Fixing Record Date – SEBI Prescribes Timeline - MMJC

This article is relevant for those entities who have their equity and non-convertible securities and entities who have listed non-convertible securities only.

Securities and Exchange Board of India (‘SEBI’) vide its amendments Notification No. SEBI/LAD-NRO/GN/2024/190 July 10, 2024 (‘July 2024 amendment’)[1], added a new sub regulation (7) to regulation 23 of SEBI (Issue and Listing of Non-Convertible Securities) (‘SEBI ILNCS’) Regulations, 2021. Sub-regulation reads as follows, – ‘(7) (a) The issuer shall fix a record date for the purposes of payment of interest, dividend and payment of redemption or repayment amount or for such other purposes as specified by the Board. (b)  Such record date shall be fixed at fifteen days prior  to  the  due  date  of  payment  interest  or dividend, repayment of principal or any other corporate actions’. Record date is the date fixed for taking record of shareholders or debenture holders of the Company to determine who is eligible for the benefits.

Subsequently, Bombay Stock Exchange (‘BSE’) vide their circulars dt: September 10, 2024[2] stated that all entities who have their non-convertible securities listed on stock exchange are required to fix record date in compliance with July 2024 amendment.

1. Introduction

The key focus of SEBI’s July 2024 amendment is the insertion of sub-regulation (7) under Regulation 23 of the SEBI ILNCS Regulations, 2021. This sub-regulation establishes the requirement for issuers to fix a record date for the purpose of payment of interest, dividends, and redemption or repayment amounts.

Further the clarification notice issued by BSE, states that SEBI has emphasized the mandatory nature of the newly added sub-regulation for all entities with non-convertible securities listed or proposed to be listed to fix a record date i.e.  all issuers must set the record date 15 days before any payment of interest, dividends, or redemption amounts, ensuring adequate time for market participants to align their records and decisions accordingly.

2. Actionable

To comply with the July 2024 amendment, issuers with listed or proposed-to-be-listed non-convertible securities should immediately undertake the following actions:

1. Ensure that the record date for interest, dividend, or repayment payments is set at least 15 days prior to the actual payment date. This will involve coordination between the issuer’s finance and legal teams to ensure compliance.
2. Further going forward offer documents need to have this timeline mentioned.
3. Further for listed entities having equity and debt listed, while fixing record date for interim or final dividend and fixing record date for payment of interest or redemption for non-convertible securities, companies need to ensure that time gap of 30 days as prescribed by reg 42(4) of SEBI (Listing Obligation and Disclosure Requirement), regulations (‘SEBI LODR’) is mentioned while fixing record date for non-convertible securities and equity. For e.g. record date for declaration of dividend is fixed on September 25^th of the month and record date for payment of interest to non-convertible security holders is fixed on September 26, then this will lead to violation of regulation 42 (4) of SEBI LODR as the gap between two record dates is not exceeding 15 days.

Conclusion:

As July 2024 amendment is effective from September 10, 2024, issuers who have their non-convertible securities already listed shall ensure that record dates for equity and debt needs to be fixed in adherence to the revised timeline.

[1] https://www.sebi.gov.in/legal/regulations/jul-2024/securities-and-exchange-board-of-india-issue-and-listing-of-non-convertible-securities-amendment-regulations-2024_84775.html

[2] https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20240910-58