LODR Regulations: What You Need to Know for the March 2025 Quarter - MMJC

Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2024, came into effect from 12^th December 2024 [LODR Third Amendment’]. LODR Third Amendment mandated certain additional disclosures to be placed on website of listed entity, provide rationale for special business to be transacted at general meetings and changes to the materiality policy.

This write-up highlights amendments that needs compliance check before March 31, 2025:

1. Website compliance: The listed entities are now required to place their memorandum of association and articles of association and the brief profile of board of directors including directorship and full-time positions in body corporates on website of listed entity, in addition to the disclosures which were already prescribed in Regulation 46(2) of LODR. Furthermore, the Part I of Annexure II of the Annual Corporate Governance (CG) report seeks the data, including distinct confirmation by the company regarding its adherence to the website disclosure requirements along with the links where the same has been displayed on their webpage. The listed entities must ensure that these above stated disclosures are updated on their website before March 31, 2025.

• Rationale for special business: As a step towards enhanced transparency and accountability in corporate decision-making processes, Regulation 17(11) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) regulations, 2015 [‘LODR’] is amended. Reg. 17(11) provides that board of directors of listed entities shall provide their recommendations to shareholders for approval of special business. This had to be provided under explanatory statement, as provided under Section 102(1) of the Companies Act, 2013. Pursuant to LODR Third amendment, the board of directors of listed entities are now additionally required to provide a rationale for the recommendations they are required to make to shareholders for approval of special business. This change ensures that shareholders are given a clearer understanding of the reasoning behind the Board’s proposal.

The revised provision applies to all special businesses transacted by the listed entities post December 12, 2024. Hence listed entities should have a check whether they have provided recommendation along with rationale of board of directors in the explanatory statement to the resolution for passing special business, if any. This would have to be confirmed by listed entities in corporate governance report for quarter and year ended March 31, 2025.

• Changes to materiality policy: SEBI notified the Industry Standards Note on Regulation 30 of the LODR Regulations [ISF Note Reg. 30’] vide its circular dt: February 25, 2025. Point 5.1.1 of this note states that the listed entities may include sector regulator for their business, if any depending on their business activity, in addition to sectoral regulators specified in ISF Note on Reg. 30 in their materiality policy framed under sub-regulation (5) of regulation 30 of LODR. ISF Note Reg. 30 vide a separate annexure has provided a list of sector regulator/enforcement authorities for listed entities. So listed entities need to ensure that their materiality policy are updated with sector specific regulators, if any which are not specified under ISF Note Reg. 30.

Fines and penalties imposed by sectoral regulators, enforcement agencies, judicial bodies, or any other authority is required to be disclosed to stock exchange if they meet the materiality thresholds provided by the LODR Third Amendment, as specified in point 20 of Para A, Part A of schedule III of LODR. Listed entities were classifying entities or bodies levying penalties as sectoral regulators, enforcement agencies, judicial bodies, any other authority based on general understanding. Now ISF Note on Reg. 30 has specifically categorized it for listed entities. Listed entities now need to ensure that disclosure to stock exchange under point 20, para-A, Part A of Schedule III of LODR is made as per the guidance provided by ISF note on reg. 30. Information on fines and penalties levied under point 20, para-A, Part A of Schedule III of LODR is also required to be disclosed in the Integrated corporate governance report filling on quarterly basis in certain circumstances. In this regard, the listed entities should ensure compliance with this point and make the changes in their materiality policy before year ended March 31, 2025.

The article is written by Ms. Anushka Bhalerao – Deputy Manager.