including the financial situation, business performance, strategic
shifts, ownership and governance of the company. These Amendments seek to address aspects relating
to proactive disclosure of material information by boards and management so as to build trust with
stakeholders, which may impact decision making variables.
Submission of annual reports The Amendments, aiming to reduce the above time-gap
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(q) and between disclosures to the shareholders and submission to
Para 3(r)(i)] stock exchange, requires the listed entity to submit to the stock
exchange and publish on the website:
Timeline for submission of annual report to stock exchange
and publishing on website: •• A copy of the annual report shall be sent to the
shareholders along with the notice of the AGM to be
SEBI (LODR) Regulations require submission of annual report to disclosed not later than the day as dispatched to the
the stock exchange within 21 working days of it being approved shareholders;
and adopted in the AGM as per the provisions of the Companies
•• In the event of any changes to the annual report, the
Act. While, on the other hand, the SEBI (LODR) Regulations
revised copy along with details of and explanation for the
require sending the annual report to shareholders in not less
changes is required to be sent in not later than 48 hours
than 21 days before the AGM.
after the AGM.

Submission of annual report in electronic mode: or for any fixed deposit program, or any scheme or proposal
involving mobilization of funds, needs to be disclosed along with
The Companies Act read with the relevant Accounts Rules
any revisions thereto during the relevant financial year.
require listed entities to send soft copies of financial statements
by electronic mode to those members (holding Demat Currently, there is no specific provision in the Companies Act
securities) whose email ids are registered with the depository regarding the disclosure of credit ratings however, SEBI (LODR)
and also dispatch physical copies in all other cases. Regulations require disclosure of revision in credit rating for
different instruments from time to time to the stock exchanges
However, currently, SEBI (LODR) Regulations requires sending
as and when changes happen.
soft copies of full annual report to all those shareholders
who have registered their email address(es). While it requires All listed entities will need to comply with this amendment with
sending hard copies of statement containing the salient effect from 1 October 2018.
features of all the documents, as per Section 136 of the
Companies Act read with Companies (Accounts) Rules, 2014, to Searchable formats of disclosures
those shareholders whose email address(es) are not registered. [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(r)(ii)]
Further, it requires sending hard copies of full annual reports to
those shareholders who request for the same. The Amendments introduce the requirement for the listed
entity to make disclosures:
The Amendments now clarifies that the listed entity to send soft
copies of full annual report to all those shareholders who have •• to stock exchanges, in XBRL format, in accordance with the
registered their email address(es), either with the listed entity guidelines specified by the stock exchanges from time to
or with any depository. time;
•• to stock exchanges and on the entity’s website in a format
Both of the above requirements with respect to the “submission
that allows users to find relevant information easily through
of annual reports” are applicable in respect of the annual
a searching tool.
reports filed for the year ending 31 March 2019 and
thereafter. The above requirement does not override any statutory
requirement to make disclosures in formats which may not be
searchable, such as copies of scanned documents.
All listed entities will need to comply with this amendment from
Interplay with Companies (Amendment) Act, the date of notification of these amendments, i.e., 9 May 2018.
2017 Currently, there is no specific provision for the same in the
Companies Act and SEBI (LODR) Regulations.
The Companies (Amendment) Act, 2017 amends section 136
of the Companies Act, 2013 by allowing companies to circulate
financial statements at a shorter notice, if it is so agreed by Disclosures of key changes in financial indicators
95% of the members entitled to vote at the meeting. This is in [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x)(b)]
line with the existing requirement to call an AGM at a shorter The Amendments introduce a requirement for all the listed
notice. entities to disclose in the Management Discussion and Analysis
Practically, listed entities may be able to take the benefit, (MD&A) section of the annual report:
of circulating financial statements at a shorter notice, in a. Details of significant changes (i.e., change of 25% or more
complying with the requirement to submit annual report to as compared to the immediately previous financial year)
stock exchange and publish it on the website, which needs to in the key financial ratios, along with detailed explanations
be no later than the day as dispatched to the shareholders. thereof, including:
1. Debtors turnover
2. Inventory turnover
Disclosures pertaining to credit rating 3. Interest coverage ratio
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(t)(ii) and 4. Current ratio
Para 3(x)(c)(ii)]
5. Debt equity ratio
The Amendments require listed entity to disclose, under a 6. Operating profit margin (%)
separate section on its website, all credit ratings obtained for all
7. Net profit margin (%)
its outstanding instruments which shall be updated immediately
as and when there is any revision in any of the ratings. Further, or, sector-specific equivalent ratios, as applicable
as a part of the Corporate Governance Report, a list of all credit
b. Details of any change in Return on Net Worth as compared
ratings obtained by the listed entity for all debt instruments

to the immediately previous financial year along with a Disclosures of subsidiary accounts
detailed explanation thereof [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(t)(ii)]
All listed entities will need to comply with this amendment in In order to enhance transparency and have an ease of reference
the annual reports filed for the year ending 31 March 2019 for public shareholders of listed entities, the Amendments
and thereafter. require that at least 21 days prior to the date of the AGM called
Currently, there is no specific provision in the Companies Act to consider accounts of that financial year, separately audited
and SEBI (LODR) Regulations for the same. financial statements of each subsidiary of the listed entity
should be uploaded under a separate section on the website of
the listed entity.
Utilization of proceeds of preferential issue and
SEBI (LODR) Regulations currently only require a listed entity
Qualified Institutional Placement (QIP)
to maintain a functional website containing certain specified
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(n) and
information. However, this amendment aligns the requirement
Para 3(x)(c)(iii)]
to the current proviso to Section 136(1) of the Companies
Currently, SEBI (ICDR) Regulations, 2009 require periodic Act which requires every company to place separate audited
disclosure on the utilization of issue proceeds in case of public accounts of each of its subsidiary on its website, if any.
issues. However, these disclosures are not required for funds
raised by way of preferential allotments and QIPs.
The Amendments introduce a requirement to disclose details of

utilization of funds raised through preferential allotment or QIP Interplay with Companies (Amendment) Act,
as specified under Regulation 32(7A) as a part of the Corporate 2017
Governance Report.
The Companies (Amendment) Act, 2017 clarifies the
All listed entities will need to comply with this amendment in
requirements of section 136(1) of the Companies Act, 2013 by
the annual reports filed for the year ending 31 March 2019
stating the following:
and thereafter.
•• The requirement for placing financial statements on the
Disclosure pertaining to directors website will be met by placing the consolidated financial
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x)(c)(i)] statement of such foreign subsidiary on the listed entity’s
website, where such foreign subsidiary is statutorily
Currently, SEBI (LODR) Regulations require disclosure of required to prepare consolidated financial statements
number of other boards or committees, in which a director is under any law of the country of its incorporation
a member or a chairperson. The Amendments introduce an
•• The holding Indian listed entity may place unaudited
additional requirement to disclose separately the names of the
financial statements of the concerned foreign subsidiary on
listed entities where the person is a director and the category is
its website, where such foreign subsidiary does not get its
of directorship.
financial statements audited since it is not required to get
All listed entities will need to comply with this amendment in its financial statement audited under any law of the country
the annual reports filed for the year ending 31 March 2019 of its incorporation
and thereafter.
Practically, listed entities having foreign subsidiaries will
have to evaluate whether the above clarification can also
Disclosures pertaining to disqualification of be extended to the SEBI (LODR) Regulations requirement
directors of uploading separate audited financial statements for each
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x)(c)(iii)] subsidiary.
The Amendments introduce a requirement to disclose a

certificate from a company secretary in practice that none
of the directors on the board of the company have been
debarred or disqualified from being appointed or continuing Prior Intimation of board meeting to discuss
as the directors of companies by the board / MCA or any such bonus issue
statutory authority. Currently, there is no specific provision in [SEBI (LODR) (Amendment) Regulations, 2018, Para 3(m)]
the Companies Act and SEBI (LODR) Regulations for the same.
Currently, SEBI (LODR) Regulations provides that prior
All listed entities will need to comply with this amendment in intimation is not required to be given to the stock exchanges
the annual report filed for the year ending 31 March 2019 and about the board meeting, where the declaration of bonus by the
thereafter. listed entity is not as one of the items on the agenda.

The announcement of issue of bonus shares generally has a
market price impact and therefore, its disclosure becomes
critical. Accordingly, the Amendments require the proviso to
Regulation 29(f) of SEBI (LODR) Regulations, to be deleted with
effect from 1 October 2018, which states that prior intimation How we see it
is not required to be given to the stock exchange(s) in case the
declaration of bonus by the listed entity is not on the agenda of •• Submission of annual accounts in soft copies will
the board meeting. boost the green initiatives in corporate governance
undertaken by MCA
Views of committees not accepted by the board •• Credit rating disclosure for all outstanding instruments
of directors of the issuer will help enhance transparency in credit
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x)(c)(iii)] risk across issuers, instruments and sectors. Also,
this will result in the evolution of credit risk pricing by
The Amendments extend the requirement to disclose, along market participants and development of credit spreads
with the reasons thereof, where the board had not accepted over government bond yields in the near future
any recommendation of any committee of the board which is
•• Using searchable formats of the disclosures will
mandatorily required, in the relevant financial year.
reduce the hardships to the investors at large and also
However, such disclosure requirement shall only apply where regulators for searching information in the company
recommendation of / submission by the committee is required filings using relevant key words for analytical purposes
for the approval of the board and shall not apply where prior •• Generally, disclosure of key financial indicators
approval of the relevant committee is required for undertaking and changes in them are made in the investor
any transaction under SEBI (LODR) Regulations. presentations / earnings call. However, this
Currently, except for Section 177(8) of the Companies Act requirement to disclose in MD&A strengthens the
(in relation to audit committee), there is no provision for a focus around a mix of qualitative and quantitative
disclosure to the shareholders, if recommendations of the analysis to be provided by the management with
relevant committee are not accepted by the board. respect to the company’s business and financial
performance. This will result into an informed decision-
All listed entities will need to comply with this amendment in making by investors and would also put an onus on the
the annual reports filed for the year ending 31 March 2019 and management to appropriately explain any variance in
thereafter. the disclosed financial indicators
•• Disclosure of the name of the listed entities
where a person is a director may enable investors
to understand if the director is involved in any
Interplay with Companies (Amendment) Act, business(es) that competes or is likely to compete
2017 against each other
•• Certificate from company secretary on disqualification
The Companies (Amendment) Act, 2017 clarifies that of directors will assure the investors that the directors
if the audit committee does not approve related party will act in good faith in order to promote the objects
transactions which are not covered under section 188 of the of the company for the benefit of its members as a
Companies Act, 2013 then the audit committee will make its whole and in the best interest of the company, its
recommendation to the board. This will require the board to employees, the shareholders, and the community for
consider and approve these transactions, even if they were the protection of the environment
otherwise not covered under the approval requirement of
•• Disclosure of subsidiary accounts will provide
section 188.
complete overview of the group and help understand
Combined effect of the amendments to Companies Act and the financial results in a better manner. Overall, it will
SEBI (LODR) Regulations imply that all recommendations enable investors, analysts, business owners and other
made by the audit committee to the board for related party interested parties in making an informed investment
transactions which are not covered under section 188 should decision
be disclosed to the shareholder, in case if the board does not •• Prior intimation / advance notice is required to be
accept those recommendations. given to the stock exchange for consideration of bonus
The Companies (Amendment) Act, 2017 also clarify that if the issuance due to its sensitive nature and the impact it
related party transactions between a holding company and will have on market prices of the securities, given the
its wholly-owned subsidiaries require board approval under risk of insider trading
section 188, then they will also require approval of the audit
committee.

Accounting and audit
related issues

June 2018
Notification of For all listed entities: For all listed entities:

the SEBI (LODR) •• Disclosure of total fees •• Auditor to review and report on management
(Amendment) paid at consolidated level estimates of audit qualifications
Regulations, 2018 for all services of auditor •• Mandatory submission of quarterly / year-to-date
and its network firms/ consolidated financial statements
entities* •• Limited review of last quarter financial results with
disclosure of material adjustments pertaining to
earlier period
•• Submission of standalone and consolidated cash
flow statements for the half year
•• Limited review of subsidiary entities by statutory
auditor of parent listed entity
•• Disclosure to stock exchange of detailed reasons
for auditor resignation
•• Disclosure as a part of AGM notice the auditors’
credentials and proposed audit fees
Financial statements are the primary document that stakeholders (including investors, lenders, customers
and suppliers) rely upon in gauging the role that management played in earning returns on the capital
employed by the stakeholders. These statements give a snapshot of the financial position of the business at
a point in time as well as the earnings generated out of all the business activities (both operating and non-
operating) for a period of time. Good quality financial statements having a balanced disclosure of material
items that may potentially influence decision-making reinforces stakeholder’s trust in the management.
These Amendments seek to improve disclosures and enhance the quality of financial statements and audit.
Audit qualifications The Amendments aim to strengthen disclosures by bringing

[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(w)] an increased focus on quantification of audit qualifications
(mandatory), with the exception being only for matters like
The Amendments modify the requirement, thereby making going-concern or sub-judice matters.
it mandatory, in case where audit qualifications are not
quantifiable: The Circular issued by SEBI on 27 May 2016 has clause 4.4
that requires management to provide reasons in case it is
•• The management shall mandatorily make an estimate, unable to make an estimate of audit qualification and the same
which the auditor shall review and report accordingly shall be reviewed and commented by the auditor. SEBI Circular
•• Notwithstanding the above, the management may be dated 10 May 2018 removes this requirement to align with the
permitted to not provide estimates on matters, like above Amendments.
going concern or sub-judice matters; in which case, the
management shall provide the reasons and the auditor shall
Quarterly financial disclosures
review the same and report accordingly
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(o)]
Currently, SEBI (LODR) Regulations provide that if the
Consolidated financial results
management is unable to make an estimate with respect to any
audit qualification, it shall provide the reasons and the auditor The Amendments remove the option given in every financial
shall review the same and report accordingly. This is narrowed year to the listed entity to opt for submission of consolidated
down to matters like going concern and sub-judice matters. financial results on a quarterly / year-to-date basis and rather,
make it mandatory to submit consolidated financial results on a
quarterly / year-to-date basis.

The Companies Act and SEBI (LODR) Regulations mandate of the audit of all the entities / companies whose accounts
the submission of consolidated financial statements by a listed are to be consolidated with the listed entity as per AS 21 in
entity every financial year on an annual basis. accordance with guidelines issued by SEBI on this matter.
Last quarter financial results:
The Amendments relax the requirement of getting the financial

results of the last quarter audited before submission and allows How we see it
limited review of financial results of the last quarter when the
listed entity submits them along with the results for the entire •• Companies should start their preparations early
financial year. to prepare comparative financial information
(e.g., quarterly consolidated). SEBI needs to
Further, the Amendments also require the listed entity to
specify whether limited review, of the entities
disclose by way of a note in the last quarter financial results,
in the group, to be performed by the statutory
the aggregate effect of material adjustments, which pertain to
auditor of the parent listed entity, would extend
earlier periods, made in the results of that quarter.
to even foreign subsidiaries. Also, the above
Currently, SEBI (LODR) Regulations require submission of amendment requires considering consolidation
audited financial results in respect of the last quarter along with criteria as per AS 21 but ICAI to issue guidance on
the results for the entire financial year, with a note stating that whether it is equally applicable if listed entities are
the figures of last quarter are the balancing figures between following Ind AS. Further, ICAI to issue guidance
audited figures in respect of the full financial year and the on limited review of audit of all components.
published year-to-date figures up to the third quarter of the
•• Accordingly, the parent listed entity will have to
current financial year.
ensure timely closure of the financial statements
Audit / limited review of quarterly consolidated financial of all its components in order for the statutory
results: auditor of the listed entity to perform a limited
review.
The Amendments introduce a requirement for the listed entity
to ensure, for the purposes of quarterly consolidated financial
results, that at least 80% of each of the consolidated revenue,
assets and profits, respectively shall have been subject to audit
or in case of unaudited results, subjected to limited review. Disclosure of reasons for resignation of auditors
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(v)]
Cash flow statements:
The Amendments require the listed entity to disclose to the
The Amendments introduce a requirement that the listed entity stock exchanges as soon as possible but not later than 24
should submit, by way of a note, a statement of cash flows for hours from the receipt from the auditors, detailed reasons for
the half-year as part of its standalone and consolidated financial resignation of auditors.
results for the half-year.
Currently, the Companies Act read with Audit Rules requires
Limited review of subsidiaries reasons for resignation of auditors to be filed with the
The Amendments introduce a requirement on the part of the company and the Registrar. While currently, under SEBI
statutory auditor of a listed entity to undertake a limited review (LODR) Regulations, a change in auditor is a deemed material

event and disclosure is required to be made to the exchanges. b. Basis of recommendation for appointment, including
However, there is no specific provision for the disclosure of the details in relation to and credentials of, the statutory
detailed reasons for such change. auditor(s) proposed to be appointed
Currently, the appointment of auditors at an AGM is not

Disclosures on audit and non-audit services considered to be a “special business” and hence does not
rendered by the auditor require any statement to the shareholders with requisite
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(x)(c)(iii)] disclosures as per Section 102(1) of the Companies Act.
However, SEBI (LODR) Regulations currently imposes an
The Amendments introduce a new requirement to disclose total
obligation on the listed entity to ensure that the audit is
fees for all services paid by the listed entity and its subsidiaries,
conducted by an independent, competent and qualified auditor.
on a consolidated basis, to the statutory auditor and all entities
in the network firm / network entity of which the statutory
auditor is a part.
All listed entities will need to comply with this amendment by

disclosing in the Corporate Governance Report section of the
annual reports filed for the year ending 31 March 2019 and
How we see it
thereafter. •• The resignation of an auditor before the expiry
of the term may be a cause for concern. For the
Disclosure of credentials and audit fee of auditors sake of greater transparency, it is important
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(r)(ii)] for companies to disclose the reasons for the
resignation of its auditor
The Amendments introduce a new requirement where the
•• Adequate disclosure of the skill set of the auditors
statutory auditor(s) is/are proposed to be appointed/re-
as well as credentials highlighting professional
appointed, the listed entity shall make the following disclosures
competence and experience of the audit firms /
as a part of the explanatory statement to the notice sent to
auditors enables shareholder to make informed
shareholders for an AGM:
decisions in appointing auditors
a. Proposed fees payable to the statutory auditor(s) along with
terms of appointment. In case of a new auditor, any material
change in the fee payable to such auditor from that paid
to the outgoing auditor along with the rationale for such
change

Investor participation in
meetings of listed entities

9 May 2018 1 Oct 2018 1 Apr 2019 1 Apr 2020
June 2018
Notification of the SEBI For top 100 listed entities as at 31 March every financial
(LODR) (Amendment) year:
Regulations, 2018 •• AGM to be held within five months from date of
closing the financial year*
For top 100 listed entities based on market capitalization

at the end of immediately preceding financial year:
•• One-way live webcast of the proceedings of the AGM*
* Applicable for the AGMs held after 1 April 2019 (i.e. from the AGM for financial year ended 31 March 2019)
It is understood that increased and better participation by constituents enhances good governance.
Accordingly, easing investor participation, including through the use of technology, is imperative and
responding to questions from the shareholders promotes accountability of boards and management. The
Amendments seek to facilitate and ease participation by removing the boundaries of physical meetings and
adopting the use of technology.
Timeline for annual general meetings of listed determined on the basis of market capitalization, as at the end
entities of the immediate previous financial year.
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(s)(ii)] Currently, the Companies Act and SEBI (LODR) Regulations do
The Amendments introduce a requirement that reduces the not mandate webcast of the meeting proceedings.
timeline for holding AGM within a period of five months from
the date of closing of the financial year. This requirement is
applicable to top 100 listed entities by market capitalization,
determined as on 31 March of every financial year. How we see it
The Amendments seek to align the timeline for holding AGM Reducing the timelines of the AGM in line with global
with the global practices and to avoid bunching of AGMs practices will reduce the clash in AGM’s for different
(especially in August/ September), which results in lower companies and result in maximum participation by
shareholder participation. the shareholders. By making a meeting accessible via
Currently, the Companies Act requires listed entities in India to a webcast will substantially increase its exposure and
hold AGM within six months from the end of the financial year. reach. The internet platform overcomes constraints
There is no specific provision in SEBI (LODR) Regulations on of physical presence and webcast allows large
this. number of shareholders to remotely participate
at the same time. This results in efficient decision
making for approval of audited accounts, election of
Webcast of proceedings of the meeting
directors, appointment of auditors and various other
[SEBI (LODR) (Amendment) Regulations, 2018, Para 3(s)(ii)]
initiatives, thereby facilitating accomplishment of
The Amendments introduce a requirement that the top business goals and strategic objectives.
100 listed entities shall provide one-way live webcast of the
proceedings of the AGM. The top 100 listed entities shall be

Recommendations
referred to other agencies

SEBI decided to refer several recommendations of the Kotak Committee to various agencies (i.e.,
government, other regulators, professional bodies, etc.) considering that the matters involved relate to them
and are beyond SEBI’s regulatory ambit. Such recommendations, inter-alia, include strengthening the role of
ICAI, internal financial controls, adoption of Ind AS, treasury stock, governance aspects of PSEs, etc.
Group audits
[Kotak Committee report, chapter VII(3)]
ICAI’s Standards of Auditing permit the holding company’s
auditor (i.e., principal auditor) to place reliance on the audit
2017
performed by the auditor of the subsidiaries and provide an
The Companies (Amendment) Act, 2017 amends section
audit opinion on the consolidated financial statements based
143(1) of the Companies Act, 2013 such that the auditor of a
on the audit report provided by the other auditors. In placing
holding company will have a right to access the accounts and
reliance, depending upon circumstances, the principal auditor
records of the associates and joint ventures in the group in
may choose to perform supplemental tests on records or
addition to the accounts and records of the subsidiary company
financial statements of the group entity or may even require
whose accounts are required to be consolidated.
the other auditor to answer a detailed questionnaire regarding
those matters that require information for discharging his This amendment will help auditors to deal with scenarios where
duties. the holding company auditor needs to obtain additional comfort
/ perform additional procedures on financial information of
Currently, there is no specific provision with respect to group
associates and joint ventures for being able to express a true
audits under the Companies Act or SEBI (LODR) Regulations.
and fair opinion on the consolidated financial statements of the
Recommendation and rationale by Kotak Committee: parent.
The Kotak Committee recommended that for the listed entities

in India, the auditor of the holding company should be made
responsible for the audit opinion of all material unlisted
subsidiaries. Internal Financial Controls (IFCs)
The rationale behind such a recommendation was that several
international jurisdictions following International Standards ICAI’s guidance on IFC restricts the reporting requirements for
on Auditing (ISA) are governed by the requirements of ISA an auditor of the consolidated financial statements, to the IFC
600, which do not permit a division of responsibility between at the Indian subsidiaries only.
auditors of the holding company and its subsidiaries. Therefore, On the other hand, section 143(3)(i) read with section 129(4)
in such cases, the auditor of the holding company is responsible of the Companies Act requires an auditor to report on the IFC
for the direction, supervision and performance of the group of the entire Group. Further, while the SEBI (LODR) Regulations
audit engagement. have general provisions on IFC, there is no specific provision on
Outcome the coverage of the same.
SEBI has referred the recommendation to the ICAI to introduce Recommendation and rationale by Kotak Committee:
amendments to the relevant accounting / auditing standards to The Kotak Committee recommended that IFC reporting
do above implementations. requirements be made applicable to the entire operations of
the group and not just to the Indian operations. However, it
recognizes that companies may require adequate transition
time and in this regard, recommends that the requirements
How we see it initially be only applicable to the listed entities with net worth of
INR1,000 crore and above.
This is a step towards aligning with global practices. The rationale behind such a recommendation is to align with
ICAI may provide further clarity regarding these global practices where IFC reporting requirement applies to the
recommendations in due course. Over a period entire group and especially since, as per the Companies Act,
of time companies may migrate to one audit firm India has also adopted IFC reporting requirements for certain
across the group to reduce the time required for companies.
audits to be completed and increase efficiencies.
Outcome
SEBI has referred the recommendation to the ICAI to introduce

appropriate amendments in its guidance on IFC.¬

auditors. However, the Kotak Committee also noted that many
of the aforesaid indicators are already a part of ICAI’s peer
How we see it review system.
Outcome
Extending the holding company auditor’s IFC
reporting requirement to the entire group would be SEBI has referred the recommendation to the ICAI.
as extensive as the requirement of the auditor being
responsible for the audit opinion of all subsidiaries.
Any amendments in this regard should strike a
balance between this exercise becoming onerous
on auditors as well as management and achieving
How we see it
effective oversight role. Also, these requirements Audit quality indicators could potentially help
would be in addition to getting the financial audit committees in discharging these crucial
statements audited in order to comply with the local responsibilities by promoting a better understanding
regulations governing foreign subsidiaries. of the audit firm’s system of quality controls
and factors related to the quality of the audit
engagement. This can be one of the key decision-
making factors for the management when appointing
new auditors pursuant to the mandatory audit
rotation requirements of the Companies Act.
2017
The Companies (Amendment) Act, 2017 amends section Ind AS Adoption

143(3) of the Companies Act, 2013 to clarify that the [Kotak Committee report, chapter VII(10)]
auditor’s report, amongst other matters, will state “whether The MCA and SEBI have specified timelines for listed entities
the company has adequate internal financial controls with (including listed banks, NBFCs and insurance companies) to
reference to financial statements in place and the operating adopt Ind AS. While listed entities (other than banks, NBFCs
effectiveness of such controls.” This amendment does and insurance companies) that are currently required to comply
not extend auditor’s reporting requirement to operating with the provisions of Ind AS in preparation of their financial
effectiveness of business controls. statements and audit, the timelines for the financial services
sector is as below:
i. Banks are required to prepare Ind AS based financial

statements for accounting periods beginning from 1 April
Audit quality Indicators
2018 (which is currently deferred by one year pursuant to
RBI circular1)
Currently, there is no specific provision in the Companies ii. Certain NBFCs (depending on net worth and whether listed/
Act or SEBI (LODR) Regulations with respect to audit quality unlisted) are required to prepare Ind AS based financial
indicators. statements for accounting periods beginning from 1 April
Recommendation and rationale by Kotak Committee: 2018 or 1 April 2019, as the case may be
iii. Insurance companies are required to prepare Ind AS based
The Kotak Committee recommended that making public,
financial statements for accounting periods beginning from
the audit quality indicators such as workforce metrics, skill-
1 April 20202
development and training of audit team, quality metrics such
as audit restatements, trends in audit metrics such as billable Recommendation and rationale by Kotak Committee:
hours and audit fines, legal actions and fines against the firm,
The Kotak Committee recommends full implementation of
independence metrics such as client and group concentration,
Ind AS as currently scheduled without extension, for all listed
use of technology, etc.
entities including banks, NBFCs and insurance companies.
The rationale behind such a recommendation is to enable
The rationale behind such a recommendation is that listed
transparency and comparison of the audit quality of different
banks, NBFCs and insurance companies are important financial
1
RBI, Statement on Developmental and Regulatory Policies dated April 5, 2018
2
IRDAI, Circular – IRDA/F&A/CIR/ACTS/146/06/2017, dated June 28, 2017

intermediaries, critical to the sanctity of India’s financial In addition, in relation to the enforcement/disciplinary process
markets and its growth. Given the principle-based rules of of the ICAI, the Kotak Committee recommends:
Ind AS and resultant disclosures in financial statements, it is •• Increased disclosure by ICAI of actions taken against
important for all the sectors in India to adopt Ind AS in a timely members to increase transparency and act as a deterrent;
manner without any further deferral in the respective sector-
•• Separate team/cell for enforcement pertaining to listed
implementation roadmaps.
entities in order to reduce the turnaround time for
Outcome disciplinary proceedings;
Regulatory bodies like RBI and IRDAI are instrumental deciding •• Having a team that analyses reports of proxy advisors on
the roadmap for banks and insurance companies, respectively audit related matters of listed entities and take appropriate
while MCA decides the roadmap for NBFCs. Accordingly, since action, if any, against its members.
the regulators have a far greater role as compared to MCA The rationale behind such a recommendation is the view
and SEBI, the recommendation are referred by SEBI to the that reliable financial statements are at the core of corporate
respective regulator / authority, as necessary. governance and the fiduciary role of the auditor is crucial.
Therefore, for enhancing governance of listed entities, a need
is identified for ICAI to be able to punish or impose penalties on
audit firms, in addition to individual members.
How we see it Outcome
The adoption of Ind AS is a welcome change and has ICAI had expressed its view on the above recommendation
played a key role in enhancing the comparability of stating that it was outside the scope of the terms of reference
financial statements of Indian companies with global of the Kotak Committee and that ICAI has already taken up
best practices in financial reporting. It improves most of the aforesaid matters at appropriate levels.
the quality of financial reporting by focusing on Accordingly, SEBI has referred the above recommendations to
reflection of the substance of the transaction and the appropriate authorities/regulators.
requiring enhanced disclosures to explain accounting
policy elections, significant accounting estimates
and judgements as well as in explaining relevant line
Strengthening the independent functioning of
items in the financial statements. QRB
[Kotak Committee report, chapter VII (13)]
There is no specific provision on Quality Review Board (QRB)

under the Companies Act or SEBI (LODR) Regulations.
Strengthening the role of ICAI Recommendation and rationale by Kotak Committee:
[Kotak Committee report, chapter VII (12)]
The Kotak Committee recommends:
The ICAI Act regulates the conduct of chartered accountants in
India and provides a mechanism for taking disciplinary action •• Strengthening QRB’s role to meet International Forum
against members who are found in the act of violation of of Independent Audit Regulators (IFIAR)’s independence
obligations cast on such professionals. Further, CA Act permits criteria and become a member of IFIAR at the earliest.
ICAI to punish or levy a penalty not exceeding INR5 lakhs QRB to be provided with requisite financial resources
on such a member. It does require ICAI to punish or impose and staff with adequate full-time personnel to be able to
penalties on firms. While the Companies Act also has provisions effectively carry out its mandate. Steps to be taken for
for enhanced monetary penalties on auditors, enforcement of further operational independence of QRB such as providing
the same is through the MCA and not the ICAI. infrastructural support by the government, etc.;
•• Reasons for disagreement between the ICAI and the QRB
Recommendation and rationale by the Kotak Committee:
to be recorded in writing and communicated to QRB for
The Kotak Committee recommends that ICAI may be given improving transparency in the functioning.
powers to increase the scope of punishment as well as the The rationale behind such recommendation is that most
penalty amount as follows: major economies in the world have implemented systems of
•• On the member – penalty of up to INR1m; independent oversight for the auditors of listed companies that
provide confidence to the shareholders and the stakeholders.
•• On the audit firm – punishment or impose penalties of up to
The IFIAR is an international body established in 2006 that
INR50m in case of repeated violations (that is, where the
comprises independent audit regulators from 52 jurisdictions
number of violations exceed three).
representing Africa, North America, South America, Asia,
Oceania, and Europe. IFIAR’s mission is to serve the public

interest and enhance investor protection by improving audit The rationale behind such a recommendation is for investors to
quality globally. In India, the QRB is mandated to conduct such take into account the discussions during the AGM and vote with
reviews and has now started carrying out reviews of audits complete information, which is currently not possible.
performed by various auditors. Therefore, strengthening the
Outcome
role of QRB assumes significance.
SEBI would refer the above recommendation to the MCA for
Outcome
amendment of Management and Administration Rules.
ICAI had expressed its view on the above recommendation
stating that it was outside the scope of the terms of reference Governance aspects of PSEs
of the Kotak Committee. Further, QRB has already applied [Kotak Committee report, chapter IX]
for IFIAR membership and the dialogue is on with the IFIAR
regarding the same. The Kotak Committee acknowledged that PSEs face unique
challenges that make their governance more complex than
Accordingly, SEBI has referred the above recommendations to in the private sector, given that (i) most PSEs pursue multiple
the appropriate authorities/regulators. and diverse objectives in line with their broader social welfare
objectives (unlike private enterprises which may focus on value
maximization for their shareholders); (ii) PSEs may also have
certain structural issues arising due to conflicts of interest that
How we see it are inherent in cases where the same entity is both the owner
and regulator; (iii) protracted decision making in PSEs owing to
Strengthening and streamlining ICAI’s and QRB’s role accountability at multiple levels. Nonetheless, there is a need
would avoid the needless addition to a regulatory for moving to enhanced governance standards.
level such as setting up NFRA. This was the view of Accordingly, the Kotak Committee proposed that government
the Standing Committee on Finance, to which we should keep the following key guiding principles in mind for
agree, since multiple regulatory bodies overseeing assessment of governance aspects of PSEs:
the accounting and auditing profession may result in
duplication of work, cross-overs of jurisdictions and •• Establish a transparent mandate for PSEs and disclose its
unwarranted compliances. objectives and obligations;
MCA’s notification of section 132(3) and 132(11) •• Ensure independence of the PSEs from the administrative
indicates their focus of moving ahead with the ministry;
Company Law Committee’s view of aligning with •• Consolidate the government stake in listed PSEs under
global practices of setting up an independent holding entity structure(s).
regulatory body.
Recommendation and rationale by the Kotak Committee:
The committee recommends that the listed PSEs fully comply

with the provisions of SEBI (LODR) Regulations and the same
E-voting of Proceedings of the Meeting be suitably enforced. Additionally, the government should
[Kotak Committee report, chapter VIII (2)] assess and examine the broader issues, inter-alia, concerning
ownership structure for the government stake, removal of
Currently, under the Companies Act read with Management conflicts and creating a more autonomous environment for
and Administration Rules, it is mandatory for a listed entity to PSEs to function in the best interest of all stakeholders. The
provide e-voting facility to the shareholders and such e-voting committee believes that this will significantly enhance the value
is permitted up to 5 p.m. one day prior to the AGM. Also, under of the national assets. This should be done in a time-bound
SEBI (LODR) Regulations, remote e-voting facility is mandatory manner.
in respect of all shareholder resolutions and voting results are
to be submitted within forty-eight hours of the conclusion of the The rationale behind such a recommendation is that all listed
AGM. entities, government or private, should be treated at par on
governance standards. Therefore, all listed PSEs should be
Recommendation and rationale by Kotak Committee compliant with the SEBI (LODR) Regulations. In case there is
The Kotak Committee recommended that e-voting should be any inconsistency between SEBI (LODR) Regulations and the
kept open till midnight (i.e. 11:59 p.m.) on the day of the AGM, relevant legislation, if any, under which the respective PSE has
however, continuing the current requirement of not permitting been established, appropriate harmonization of the legislation
modification votes cast through e-voting. to bring the same in line with the requirement of SEBI (LODR)
Regulations should be undertaken.

Appendix A –
Amendments effective
from 1 October 2018
(half-year ended
March 31, 2019)

The table below summarizes the Amendments which are effective for half-year ending March 31, 2019.
This implies that listed entities will need to start making decisions from October 1, 2018, in order to ensure
compliance for FY 2018-19:
Chapter Area Kotak Committee Recommendation
Promoters / Con-trolling Disclosure of Related Party The amendments introduce a new requirement for a listed
Shareholders and RPTs Transactions entity to disclose related party transactions on a consolidated
basis as per the format specified in the relevant accounting
[The Kotak Com-mittee [SEBI (LODR) (Amendment)
standards for annual results to stock exchanges, and to publish
report, chapter V] Regulations, 2018, Para 3(a),
the same on its website. These disclosures need to be made
Para 3(i)(e) and Para 3(x)(a)]
within 30 days from the date of publication of the standalone
and consolidated financial results for the half-year by the listed
entity.
Promoters / Con-trolling Approval of Related Party The amendments in the clauses pertaining to the approval of
Shareholders and RPTs Transactions related party transac-tion have been made in order to plug
the gap in the legal framework, wherein, the Companies Act
allows related parties to vote on (but not in favor of) a related
report, chapter V] Regulations, 2018, Para 3(i)(c)
party transaction and while currently, SEBI (LODR) Regulations
and Para 3(i)(d)]
require all related parties should abstain from voting on a
related party transaction.
Promoters / Con-trolling Royalty and Brand Payments The amendment specifies a threshold of 2% of the annual
Shareholders and RPTs to Related Parties consolidated turnover of the listed entity as per its last audited
financial statements for transactions involving payment made
to a related party with respect to brand usage or royalty,
report, chapter V] Regulations, 2018, Para 3(i)
either con-sidered individually or taken together with previous
(b)]
transactions during a financial year.
Promoters / Controlling Materiality Policy The amendments intend that companies also disclose, as a part
Shareholders and RPTs of their materiality policy, clear threshold limits duly approved
[SEBI (LODR) (Amendment)
by the board of directors. Such materiality policy is required to
[The Kotak Com-mittee Regulations, 2018, Para 3(i)
be reviewed and updated by the board of directors at least once
report, chapter V] (a)]
every three years.

Appendix B –
Amendments
currently applicable,
with reporting for year
ended March 31, 2019

The table below summarizes the amendments which are effective for year ending March 31, 2019. This
implies that listed entities will need to start making decisions immediately in order to ensure compliance for
the FY 2018-19:
Composition and Role of the Disclosure of Expertise / Skills The amendments require disclosure of a list of core skills/
Board of Directors of Directors expertise/competencies identified by the board as required
in the context of its business(es) and sector(s) for an efficient
[The Kotak Committee [SEBI (LODR) (Amendment)
functioning. It also requires disclosure of those skills/expertise/
report, chapter I] Regulations, 2018, Para 3(x)
competencies that its board members actually possess, without
(c)(i)(2)]
disclosing the names of the directors.
Enhanced Monitoring of Secretarial Audit The amendments extend the requirement of Secretarial Audit
Group Entities to every listed entity and its material unlisted Indian subsidiaries
along with the requirement to annex with its annual report,
[The Kotak Committee Regulations, 2018, Para 3(k)]
a secretarial audit report given by a practicing company
report, chapter IV]
secretary.
Disclosures and Submission of Annual Reports The amendments require the listed entity to submit to the stock
Transparency exchange and publish on the website:
[The Kotak Committee Regulations, 2018, Para 3(q) •• A copy of the annual report shall be sent to the
report, chapter VI] and Para 3(r)(i)] shareholders along with the notice of the AGM to be
disclosed not later than the day as dispatched to the
shareholders.
•• In the event of any changes to the annual report, the
revised copy along with details of, and explanation for the
changes are required to be sent in not later than 48 hours
after the AGM.
The amendments now also clarify that the listed entity to send
soft copies of the full annual report to all those shareholders
who have registered their email address(es), either with the
listed entity or with any depository.
Disclosures and Disclosures of Key Changes in The Amendments introduce a requirement for all the listed
Transparency Financial Indicators entities to disclose in the MD&A section of the annual report:
[The Kotak Committee [SEBI (LODR) (Amendment) •• details of significant changes (i.e. change of 25% or more
report, chapter VI] Regulations, 2018, Para 3(x) as compared to the immediately previous financial year)
(b)] in the key financial ratios, along with detailed explanations
thereof; and
•• details of any change in Return on Net Worth as compared
to the immediately previous financial year along with a
detailed explanation thereof.
Disclosures and Utilization of Proceeds The amendments introduce a requirement to disclose details of
Transparency of Preferential Issue and utilization of funds raised through preferential allotment or QIP
Qualified Institutional as specified under Regulation 32(7A) as a part of the Corporate
[The Kotk Committee report,
Placement (QIP) Governance Report.
chapter VI]
Regulations, 2018, Para 3(n)
and Para 3(x)(c)(iii)]

Disclosures and Disclosure Pertaining to The amendments introduce an additional requirement to

Transparency Directors disclose separately the names of the listed entities where the
person is a director and the category is of directorship.
report, chapter VI] Regulations, 2018, Para 3(x)
(c)(i)]
Disclosures and Disclosures Pertaining to The amendments introduce a requirement to disclose a

Transparency Disqualification of Directors certificate from a company secretary in practice stating that
none of the directors on the board of the company have been
debarred or disqualified from being appointed or continuing
report, chapter VI] Regulations, 2018, Para 3(x)
as the directors of companies by the Board / MCA or any such
(c)(iii)]
statutory authority. Currently, there is no specific provision in
the Companies Act and SEBI (LODR) Regulations for the same.
Disclosures and Views of Committees Not The amendments extend the requirement to disclose, along
Transparency Accepted by the Board of with the reasons thereof, where the Board had not accepted
Directors any recommendation of any committee of the board which is
[The Kotak Committee
mandatorily required, in the relevant financial year.
report, chapter VI] [SEBI (LODR) (Amendment)
Regulations, 2018, Para 3(x) However, such disclosure requirement shall only apply where
(c)(iii)] the recommendation of / submission by the committee is
required for the approval of the board and shall not apply
where prior approval of the relevant committee is required for
undertaking any transaction under SEBI (LODR) Regulations.
Accounting and Audit Disclosures on Audit and Non- The amendments introduce a new requirement to disclose total
related issues audit Services Rendered by fees for all services paid by the listed entity and its subsidiaries,
the Auditor on a consolidated basis, to the statutory auditor and all entities
[The Kotak Committee
in the network firm/network entity of which the statutory
report, chapter VII] [SEBI (LODR) (Amendment)
auditor is a part.
Regulations, 2018, Para 3(x)
(c)(iii)]

Appendix C -
Recommendations
not notified by SEBI

SEBI’s notification of the Amendments on May 9, 2018 and issue of circular on May 10, 2018 does not
have a reference to several recommendations made by the Kotak Committee, a list of which have been
given below. Refer the Kotak Committee Report for detailed recommendation, rationale and proposed
amendments to SEBI (LODR) Regulations.
Area Current regulatory provisions Kotak Committee Recommendation
Composition and Role of the Board of Directors

[The Kotak Committee report, chapter I]
Attendance of directors Currently, the Companies Act provides If a director does not attend at least half of the total number
for the automatic vacation of the office of board meetings over two financial years on a rolling basis,
of a director if a director is absent from his/her continuance on the board should be ratified by the
all meetings of the board of directors shareholders at the next annual general meeting.
held during a 12-month period. There is
no requirement for minimum attendance
of directors in meetings of the board
of directors under the SEBI (LODR)
Regulations.
Minimum number of board Currently, both the Companies Act and The minimum number of meetings of the board of directors be
meetings the SEBI (LODR) Regulations require at increased to five every year.
least four meetings of the board every
At least once a year, aspects which are critical to the
year with a maximum gap of one hundred
medium-term and long-term future of a listed entity, like
and twenty days between any two
strategy, succession planning, budgets, risk management,
meetings.
ESG (environment, sustainability and governance) and board
evaluation, should be specif-ically discussed by the board.
Updating knowledge of the Currently, the Companies Act contains In order to fill the information gap, it is recommended that
board members general provisions pertaining to the the board of directors should be updated on regulatory and
induction of independent directors. compliance changes, at least once every year.
SEBI (LODR) Regulations require
familiarization of the independent
directors relating to certain specified
matters and that the board of directors
periodically review compliance reports
pertaining to all laws applicable to the
listed entity as well as steps taken to
rectify instances of non-compliances.
NED engagement with the Currently, the Companies Act and SEBI In order to fill the information gap, it is recommend-ed that
management (LODR) Regulations do not have any the board of directors should be updated on regulatory and
provisions requiring the mandatory compliance changes, at least once every year.
engagement of the NEDs with the
management.
Matrix Reporting Structure The Companies Act states that the An interaction should be required between the NEDs and senior
board of direc-tors of a company shall be management, at least once every year.
entitled to exercise all such powers and
A confirmation should be provided by the board of a listed entity
to undertake all such activities as the
as a part of the Corporate Governance Report that it has been
company is authorized to exercise and
responsible for the business and overall affairs of the listed entity
under-take. The SEBI (LODR) Regulations
in the relevant financial year and that the reporting structures of
also sets forth detailed responsibilities for
the listed entity, formal and informal, are consistent with these
the board of directors of a listed entity.
requirements.

Institution of Independent Directors

[The Kotak Committee report, chapter II]
Minimum number of At present, the Companies Act requires Irrespective of whether the Chairperson is executive or not, to
independent directors every listed company to have at least improve governance, every listed entity may be required to have
one-third of the total number of directors at least half of its total number of directors as IDs.
as IDs. SEBI (LODR) Regulations impose
Appropriate transition time should be provided such that this is
stricter obligations that require at least
applicable to top 500 listed companies by market capitalization
half of the total directors of the board of
by April 1, 2019, and to the rest of listed companies by April 1,
a listed entity to be IDs if the Chairperson
2020.
is executive/related to the promoter, and
in other cases, at least one-third IDs.
Minimum compensation to While the Companies Act prescribes a Listed entities may be required to pay certain minimum
independent directors ceiling on the compensation that can be compensation to IDs as under:
paid to directors, there is no requirement
for minimum compensa-tion to be paid, •• Minimum total remuneration of INR5 lakhs per year
except that the sitting fee paid to IDs for top 500 companies by market cap., only in case
cannot be lower than that of other of the adequacy of profits (subject to approvals under
directors. SEBI (LODR) Regulations Companies Act);
also do not prescribe any minimum •• Minimum sitting fees for every board meeting to be
compensation to be paid to IDs. INR50,000 for top 100 companies and INR25,000
for next 400 companies by market cap.;
•• Minimum sitting fees for every audit committee
meeting to be INR40,000 for top 100 companies and
INR20,000 for next 400 companies by market cap.;
•• Minimum sitting fees for every other board
committee meeting (which are mandatory under SEBI
(LODR) Regulations) to be INR20,000 for top 100
companies and INR10,000 for next 400 companies
by market cap.
Induction and training of The Companies Act provides general While accepting that IDs will not, and need not, know the
independent directors clauses per-taining to training, business as well as executive directors, the following would be
induction, etc. of directors. SEBI (LODR) helpful:
Regulations require familiarization of
the IDs relating to certain specified •• A formal Induction should be mandatory for every
matters. How-ever, specific provisions new ID appointed to the board; and
on Induction, Training, and Periodicity of •• Formal Training, whether external/internal, especially
Continuous Updation are lack-ing. with respect to governance aspects, should be
required for every ID once every five years, the onus
of which shall be on the director.

Lead independent director Currently, there is no requirement for a 1. All listed entities where the Chairperson is not independent
(ID) in companies with non- Lead ID in Companies Act / SEBI (LODR) to designate an ID as the Lead ID;
independent chairperson Regulations. 2. The Lead ID should be a member of NRC;
3. The Lead ID shall:
a. lead exclusive meetings of the IDs and provide
feedback to the Chairperson/board of directors after
such meetings;
b. Serve as liaison between the chairperson of the board
and the IDs;
c. Preside over meetings of the board at which the
chairperson or vice-chairperson is not present, including
executive sessions of the IDs;
d. Have the authority to call meetings of the IDs; and
e. If requested by significant shareholders, ensure
that he/she is available for consultation and direct
communication.
Exclusive meeting of inde- The Companies Act and the SEBI (LODR) In view of the proposed introduction of the concept of Lead ID,
pendent directors Regula-tions require at least one meeting such meetings may be held more than once at the discretion of
of the IDs in a year without the presence the IDs.
of other directors.
Casual vacancy of office of Currently under Companies Act, if the Any appointment to fill a casual vacancy of the office of any ID
independent director office of any director appointed by the should also be approved by the shareholders at the next AGM.
company in an AGM is vacated before
his term of office expires in the normal
course, the resulting casual vacancy
may be filled for the residual term by the
board of di-rectors at a meeting of the
board.
SEBI (LODR) Regulations provide for

filling the vacancy of IDs only in case of
resignation and removal and provides
that in case of such resigna-tion/removal,
such vacancy shall be filled, but not later
than the immediate next meeting of the
board of directors or three months from
the date of such vacancy, whichever is
later.
Board committees
[The Kotak Committee report, chapter III]
Minimum number of commit-tee Currently, SEBI (LODR) Regulations The minimum number of Audit Committee meetings be increased
meetings require at least four meetings of the to five every year. In addition, all other mandatory board
Audit Committee every year. The SEBI committees necessarily meet at least once in a year.
(LODR) Regulations does not re-quire a
minimum number of meetings for other
committees.

Composition of Nomination Under the Companies Act, the Audit The requirement of having at least two-thirds of its members as
and Remuneration Commit-tee Committee and the NRC are required IDs may be required for NRC as well, in line with the requirement
(‘NRC’) to have at least half of their members for the audit committee.
as IDs. On the other hand, under SEBI
(LODR) Regulations, while the Audit Com-
mittee is required to have 2/3rd of its
members as IDs, the NRC is required to
have only half of its members as IDs.
Membership and chairperson- Currently, in determining the maximum In determining the maximum number of committees of which
ship limit number of committees of which a a director can be a member / Chairperson, NRC should also be
director can be a member / Chairperson, included and thereby treated at par with the Audit Committee
SEBI (LODR) Regulations considers only and SRC.
the Audit Committee and SRC.
Information Technology There are no specific provisions in Listed entities may constitute an Information Tech-nology
Committee the Companies Act and SEBI (LODR) Committee which, in addition to the RMC, will focus on Digital
Regulations on the constitu-tion of an and other Technological aspects.
Information Technology Committee.
Promoters / Controlling Shareholders and RPT

[The Kotak Committee report, chapter V]
Sharing of information with The SEBI PIT Regulations provide that The regulatory framework should be amended to provide an
controlling promoters / any communication or procurement of enabling transparent framework regulating the information
Shareholders with nominee unpublished price sensitive information rights of certain promoters (including promoters of the
directors is prohibited except in furtherance of promoter) and significant shareholders to reduce subjectivity and
legitimate purpose, the performance of provide clarity for ease of business, along with appropriate and
duties or discharge of legal obligations. adequate checks and balances to prevent any abuse and unlawful
The SEBI (LODR) Regulations provide for exchange of UPSI i.e. to ensure information moves from one
equitable treatment of all shareholders. known safe container to another. The Committee recommends
Under the SEBI PIT Regulations and the that this framework be optional at this stage. In addition, this
SEBI (LODR) Regulations, there is no framework will not impact the applicability of the SEBI PIT
specific provision enabling information Regulations other than as specified.
sharing by the listed entity with specific
shareholders.
Re-classification of Presently, the Companies Act is silent Recommendations for re-classification of Promoters /
promoters / Classification on reclassification of promoters, while Classification of Entities as Professionally Managed are given for
of entities as professionally the SEBI (LODR) Regulations permit the following two scenarios, upon satisfying certain conditions:
managed reclassification of promoters in limited
a. Where there are multiple promoters/promoter groups and
circumstances such as (i) requirement
a specific promoter/promoter group wishes to undergo re-
of approval of stock exchanges, (ii)
classification;
reclassification when a promoter
is replaced by a new promoter, (iii) b. Where there is only one specific promoter/ promoter group
reclassification where a company ceases who/ which wishes to be re-classified and the entity wishes
to have any promoters (i.e. becomes to be classified as professionally managed.
professionally managed) and (iv) general
conditions.
In addition, in cases where the entity

becomes professionally managed, the
aggregate shareholding of a person
or group along with persons acting
in concert (hereinafter referred to as
“PACs”) should not exceed 1%.

Disclosures and Transparency

[The Kotak Committee report, chapter VI]
Disclosures pertaining Currently, there is no specific provision Indian listed entity should obtain details of holders of any global
to holders of depository in the Companies Act or SEBI (LODR) depository receipts (as defined under the Companies Act,
receipts Regulations on requiring disclosures of which includes ADRs) issued by such entity from the overseas
holders of Depository Receipts (ADRs/ depository at least on a monthly basis.
GDRs) issued by listed entities.
Based on the information shared by the overseas
depository, the listed entity shall disclose details of such
holders of GDRs who hold more than 1% shareholding
of the entity to the stock exchange as a part of the
disclosure on the shareholding pattern on a quarterly
basis.
Harmonization of Currently, there is no specific provision •• The stock exchanges shall collectively harmonize the
disclosures in the Companies Act or SEBI (LODR) formats of the disclosures made by the listed entities
Regulations with respect to harmonized / on their respective websites no later than April 1,
standardized dissemination of disclosures 2018.
made by the listed entities across
websites of stock exchanges. •• The stock exchanges shall move to disclosures by
listed entities on exchange platforms in XBRL format
in latest available taxonomy no later than April 1,
2018.
•• Further, a common filing platform may be devised
on which a listed entity may submit all filings,
which could then be disseminated to all exchanges
simultaneously. The exchanges shall introduce such a
platform in consultation with SEBI by April 1, 2018.
•• The disclosures filed with the exchanges may, as far
as possible, be harmonized with the filings made to
MCA.
Disclosures pertaining to Currently, SEBI (LODR) Regulations The disclosure of schedules of analyst / institutional investor
analyst/institutional investor require the disclosure of schedules meetings may not be required. To clarify, the information to be
meets for an analyst or institutional investor shared at such meetings has to be strictly in compliance with the
meetings and presentations made by the SEBI PIT Regulations.
listed entity to analysts or institutional
investors on its website and to the stock
exchange.
Disclosures in valuation re- Currently, there is no specific provision In the interest of full disclosures to the investors:
ports in schemes of arrange- in the Companies Act or SEBI (LODR)
Regulations per-taining to disclosures •• SEBI may consider issuing guidelines for overall
ment
of the basis of the valuation arrived at improvement in standards of information in the
in valuation reports or requirement of valuation reports that are included as part of schemes
disclosure of assets and liabilities of the of arrangement disclosures.
relevant entities which are part of, or •• Specific disclosures on assets, liabilities and turnover
subject to, the schemes of arrangement. of the entities involved should be disclosed in the
valuation reports on schemes of arrangement.

Disclosures on website Currently, as per Regulation 46 of the Companies shall maintain a separate section for investors on
SEBI (LODR) Regulations, a listed entity is its website and provide all the information mandated under
required to maintain a functional website Regulation 46 of SEBI (LODR) Regulations in a separate section,
containing the basic information about to ensure ease of availability and access of pertinent information
itself. in one place to investors and regulators alike.
Disclosures on long-term Currently, there is no specific provision In order to provide for disclosures pertaining to strategy of the
and medium-term strategy on disclosure of medium-term and long- entity, especially the medium-term and long-term strategy (in
term strategy under the Companies Act line with the Committee’s recommendation that boards devote
or SEBI (LODR) Regulations. more time on strategy), a guidance may be issued by SEBI to
listed entities to disclose their medium and long-term strategy
in their annual reports under the MD&A section. In addition,
entities should articulate a clear set of long-term metrics specific
to the company's long-term strategy to allow for appropriate
measurement of progress. However, each entity may define its
own time frame with respect to medium and long-term since it
would vary across entities/sectors.
Commodity risk disclosures SEBI (LODR) Regulations require the The listed companies should disclose their risk management
disclosure of commodity price risk activities during the year, including their commodity hedging
and commodity hedging activities by positions in a more transparent, detailed and uniform manner for
the listed companies in the corporate easy understanding and appreciation by the shareholders.
governance section of the annual report.
For the consistent implementation of the requirements
of SEBI (LODR) Regulations regarding disclosure of
commodity risks and other hedging activities across
listed companies, a detailed reporting format along with
the periodicity of the disclosures may be outlined by
SEBI which would depict the commodity risks they face,
how these are managed and also the policy for hedging
commodity risk, etc. followed by the company for the
purpose of disclosures in the annual report.
Accounting and Audit related issues

[The Kotak Committee report, chapter VII]
Independent external Currently, there is no specific provision SEBI (LODR) Regulations should be amended, providing a clear
opinion by auditors in the Companies Act or the SEBI (LODR) right to an auditor to independently obtain external opinions
Regulations enabling an auditor to obtain from experts.
an independent ex-ternal opinion in
relation to the audit / limited review at
the cost of the listed entity.

Strengthening monitoring, Earlier, SEBI (LODR) Regulations had Any audit qualification needs detailed scrutiny and therefore,
oversight and enforcement detailed provisions on the review of audit the QARC mechanism may be revived or any other similar
by SEBI – Review of audit qualifications by the QARC and further mechanism may be devised where-in audit qualifications are
qualifications reference of the same to the FRRB of examined in greater detail. Further, the process to be followed by
ICAI. However, after consultation with such commit-tee should be time bound.
SEBI Advisory Committees, ICAI, Stock
Ex-changes and Industry Bodies, it was
decided by SEBI to discontinue QARC
mechanism and in place of the same,
require disclosures on the impact of audit
qualifications.
Strengthening Monitoring, Under the SEBI Act or Regulations SEBI should have clear powers to act against auditors and other
Oversight and Enforcement framed thereunder, there is no specific third-party fiduciaries with statutory duties under securities
by SEBI – Powers of SEBI provision which provides specific penal law (as defined under SEBI (LODR) Regulations), subject to
with respect to auditors and powers in relation to auditors. appropriate safeguards. This power ought to extend to act
against the impugned individual(s), as well as against the
other statutory third-party Section 11 of SEBI Act provides that firm in question with respect to their functions concerning
fiduciaries for listed entities subject to the provisions of the SEBI listed entities. This power should be provided in case of gross
Act, it shall be the duty of SEBI to negligence as well, and not just in case of fraud/connivance.
protect the interests of investors
in securities and to promote the Note: The ICAI has expressed its dissent on the above
development of, and to regulate recommendation as the regulation of chartered
the securities market, through such accountants is covered under the CA Act and to avoid
measures as it thinks fit. jurisdictional conflict and other issues.
Investor Participation in Meetings of Listed Entities

[The Kotak Committee report, chapter VIII]
Stewardship Code There is no specific provision for A common stewardship code is introduced in India for the
a ‘stewardship code’ under SEBI entire financial sector on the lines of best practices globally
(LODR) Regulations. However, based on the seven principles of stewardship as outlined
for specific institutional investors above. The Committee also recommends that since SEBI is the
capital market regulator and the Code applies to investments
such as mutual funds, etc., certain
in the capital market, the common Stewardship Code may be
stewardship principles such as on
introduced by SEBI for investments by institu-tional investors in
voting, conflict of interest, etc. Indian capital markets.
have been adopted under the
specific SEBI regulations as may
be applicable. IRDAI in March 2017
issued a stewardship code for
insurance companies in In-dia.
Treasury Stock The Companies Act specifically prohibits In case a listed entity holds its own shares in its name or in the
the crea-tion of treasury stock (i.e. shares name of any trust either on its behalf or on behalf of any of its
in its own name or in the name of any subsidiaries or associates (i.e. treasury stock), no voting rights
trust either on its behalf or on behalf attached to such shares shall be exercisable with effect from
of any of its subsidiary or associated April 1, 2021.
companies). However, there is no
requirement for cancelling / extinguishing
treasury stock which existed prior to
notification of the Companies Act.
Further, under SEBI (LODR) Regulations
there is no specific provision on treasury
stock.

Resolutions sent to While in certain cases the board’s In the usual course, the resolution placed before the
shareholders without recommendation is required for shareholders should be recommended by the board of directors.
board’s recommendation consideration by shareholders (for e.g. Placing a resolution before the shareholders without a board
declaration of dividend), there is no recommendation should be used sparingly and on rare
general rule (either in the Companies Act occasions;
or in SEBI (LODR) Regulations) that every
However, in exceptional circumstances, a listed entity may issue
resolution placed before the shareholders
a notice of a general meeting, which may include one or more
should have been recommended by the
resolutions for consideration by shareholders without such
board of directors.
resolution having been recommended by the board. In such
cases, an explanatory statement for such a resolution must
disclose the board’s deliberated views to the shareholders.
Leniency Mechanism Section 24B of the SEBI Act and Section A leniency program would improve effective detection of
23O of the SCRA provide powers to violations and enhance ease of investigation and enforcement,
[The Kotak Committee the Central Government (based on while also acting as a deterrent that could result in an increase in
report, chapter X] recommendations by SEBI) to grant the overall compliance with securities regulations.
immunity both from prosecution and
SEBI may be empowered to grant leniency and offer protection
imposition of penalty under the SEBI Act
against victimization to whistle-blowers in certain instances
and the SCRA for the alleged violation,
determined on a case by case basis. Any such power would have
subject to certain conditions.
to be accompanied by the rules and regulations in relation to the
In addition, while SEBI currently has conditions to be satisfied for getting benefits under the leniency
a consent mechanism for certain program and protection against victimization, the procedure for
categories of violations, there are no the grant of lesser penalty or reduction in liability, the quantum
specific provisions in the regulatory of penalties that are waived when lenient treatment is meted out
framework that empower SEBI to grant and protection of the whistle-blower.
leniency (by way of reduction in/waiver
SEBI may take up the above recommendation with the Ministry
of penalty or immunity from prosecution)
of Finance.
as well as to protect a whistle-blower
who is allegedly in violation of relevant
securities laws.
Capacity building in SEBI SEBI’s role as a regulator of capital In order to enhance the capacity of SEBI in line with global best
for enhancing corporate markets assumes particular importance practices, SEBI should:
governance in listed given that it requires diligent detection,
a. Enhance the number and skill-sets of its human resources;
entities monitoring and enforcement action.
Thus, the efficacy of the Committee b. Exploit the power of data science and technology; and
[The Kotak Committee recommendations depends critically c. Strategically work with other agencies, especially for
report, chapter XI] upon SEBI’s detection and enforcement monitoring and enforcement.
capabilities.
SEBI may consider examining the above recommendations in
greater detail.

Glossary
10 Lakh 1 Million or 1m
1 Crore 10 Million or 10m
100 Crore 1 Billion or 1bn
American Depository Receipts ADRs
Annual General Meeting AGM
AS 21 Consolidated Financial Statements AS 21
Chartered Accountants Act, 1949 CA Act
Chief Executive Officer CEO
Chief Financial Officer CFO
Company Secretary CS
Consolidated Financial Statements CFS
Electronic voting E-voting
Environment, Sustainability and Governance ESG
Executive Director ED
eXtensible Business Reporting Language XBRL
Extraordinary General Meeting EGM
Financial Reporting Review Board FRRB
Financial Year FY
Generally Accepted Accounting Principles GAAP
Generally Accepted Accounting Principles in India Indian GAAP
Global Depository Receipts GDRs
Government of India GOI / Government
Ind AS 110 Consolidation Ind AS 110
Independent Director ID
Indian Accounting Standards notified by MCA as Indian
Ind AS
equivalent of IFRS
Indian Rupee INR
Information Technology IT
Institute of Chartered Accountants of India ICAI
Insurance Regulatory and Development Authority of India IRDAI

Internal Financial Control IFC
International Accounting Standards Board IASB
International Financial Reporting Standards IFRS
International Forum of Independent Audit Regulators IFIAR

International Standards on Auditing 600 - The Audit of Group
ISA 600
Financial Statements
Key Managerial Personnel KMP
Management Discussion & Analysis MD&A
Managing Director MD
Minimum Min.
Ministry of Corporate Affairs MCA
National Advisory Committee on Accounting Standards NACAS
National Company Law Tribunal NCLT / Tribunal
National Financial Reporting Authority NFRA
National Stock Exchange NSE
Nomination and Remuneration Committee NRC
Non-Banking Financial Company NBFC
Non-Executive Directors other than Independent Directors NED
Persons acting in concert PAC
Public Sector Enterprises PSEs
Qualified Audit Report Review Committee QARC
Qualified Institutional Placement QIP
Quality Review Board QRB
Registrar of Companies RoC
Related Party Transactions RPT
Reserve Bank of India RBI
Risk Management Committee RMC

SEBI (Listing Obligations and Disclosure Requirements)
SEBI (LODR) (Amendment) Regulations, 2018 or Amendments
(Amendment) Regulations, 2018
SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 read with all its amendments, except SEBI SEBI (LODR) Regulations
(LODR) (Amendment) Regulations, 2018
SEBI (Prohibition of Insider Trading) Regulations, 2015 SEBI PIT Regulations
SEBI Committee on Corporate Governance chaired by Mr. Uday
Kotak Committee
Kotak
Securities and Exchange Board of India SEBI
Securities and Exchange Board of India Act, 1992 SEBI Act
Securities Contracts (Regulation) Act, 1956 SCRA

Stakeholders Relationship Committee SRC
Standalone / Separate Financial Statements SFS
The Companies (Accounts) Rules, 2014 Accounts Rules
The Companies (Audit and Auditors) Rules, 2014 Audit Rules
The Companies (Management and Administration) Rules, 2014 Management and Administra-tion Rules
The Companies Act, 2013 with all its amendments Companies Act
United States Dollar USD
Unpublished Price Sensitive Information UPSI

Notes
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Issue 5: June 2018

4 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 5

6 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time remaining 4 months 10 months 22 months

Minimum number of directors on the board Disclosure of expertise / Skills of directors

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 7

The Amendments introduce a requirement to obtain Separation of the roles of non-executive

8 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

i. Observations of board evaluation carried out for the year

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 9

10 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time remaining 4 months 10 months 22 months

For top 500 listed entities:

Eligibility criteria for Independent Directors Eligibility criteria

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 11

12 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

14 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time Remaining 4 months 10 months 22 months

Notification of the SEBI For all listed entities:

Role of audit committee Amendment to the role

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 15

Applicability and Role of Risk Management

16 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 17

18 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time Remaining 4 months 10 months 22 months

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 19

Group Governance Unit / Committee and Policy

There are currently no provisions under the Companies Act or

20 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 21

22 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time Remaining 4 months 10 months 22 months

Disclosure of Related Party Transactions (RPTs) by the listed entity.

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 23

This amendment shall come into effect from the half-year

24 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

•• Prior approval of the bank or public financial institution

Shareholders’ approval shall be valid only till the expiry of the

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 25

26 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time Remaining 4 months 10 months 22 months

For all listed entities:

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 27

28 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

The Amendments introduce a requirement to disclose details of

The Amendments introduce a requirement to disclose a

SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018 29

30 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

32 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time Remaining 4 months 10 months 22 months

Notification of For all listed entities: For all listed entities:

Audit qualifications The Amendments aim to strengthen disclosures by bringing

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Last quarter financial results:

The Amendments relax the requirement of getting the financial

34 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Currently, the appointment of auditors at an AGM is not

All listed entities will need to comply with this amendment by

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36 SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

Time Remaining 4 months 10 months 22 months

9 May 2018 1 Oct 2018 1 Apr 2019 1 Apr 2020