To enable investors to make well-informed investment decisions, timely, adequate, and accurate disclosure of information on an ongoing basis is of utmost importance. Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “LODR Regulations” or “LODR”), requires listed entities to disclose material events or information to the stock exchanges. The different types of events or information which may occur in respect of any listed entity is categorized into different parts in Schedule III of LODR Regulation.
Categorization of material events:
The above-mentioned Schedule III of LODR Regulations, which enlists the different kinds of events or information which may occur in a listed entity, is divided into different parts based on the nature of securities listed by an entity. Part A of Schedule III deals with events or information with regard to entities which have listed their equity shares and it is coming from Regulation 30 of LODR Regulations. This Part A of Schedule III is further divided into 4 Paras.
The events specified in Para A of Part A of Schedule III of LODR Regulations (hereinafter referred to as “Para A”) are deemed to be material events that the listed entities are required to disclose, and there is no discretion to listed entities in this regard. Whereas, events enumerated in Para B of Part A of Schedule III of LODR Regulations (hereinafter referred to as “Para B”) are required to be disclosed based on the application of the guidelines for materiality, , which the listed entities are required to frame in the form of a policy (hereinafter referred to as “Materiality Policy”) based on the criteria specified in regulation 30(4) of LODR Regulations, as amended vide latest amendment dated 14th June 2023.
Erstwhile Timelines for disclosure to stock exchanges:
As per erstwhile Regulation 30(6) of LODR Regulations, the general timeline for disclosure of events or information was within twenty-four hours from the occurrence of the event or information except in few cases where disclosure was required to be given within 30 minutes of conclusion of board meeting for certain events. In the present age of digital communication and widespread usage of social media, information permeates very fast. That may be the reason why SEBI might have felt a need for ensuring quicker disclosure of certain material events or information by listed entities.
Revised timelines for disclosure to stock exchanges:
In order to address the above regulatory concerns like leakage of information, SEBI has introduced three-explicit timelines for the disclosure of events/information specified in Para A as well as Para B of Part A of Schedule III pursuant to amendment to LODR Regulations dt: June 14, 2023, and has accordingly, substituted sub-regulation 30(6) and the provisos thereunder with the following sub-regulation and provisos, as follows:
“(6) The listed entity shall first disclose to the stock exchange(s) all events or information which are material in terms of the provisions of this regulation as soon as reasonably possible and in any case not later than the following:
- thirty minutes from the closure of the meeting of the board of directors in which the decision pertaining to the event or information has been taken;
- twelve hours from the occurrence of the event or information, in case the event or information is emanating from within the listed entity;
- twenty-four hours from the occurrence of the event or information, in case the event or information is not emanating from within the listed entity:
Provided that disclosure with respect to events for which timelines have been specified in Part A of Schedule III shall be made within such timelines:
Provided further that in case the disclosure is made after the timelines specified under this regulation, the listed entity shall, along with such disclosure provide the explanation for the delay.”
Hence it can be seen that as against the earlier timeline of 24 hours for disclosure, a bifurcation has been done as 12 hours or 24 hours based on the source where the event or information emanates from.
- The Word ‘emanate’ is not defined under LODR. As per Oxford Dictionary word ‘Emanate’ means ‘come out from a place or source’. Elaborating further it would mean if information or event is coming from a place (i.e., department, factory, unit etc.) within a listed entity or owned by listed entity then it would be considered as information emanating from within a listed entity. Information or event developed in a listed entity or information or event that started its journey from listed entity would also mean information or event emanating from within a listed entity. Further if information is coming from a place or source from outside the listed entity (i.e., orders of courts, show cause notice, inspection notice, sanction notice etc.) then it would be considered as information or event emanating from outside listed entity.
- For certain disclosures, timelines for disclosure have been provided separately as follows:
| Particulars of disclosure | Timeline within which disclosure required. |
| In case of resignation of key managerial personnel, senior management, Compliance Officer, or director – to disclose the letter of resignation along with detailed reasons for the resignation. [earlier this disclosure was required only in case of independent directors and statutory auditors] | Withing seven days of resignation coming into effect. |
Includes only those timelines that are newly introduced pursuant to SEBI LODR (Second) Amendment 2023
Second Proviso to Regulation 30(6) of LODR Regulations provides for timelines to make disclosures but it also states that delayed disclosures shall be backed by explanation for delay. So listed entities encountering situation of delayed disclosures would have to give reason for delayed disclosure.
When is information or event said to have occurred?
LODR amendment dt: June 14, 2023, further mandates that information or event shall be disclosed within specified period of ‘occurrence of event’. When is an event said to have occurred is the questions that need guidance. SEBI had vide its circular dt: September 09, 2015, under Annexure II provided guidance in this regard. It has expressly laid guidance on when an event/information can be said to have occurred.
For understanding the above question, it is important to draw our attention to Annexure II of SEBI September 09, 2015, Circular No. CIR/CFD/CMD/4/2015 and analyze the linkage between Regulation 30(6) and Annexure II of this circular.
The September Circular contented that, in certain instances, the answer to the above question would depend upon following:
- When information or an event is subject to discussion then occurrence of event would depend on the stage of discussion, negotiation, or approval. The events/information can be said to have occurred upon receipt of approval of the Board of Directors e.g., further issue of capital by rights issuance, and in certain events/information can be said to have occurred after receipt of approval of both i.e., Board of Directors and Shareholders. However, considering the price sensitivity involved, for certain events e.g., decision on declaration of dividends, etc., disclosure shall be made on receipt of approval of the event by the Board of Directors, pending Shareholder’s approval.
AND
- In other instances where there is no such discussion, negotiation or approval required viz. in case of natural calamities, disruptions etc., the answer to the above question would depend upon the timing when the listed entity became aware of the event/information. In this case the events/information can be said to have occurred when a listed entity becomes aware of the events/information, or as soon as, an officer of the entity has, or ought to have reasonably come into possession of the information in the course of the performance of his duties.
Looking at the explanation given in the above SEBI circular about when the information / event can be said to have occurred, the timeline of 12 hours or 24 hours for disclosure may be decided by the Compliance Officer.
Conclusion:
In order to enable investors to make well-informed investment decisions, it’s necessary to read and interpret both the said circular and Regulation 30(4) and Regulation 30(6) collectively and accordingly, the listed entity can take a call with regard to the timeline of giving the relevant disclosure under Regulation 30.
The article is written by:
CS Vallabh Joshi – Senior Partner – vallabhjoshi@mmjc.in
CS Deepti Jambigi Joshi – Partner – deeptijambigi@mmjc.in
The article is published on Taxmann.