The use of Unified Payments Interface (UPI) in public offers was introduced in Novermber 2018 with effect from July 01, 2019.

In December 2021, the National Payments Corporation of India (NPCI) increased the per transaction limit for UPI from ₹2 lakhs to ₹5 lakhs for UPI based Application Supported by Blocked Amount (ASBA) in Initial Public Offers (IPOs).

In March 2022, the NPCI conducted system audits across various market intermediaries and found that more than 80% of these market players are ready to accept the increased limit.

SEBI revised the bid limit from ₹2 lakhs to ₹5 lakhs for UPI- based ASBA in IPOs that will open on or after May 01, 2022.

SEBI has stated that all retail investors applying in Public Issues where the application amount is up to ₹5 Lakhs shall use UPI and also provide their UPI ID in bid- cum-application form to be submitted with any of the following entities:

• a syndicate member;
• a stock broker registered with a recognised stock exchange;
• a depository participant;
• a registrar to an issue and share transfer agent.

Background

In order to strengthen the delisting process, the Securities and Exchange Board of India (“SEBI”) released a consultation paper dated November 20, 2020 (“Consultation Paper”) thereby proposing a comprehensive review of the SEBI (Delisting of Equity Shares) Regulations, 2009 (hereinafter referred to as the “Erstwhile Regulations”) towards (i) enhancing the disclosures to help investors take informed investment decisions; (ii) refining the delisting process; (iii) rationalizing the existing timelines for completing the delisting in a time bound manner; (iv) streamlining the Erstwhile Regulations to make it robust, efficient, transparent and investor friendly; (v) plugging-in gaps in the Erstwhile Regulations; and (vi) updating references to the Companies Act, 2013, as amended and other securities laws.

The New Delisting Regulatory Framework

Subsequent to receiving market feedback on the proposals under the Consultation Paper, SEBI on June 10, 2021 notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021(hereinafter referred to as the “Regulations”) repealing the Erstwhile Regulations and putting in place a revised regulatory framework governing the delisting process in India. The following tabulation reflects the manner and extent to which key suggestions proposed under the Consultation Paper have been addressed and incorporated under the Regulations:

Sr. No.	Reference	Position under the Erstwhile Regulations	Issues & Concerns	Proposal under the Consultation Paper	Position under the Regulations
Part A: Enhancing Disclosures
1.	Promoter’s/Acquirer’s intention to voluntarily delist the company and its disclosures	The promoter/acquirer’s proposal to voluntarily delist the company, is disclosed to the recognized stock exchanges by the company’s board of directors [Regulation 8(1A)]	The obligation to disclose the intention to voluntarily delist the company to public is not cast on the promoter/acquirer. The aforesaid information is not disseminated to the public on an immediate basis, thus leaving the scope for information asymmetry. Under the applicable takeover regulations, the day acquirer acquires or agrees to acquire becomes the trigger date and the public announcement is required to be made on the same day. However, under the Erstwhile Regulations, the words “promoters” and “acquirer” were used interchangeably. It was considered appropriate to align these provisions.	The promoter/acquirer shall make the Initial Public Announcement (“IPA”) of their intention to voluntarily delist the company to all stock exchanges on which the company is delisted on the same day, when their said intention is intimated to the company. The IPA shall be made by the acquirer/promoter through the manager to the delisting offer. The IPA shall, inter-alia, contain the information with respect to the reasons of delisting and compliance with applicable regulations.	Regulation 8 provides for “Initial Public Announcement” and casts an obligation on the acquirers to make an IPA re: voluntary delisting of shares. A copy of the IPA is to be sent to the company at its registered office not later than one (1) working day from the date of the IPA. The IPA shall contain information including the (i) reasons for delisting; and (ii) an undertaking with respect to compliance with regulations (2) and (5) of Regulation 4. [Regulation 8]
2.	Approval of Board of Directors	Delisting proposal to be approved by the board of directors of the company [Regulation 8(1)]	Timeline for obtaining board of directors’ approval is not specified. The board of directors neither disclose the merchant banker’s due diligence report nor the audit report.	Upon receipt of the delisting proposal, the company shall convene a meeting within twenty-one (21) working days from the date of receipt of the delisting proposal to consider and approve the delisting proposal. The board of directors while communicating their decision of granting the approval of delisting shall also disclose to stock exchanges the merchant banker’s due diligence report and the audit report.	The company to obtain the approval of the board of directors in respect of the proposal of the acquirer to delist the equity shares of the company, not later than twenty-one (21) days from the date of the IPA. [Regulation 10(1)] While communicating the decision of the board of directors on the delisting proposal, the company shall submit to the stock exchanges on which the equity shares of the company are listed, the due diligence report of the company secretary in terms of sub-regulation (3) and the audit report in terms of sub-regulation (2) of Regulation 12. [Regulation 10(5)]
3.	Refining the role of board of directors/independent directors	The board of directors while approving the proposal for delisting certify, inter-alia, that the delisting is in the interest of the shareholders. [Regulation 8(1B)]	The board of directors only certify that the delisting is in the interest of shareholders, without providing any justification. A mere statement may not be of value to the shareholders, unless supplemented by explanation/rationale justifying that the delisting is in the interest of shareholders. On the lines of Takeover Regulations, reasoned recommendations of independent directors could also be made in voluntary delisting for the benefit of public shareholders to take informed investment decisions. Voting pattern of the board of directors who voted in favour or against such resolution should be disclosed.	Committee of independent directors in line with Takeover Code may be required to provide their reasoned recommendations on the proposal for delisting. Voting pattern of the committee of the independent directors shall also be disclosed, while giving reasoned recommendations on the proposal of delisting. Expenses relating to seeking expert opinion by the committee of independent directors can be borne by the company.	Upon receipt of detailed public announcement, the board of directors of the company shall constitute a committee of independent directors to provide reasoned recommendations on the delisting offer. [Regulation 28(1)] The Committee of independent directors, while providing reasoned recommendations on the delisting proposal, shall disclose the voting pattern of the meeting in which the said proposal was discussed. [Regulation 28(3)] The committee of independent directors may seek external professional advice at the expense of the company. [Regulation 28(2)]
Part B: Refining Process
4.	Shareholder’s approval by Special Resolution	A company desirous of delisting its equity shares to obtain prior approval of shareholders of the company though postal ballot. [Regulation 8(1)(b)]	Rule  22  of  Companies  (Management  and  Administration)  Rules,  2014  provides  timeline of thirty (30) days from the date of dispatch of the notice of postal ballot. However, in case of e-voting a minimum timeline of three (3) days is required to be given. E-voting is an efficient method for shareholders to participate in the decision making process and reduces the time taken significantly.	The shareholder’s approval through special resolution may be obtained either through postal ballot or through e-voting as per the provisions of the Companies Act, 2013 and the rules made thereunder.	The special resolution shall be passed through postal ballot and / or e-voting as per the applicable provisions of the Companies Act, 2013 (18 of 2013) and the rules made thereunder. [Regulation 11(2)]
5.	Indicative Price	[No specific provision]	In some delisting offers, it was observed that acquirer(s)/ promoter(s) also mentioned indicative price, over and above the floor price, which shows promoter inclination to pay more. However, delisting regulations do not contain any provision to enable this.	Promoter(s) / Acquirer(s) may be allowed to specify an indicative price which shall not be less than the floor price calculated in terms of Regulation 8 of Takeover Regulations.	The acquirer shall have the option to provide an indicative price in respect of the delisting offer, which shall be higher than the floor price calculated in terms of Regulation 8 of Takeover Regulations. [Regulation 20(4)]
6.	Escrow Account	The Acquirer/promoter required to open an escrow account before making the  public   announcement  and  deposit an amount   equivalent to total  consideration  calculated  at  the  floor  price. [Regulation 11(1)]	There can be significant gap between making the delisting proposal to the company and  obtaining the in-principal approval from the stock exchange. In  order  to demonstrate  seriousness  and  preparedness  in  the  delisting  offer  and ensuring financial capability of the acquirer/promoter, it is warranted that some portion of  the  total  consideration may  be  deposited  in an  interest  bearing  escrow  account after obtaining the approval from the Board of the directors of the company. The modalities of the escrow account are not outlined in the delisting regulations. Thus, to bring in clarity it would be appropriate to provide the conditions relating to the operation of the escrow account.	Promoter(s)/acquirer(s) shall open an escrow account within seven (7) working days of the shareholder’s approval and deposit therein an amount equivalent to twenty-five (25%) of the total consideration,  calculated on the basis of the floor price/ indicative price. The remaining amount may be deposited as per the existing provisions contained in the regulations. The promoter /acquirer shall enter into tripartite agreement between the  Manager to the offer and the bank for the purpose of opening the escrow account and shall empower the  Manager to the offer to operate the account as per the requirement of the delisting regulations. In case of failure of the delisting offer, ninety-nine percent (99%) amount lying in escrow account shall be released within one (1) working day of public announcement of the  failure of the voluntary  delisting and  the  remaining one percent (1%)  shall  be  released  post  returning the shares/revoking the lien as per the timelines and ensuring the compliance thereof by the merchant banker.	The acquirer shall open an interest bearing escrow account with a Scheduled Commercial Bank, not later than seven working days from the date of obtaining the shareholders’ approval, and deposit therein an amount equivalent to twenty five percent of the total consideration, calculated on the basis of the number of equity shares outstanding with the public shareholders multiplied with the floor price or the indicative price, if any given by the acquirer in terms of sub-regulation (4) of regulation 20 of these regulations, whichever is higher. [Regulation 14(1)] The acquirer shall enter into a tripartite agreement with the Manager to the offer and the Bank for the purpose of opening the escrow account and shall authorize the Manager to the offer to operate such account as per the provisions of these regulations. [Regulation 14(2)] In case of failure of the delisting offer, ninety nine percent (99%) of the amount lying in the escrow account shall be released to the acquirer within one (1) working day from the date of public announcement of such failure. [Regulation 14(8)] The remaining one percent (1%) amount lying in the escrow account shall be released post return of the shares to the public shareholders or confirmation of revocation of lien marked on their shares by the Manager to the offer as per the timelines provided in the regulations. [Regulation 14(9)]
7.	Reverse Book Building	The delisting offer remains open for a period of five (5) working days, during which the public shareholders may tender their bids. [Regulation 13(2)]	No regulation mandating the disclosures regarding  the  fate  of  the  reverse  book  building  process  (i.e.  meeting the target of  90%  shareholding) in a specified timeframe. During the tendering process, the  display bids of the stock exchange  reverse  book  building  window,  inter-alia,  shows the unconfirmed  bids which gives a false indication.	The outcome of Reverse Book Building in terms of success or failure shall be announced within two (2) hours of the closure of the tendering period. Unconfirmed bids/order shall not be displayed in the stock exchange reverse book building window.	The Manager to the offer shall ensure that the outcome of the reverse book building process is announced within two hours of the closure of the bidding period. [Regulation 17(3)] The acquirer shall facilitate tendering of shares by the shareholders and settlement of the same, through the stock exchange mechanism as specified by the Board. [Regulation 17(2)]
Part C: Rationalizing Timelines
8.	Timeline for filing applications for in-principle approval and final approval by the company	Conditions and Procedures to be followed for delisting where exit opportunity is required [Regulation 8(1)]	No specific timeline provided: (i) with regard to filing of application to the concerned stock exchanges for in-principle approval; and (ii) between making payments to shareholders and making the final application to stock exchanges.	A timeline of fifteen (15) working days from the passing of special resolution be stipulated for the company to file application for in-principle approval by stock exchanges A timeline of five (5) working days from the date of making payment to the shareholders be stipulated for the company to make the final application to the stock exchanges.	The company shall make an application to the relevant recognised stock exchange for in-principle approval of the proposed delisting of its equity shares in the Form specified by the recognised stock exchange from time to time, not later than fifteen (15) working days from the date of passing of the special resolution or receipt of any other statutory or regulatory approval, whichever is later. [Regulation 12(1)] Within five (5) working days from the date of making the payment to the public shareholders, the acquirer shall make the final application for delisting to the relevant recognised stock exchange(s) in the Form specified by such stock exchange(s) from time to time. [Regulation 25(1)]
9.	Timeline provided for issuance of in-principle approval by stock exchanges	An application seeking in-principle  approval  for  delisting  shall  be  disposed  of  by  the  recognised  stock  exchange within a period not exceeding five (5) working days from the date of receipt of such application complete  in all respects. [Regulation 8(3)]	Sufficient time has not been provided to the stock exchanges for processing the delisting application as exchanges may be required to analyse the surveillance alerts, if any, and/or any significant changes in shareholding pattern prior to the delisting proposal being approved by the company.	Time period for granting in-principle approval by stock exchanges may be extended from five (5) working days to fifteen (15) working days.	Such application seeking in-principle approval for the delisting of the equity shares shall be disposed of by the recognised stock exchange within a period not exceeding, fifteen working days from the date of receipt of such application that is complete in all respects. [Regulation 12(3)]
10.	Tendering of Shares	Shareholders  holding dematerialized  shares desirous  of  availing  the  exit  opportunity  may  either  deposit  the  equity  shares  in respect of which bids are made, with the special depositories account opened by the  merchant  banker  for  the  purpose  prior  to  placement  of  orders  or,  alternately, may mark a pledge/ lien for the same to the merchant banker in favour of the said  account. [Schedule II – Clause 7] In case promoter decides not to accept the offer price, the  equity  shares  deposited  or  pledged  by  a  shareholder  shall  be  returned  or released to him within ten working days of closure of the bidding period. [Regulation 16(2)]	Lien is  an  efficient  process  having  feature  of  complete  audit  trail  without  actually transferring  the  shares  to  the  beneficiary  account. Lien is  executed  through  the  depository’s  framework  linking  with  the  settlement  mechanism  of  the  clearing  corporation. This is an investor friendly process and instills security and assurance in the minds of the shareholders about the timely return of such shares in the event of failure of  delisting.	Shares in dematerialized form shall be tendered by way of making a lien if favour of special depositories account, opened for voluntary listing. In  case  (a) Reverse Book Building’s threshold of ninety percent (90%) is not met; or (b)  promoter  decides  not  to  accept the discovered  price, the shares tendered by way of creating lien shall be released on the same day; In respect of physical shares, it is proposed that requisite documents along with share certificate shall be sent to RTA of the company before last date of tendering period. RTA shall complete the verification on the same day.	The shareholders holding dematerialized shares, desirous of availing the exit opportunity may enter their bid by way of marking a lien in favour of the special depositories account opened by the Manager to the offer. [Para 7 – Schedule II – Regulation 20] In case of failure of the delisting offer, ninety nine percent of the amount lying in the escrow account shall be released to the acquirer within one working day from the date of public announcement of such failure. [Regulation 14(8)] The holders of physical equity shares shall ensure that the bidding form, together with the share certificate and transfer deed, is received by the share transfer agent appointed for the purpose before the last date of bidding period. The share transfer agent shall deliver the certificates, which are found to be genuine, to the Manager to the offer, who shall not hand it over to the acquirer unless the bids in respect thereof are accepted and payment in respect thereof is made. [Para 9 – Schedule II – Regulation 20]
11.	Payment of Consideration upon acceptance of the discovered price	In case of success of delisting offer, payment to the shareholders, who tendered shares, have to be made within ten (10) working days from the closure of the offer. [Regulation 20(2)]	Ten (10) days period is a fairly long period. Investors represented that due to availability of various payment options, it is possible to reduce the timeline required to make payment. As  the  shares  are  allowed  to  be  tendered through  stock  exchange  mechanism, the payment upon acceptance of the final price may be made through the secondary market settlement mechanism.	Upon acceptance of the price discovered through Reverse Book Building: (a) if the discovered price is same as the floor price, payment with respect  to dematerialized shares shall be made through the secondary market  settlement mechanism, (b) if the discovered price is more than the floor price, payment with respect to dematerialized shares shall be made within five (5) working days.	(i) In case the discovered price is equal to the floor price or the indicative price as provided under regulation 20, or in case the acquirer is bound to accept the equity shares in the delisting offer in terms of sub-regulation (2) of regulation 22 of the regulations, the payment shall be made through the secondary market settlement mechanism; (ii) In case the discovered price or the price, if any, offered by the acquirer in terms of sub-regulation (6) of regulation 20 of the regulations, is higher than the floor price or the indicative price, as the case may be, the payment shall be made within five working days from the date of the public announcement under sub-regulation (4) of regulation 17 of the regulations. [Regulation 24]
12.	Announcement of acceptance, rejection of the discovered price or counter offer	The public announcement relating to failure or success of the delisting offer to be made within five (5) working days of the closure of the offer [Regulation 18] The counter offer to be made within two (2) working days of the closure of the offer. [Regulation 16 (1A)]	The  promoter(s) have five (5) days  to  announce  the  success  or  failure  of  the  offer, whereas they  have only two (2) days to make counter offer. There was need to streamline these provisions, such that all the three decisions (accept / reject / counter offer) are taken on a single day.	Public announcement for giving either counter offer or accepting or rejecting the discovered  price,  to be made within  two (2)  working  days  of  the  closure  of  the tendering period.	In case the discovered price is not acceptable to the acquirer, a counter offer may be made by the acquirer to the public shareholders within two (2) working days of the closure of bidding period. [Regulation 22(4)]

W&B View

The procedural complexities of voluntary delisting have been made way more simple and time-bound under the Regulations which shall boost shareholder confidence. Although the delisting process in India has not seen much success as compared to the global capital markets and it is too soon to conclude whether the new regulatory regime shall revive the delisting scene in India, the changes introduced under the Regulations are timely and steps in the right direction.

In view of the prevailing situation due to Covid-19 pandemic, the lockdown imposed by the Government and representations received from Stock Exchanges, SEBI/HO/MIRSD/DOP/P/CIR/2021/587 dated June 30, 2021 has extended the timelines for compliance with the following regulatory requirements by the Trading Members /Clearing Members / KYC Registration Agencies (“KRA”):

S.No.	Submission/Compliance	Current Timeline/Period of Exclusion	Proposed Timelines/Period of Exclusion.
1.	Maintaining call recordings of orders/instructions received from clients.	Till June 30, 2021	Till July 31, 2021
2.	Client Funding Reporting
3.	Operating the trading terminals from designated alternate locations
4.	KYC Application Form and supporting documents of the clients to be uploaded on the systems of KRA within ten (10) working days	Till June 30, 2021, documents may be uploaded on to the system of KRA within fifteen (15) working days.   A thirty (30)-day time period is provided to the SEBI registered intermediary after June 30, 2021 to clear the backlog.	Till July 31, 2021, documents may be uploaded on to the system of KRA within fifteen (15) working days.   A thirty (30)-day time period is provided to the SEBI registered intermediary after July 31, 2021 to clear the backlog.
5.	Issue of Annual Global Statement to Clients	Till June 30, 2021   Relaxation is provided only if the client has requested for a physical statement.	Till July31, 2021 Relaxation is provided only if the client has requested for a physical statement.

The Securities and Exchange Board of India (“SEBI”) vide PR No.22/2021 disseminated the decisions taken by the SEBI Board in its meeting held in Mumbai on June 29, 2021, a quick snapshot of which is as under:

S.No.	Reference	Details/Changes/Main Provisions	Remarks
1.	Review and Merger of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation – SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021	Issuers other than unlisted REITs and InvITs who are in existence for less than three (3) years, have been facilitated to tap the bond market, subject to the following conditions: (i) issuance of their debt securities is made only on a private placement basis; (ii) the issue is made on the Electronic Book Provider (“EBP”) platform irrespective of the issue size; and; (iii) the issue is open for subscription only to QIBs.	This shall enable Special Purpose Vehicles created for specific infrastructure purposes/ NBFCs/ listed REITs/ listed InvITs and other companies who propose to list debt securities purely on private placement basis but who do not have a three-year existence history, to list their debt securities issued on private placement basis.
		Parameters for identification of risk factors have been introduced to assist issuers in disclosing pertinent risk factors on risks intrinsic to the issuer as well as the instrument, other risk factors which may have an impact on the issue etc.	This shall improve the quality of the disclosures for the investors to make an informed investment decision.
		The requirement to have a minimum rating of AA- for a public issuance of Non-Convertible Redeemable Preference Shares (“NCRPS”) has been done away with in requirement as is the case for a public issue of debt securities.	This shall deepen the market by widening the pool of issuers who would be eligible to raise funds.
		The requirement of a minimum tenure of three years for a public issuance of NCRPS has been removed.	This shall provide flexibility to the issuers to structure their issuance as per their resource requirement and raise funds through an issue of NCRPS.
		The restriction of not more than four issuances of debt securities in a year through a single shelf prospectus has been done away with.	This shall enable issuers to raise funds quickly without filing a separate prospectus each time.
		The option for call and put has been introduced in case of debt securities issued on private placement basis.	This shall provide greater flexibility to the issuers and investors of debt securities and NCRPS as well. Further, the period for exercise of call and put option has been brought down to twelve (12) months from twenty-four (24) months in order to provide increased flexibility, both to issuers and investors.
		Issuers who have cured the default in payment of interest / dividend / redemption amount to raise funds through non-convertible securities, have been permitted to file shelf prospectus post such curing of default provided they have cured the default at least thirty (30) days prior to filing the draft shelf prospectus.	This shall have the effect of increased compliance levels, particularly in companies in regular need of funds.
		Minimum size of Rs. 100 crore has been done away with.	This shall encourage public issuance of debt securities.
		The EBP platform has been made mandatory for issuance of eligible securities on private placement basis proposed to be listed amounting to INR 100 crore or above in a financial year.	This shall aide transparency and improve price discovery.
		The provision of creation of charge on the assets and properties of the issuer has been harmonized with the Companies Act thus allowing issuer to have an option to create charge over its properties or assets (movable, immovable, tangible, intangible), shares or any interest thereon, of the issuer or its subsidiaries or its holding companies or its associate companies.	This shall provide greater flexibility to the issuers for creation of charge.
		The requirement of abridged prospectus has been streamlined to around ten (10) pages from over fifty (50) pages.	This shall enhance readability for the investors.
		In case an issuer wishes to roll over the debt securities the provision of e-voting has been introduced in addition to postal ballot to facilitate issuers to seamlessly obtain voting for passing the resolution.	This shall encourage wider investor participation in the voting.
2.	Introduction of Framework For Accredited Investors in Securities Market	Eligibility criteria for Accredited Investors who may be Individuals, HUFs, Family Trusts, Sole Proprietorships, Partnership Firms, Trusts and Body Corporates based on financial parameters and information as may be specified by SEBI.	Accredited Investors are investors with reliable indicators of financial sophistication to participate in such investment opportunities, while maintaining the safeguards necessary for investor protection and public confidence in investing in sectors critical for the growth of the economy. So, introducing a framework for the regulation of “Accredited Investors” is a step in the right direction and also a timely move, considering the impact of COVID-19 which has necessitated responsible investing for reviving and strengthening the economy.
		Eligible subsidiaries of depositories and specified stock exchanges, and any other specified institutions to be recognized as Accreditation Agencies. Accreditation Agencies to grant accreditation status and issue Accreditation Certificate to Accredited Investor.
		Modalities of accreditation and procedure to avail benefits linked to accreditation.
		Accredited Investors shall have flexibility to participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers (PMS) Regulations.
		AIF for Accredited Investors where each investor invests minimum investment amount of Rs. 70 Crores may avail relaxation from regulatory requirements such as portfolio diversification norms, conditions for launch of schemes and extension of tenure of the AIF.
		Accredited Investors with minimum investment of Rs. 10 Crores with registered PMS provider, may avail relaxation from regulatory requirement with respect to investment in unlisted securities and can enter into bilaterally negotiated agreements with the PMS provider.
		Accredited Investors who are clients of Investment Advisers will have the flexibility to determine the limits and modes of fees payable to the Investment Adviser through bilaterally negotiated contractual terms.
3.	Review of Regulatory Provisions related to Independent Directors (“IDs”)	Appointment/Re-appointment and Removal of IDs shall be through a special resolution of shareholders for all listed entities.	The changes have been introduced to give more power to non-promoting shareholders of the Company.   The amendments with respect to appointing process and cooling-off period shall introduce additional transparency. Further, the amendments afford the companies greater flexibility in deciding remuneration which shall enable them to appoint the most suitable talent for their businesses.   Approval of related party transactions by only independent directors on the audit committee shall further strengthen the corporate governance framework.   Extending the requirement of undertaking D&O insurance to 1000 companies by market capitalisation shall surely comfort individuals of high integrity and calibre to make themselves available for being appointed as independent directors in listed companies. This would enable these directors to function fearlessly towards protection of shareholder’s interests thereby strengthening the corporate governance in these listed companies. It may be noted that these listed companies and their policies and governance standards serve as market precedents and guidelines for other listed companies and therefore we will see a trickle down effect of better governance and shareholder protection on these companies as well.
		The process to be followed by Nomination and Remuneration Committee (NRC), while selecting candidates for appointment as IDs, has been elaborated and made more transparent including enhanced disclosures regarding the skills required for appointment as an ID and how the proposed candidate fits into that skillset.
		The composition of NRC has been modified to include 2/3rd IDs instead of existing requirement of majority of IDs.
		Shareholder approval for appointment of all directors including IDs shall be taken at the next general meeting, or within three months of the appointment on the Board, whichever is earlier.
		A cooling off period of three years has been introduced for Key Managerial Personnel (and their relatives) or employees of the promoter group companies, for appointment as an ID.
		Relatives of employees of the company, its holding, subsidiary or associate company have been permitted to become IDs, without the requirement of a cooling off period, in line with Companies Act, 2013.
		The entire resignation letter of an ID shall be disclosed along with a list of her/his present directorships and membership in board committees.
		A cooling-off period of one year has been introduced for an ID transitioning to a whole-time director in the same company/ holding/ subsidiary/ associate company or any company belonging to the promoter group.
		At least 2/3rd of the members of the audit committee shall be independent directors and all related party transactions shall be approved by only Independent Directors on the Audit Committee.
		The requirement of undertaking Directors and Officers insurance has been extended to the top 1000 companies (by market capitalization).
		SEBI to make a reference to the Ministry of Corporate Affairs, for giving greater flexibility to companies while deciding the remuneration for all directors (including IDs), which may include profit linked commissions, sitting fees, ESOPs, etc., within the overall prescribed limit specified under Companies Act, 2013.
4.	Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014  and SEBI (Real Estate Investment Trusts) Regulations, 2014	Introduction of minimum unit holders requirement for unlisted InvITs. The minimum number of unit holders, other than sponsor, its related parties and its associates shall be five together holding not less than 25% of the total unit capital of the InvIT.   Revision in minimum subscription and trading lot for publicly issued REITs and InvITs. The revised minimum application value to be within the range of INR 10,000-15,000 and the revised trading lot to be of one unit.	The reduction in application value and trading lot for REITs and InvITs will enable greater retail participation in such instruments and shall therefore deepen the markets for InvITs. With the Government targeting several REITs/InvITs to monetise state & PSU assets, the amendment shall allow better market allocations.
5.	Permitting Resident Indian fund managers to be constituents of FPIs	Proposal to amend the SEBI (Foreign Portfolio Investors) Regulations, 2019 approved to permit eligible Resident Indian Fund Managers (other than individuals) to be constituents of Foreign Portfolio Investors (FPIs). Such FPIs shall be investment funds approved by Central Board of Direct Taxes (CBDT) under Section 9A of the Income-Tax (IT) Act, 1961, read with the IT Rules, 1962.	The amendments to bring the SEBI (FPI) Regulations, 2019 in line with the recent amendments in Section 9A of the IT Act, thereby facilitating Indian fund managers in managing investment funds incorporated/established/ registered outside India.
6.	Amendment to SEBI (Mutual Funds) Regulations, 1996	Amendment to SEBI (Mutual Funds) Regulations, 1996, to provide for investment of a minimum amount as skin in the game in the Mutual Fund (MF) schemes by Asset Management Companies (AMCs) based on the risk associated with the scheme, instead of the current requirement of one percent of the amount raised in New Fund Offer or an amount of INR fifty lacs, whichever is less.	The move shall introduce more accountability among the mutual fund players. By correlating the investment by AMCs with “risk associated with the scheme”, the result would be that passive funds shall attract lower investment limits whereas active funds shall have higher limits. The fact that the AMCs, depending on the risk matrix, would be required to invest a substantial amount in the scheme, their interests would be better aligned with those of the investors. This is surely a comforting change from investor’s perspective as fund houses shall have more skin in the game in schemes with higher risks.
7.	Amendment to SEBI (Credit Rating Agencies) Regulations, 1999	SEBI (Credit Rating Agencies) Regulations amended to define a Credit Rating Agency (CRA) in terms of rating of securities that are listed or proposed to be listed on a recognized stock exchange, and to provide for an explanation specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority	The move towards increased regulatory insight shall strengthen the credit rating process which is a pro-investor move.
8.	Amendment to SEBI (Bankers to an Issue) Regulations, 1994	SEBI approved the proposal for amending the SEBI (Bankers to an Issue) Regulations, 1994 with permitting such other banks, other than scheduled banks, as may be specified by SEBI from time to time, to register as a Banker to an Issue.	The amendments shall provide easy access to investors to participate in public/rights issues by using various payment avenues.
9.	Amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015	The maximum amount of reward has been increased from INR 1 crore at present, to INR 10 Crore.	The changes have been proposed with a view to streamlining the process of reward payment and to enhance the quantum of reward under the informant mechanism.
		If the total reward payable to the informant is less than or equal to INR 1 Crore, then the reward may be granted by SEBI, after the final order is issued.
		If the total reward payable to the informant is more than Rupees 1 Crore, then an interim reward not exceeding INR 1 Crore may be granted by SEBI, after the final order is issued. The remaining reward amount will be granted only upon receipt of the monetary sanctions amounting to at least twice the balance of the reward amount payable by SEBI.

 

The Securities and Exchange Board of India (“SEBI”) in exercise of the powers conferred by sub-section (1) of Section 30 read with sub-section (1) of Section 11, clause (ba) and clause (c) of sub-section (2) of Section 11 and sub-section (1) and (1B) of Section 12 of the Securities and Exchange Board of India Act, 1992has introduced certain amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) vide the notification number SEBI/LAD-NRO/GN/2021/21 dated May 5, 2021.^[1] A brief snapshot of the changes introduced by SEBI has been discussed below:

S. No.	Reference	Earlier Position		Current Position
1.	Definition [Regulation 2 (1) (wa)]	_	Insertion of clause (wa) after clause (w) and before clause (x) pursuant to which “startup” means a private limited company or a limited liability partnership which fulfills the criteria for startup as specified by the Department of Promotion of Industry and Internal Trade, Ministry of Page 2 of 11 Commerce and Industry, Government of India, vide notification no. G.S.R. 127(E) dated February 19, 2019 or such other policy of the Central Government issued in this regard from time to time.”
2.	Definition [Regulation 2 (1) (aa)]	Venture capital undertaking” means a domestic company: i.     which is not listed on a recognised stock exchange in India at the time of making investment; and ii.     which is engaged in the business for providing services, production or manufacture of article or things and does not include following activities or sectors: 1.    non-banking financial companies; 2.    gold financing; 3.    activities not permitted under industrial policy of Government of India; 4.    any other activity which may be specified by SEBI in consultation with Government of India from time to time.	Venture capital undertaking means a domestic company which is not listed on a recognised stock exchange at the time of making investments.
3.	Placement Memorandum [Regulation 11(2)]	An information or placement memorandum (“IM”) shall contain all material information about the alternative investment fund (“AIF”) and the manager, background of key investment team of the manager, targeted investors, fees and all other expenses proposed to be charged, tenure of the AIF or scheme, conditions or limits on redemption, investment strategy, risk management tools and parameters employed, key service providers, conflict of interest and procedures to identify and address them, disciplinary history, the terms and conditions on which the manager offers investment services, its affiliations with other intermediaries, manner of winding up of the AIF or the scheme and such other information as may be necessary for the investor to take an informed decision on whether to invest in the AIF.	The IM shall contain all material information about AIF and the manager, background of key investment team of the manager, targeted investors, fees and all other expenses proposed to be charged, tenure of the AIF or scheme, conditions or limits on redemption, investment strategy, risk management tools and parameters employed, key service providers, terms of reference of the committee constituted for approving the decisions of the AIF, conflict of interest and procedures to identify and address them, disciplinary history, the terms and conditions on which the manager offers investment services, its affiliations with other intermediaries, manner of winding up of the AIF or the scheme and such other information as may be necessary for the investor to take an informed decision on whether to invest in the AIF.
4.	General Investment Conditions [Regulation 15(1)]	Category I and II AIFsshall not invest more than twenty-five percent (25%) of the investable funds in one investee company.	Category I and II AIFsshall not invest more than twenty-five percent (25%) of the investable funds in one investee companydirectly or through investment in the units of other AIFs.
5.	General Investment Conditions [Regulation 15(1) (d)]	Category III AIF shall invest not more than ten percent (10%) of the investable funds in one investee company.	Category III AIF shall invest not more than ten percent (10%) of the investable funds in one investee companydirectly or through investment in the units of other AIFs.
6.	General Investment Conditions [Regulation 15(1) (da)]	_	Insertion of clause (da) after clause (d) and before clause € pursuant to which: AIFs which are authorised under the fund documents to invest in units of AIFs shall not to offer their units for subscription to other AIFs.
7.	General Investment Conditions [Regulation 15(1) (e)]	AIF shall not invest in associates except with the approval of seventy-five percent (75%) of investors by value of their investment in the AIF.	AIF shall not invest except with the approval of seventy-five percent (75%) of investors by value of their investment in the AIF in a)     associates; or b)     units of AIFs managed or sponsored by its manager, sponsor or associates of its manager or sponsor.
8.	Conditions for Category I Alternative Investment Funds[Regulation 16 (1) (a)]	Category I AIF shall invest in investee companies or venture capital undertaking or in special purpose vehicles or in limited liability partnerships or in units of other AIFs as specified in these regulation.	Category I AIF shall invest in investee companies, venture capital undertakings, special purpose vehicles, limited liability partnerships or in units of other Category I AIFsof the same sub category.
9.	Conditions for Category I Alternative Investment Funds[Regulation 16 (1) (b)]	Fund of category I AIFs may invest in units of category I AIFs of same sub-category. Provided that they shall only invest in such units and shall not invest in units of other fund of funds. Provided further that the investment conditions shall not be applicable to investments by such funds	Omitted
10.	Conditions for Category II Alternative Investment Funds[Regulation 17 (a)]	Category II AIFs shall invest primarily in unlisted investee companies or in units of other AIFs as may be specified in the IM.	Category II AIFs shall invest in investee companies or in the units of category I or other category II AIFs as may be disclosed in the IM.Explanation.– Category II AIF shall invest primarily in unlisted companies directly or through investment in units of other AIFs.
11.	Conditions for Category II Alternative Investment Funds[Regulation 17 (b)]	Fund of category II AIFs may invest in units of category I or category II AIFs. Provided that they shall only invest in such units and shall not invest in units of other fund of funds	Omitted
12.	Conditions for Category III Alternative Investment Funds[Regulation 18 (a)]	Category III AIFs may invest in securities of listed or unlistedinvestee companies or derivatives or complex or structured products.	Category III AIFs may invest in securities of listed or unlisted investee companies, derivatives, units of other AIFs or complex or structured products.
13.	Conditions for Category III Alternative Investment Funds[Regulation 18 (b)]	Fund of category III AIFs may invest in units of category I or category II AIFs. Provided that they invest solely in such units and shall not invest in units of other fund of funds.	Omitted
14.	Investment by Angel Funds[Regulation 19F (1)]	Angel funds to invest in venture capital undertakings.	Angel funds to invest in startups.
15.	Investment by Angel Funds[Regulation 19F (1) (b) and (c)]	Angel funds shall invest in venture capital undertakings which: b)      have a turnover of less than twenty- five crore rupees; c)       are not promoted or sponsored by or related to an industrial group whose group turnover exceeds three hundred crore rupees.	Omitted
16.	General Obligations[Regulation 20]	1.       All AIFs shall review policies and procedures, and their implementation, on a regular basis, or as a result of business developments, to ensure their continued appropriateness. 2.       The sponsor or manager of the AIF shall appoint a custodian registered with SEBI for safekeeping of securities if the corpus of the AIF is more than five hundred crore rupees. Provided that the sponsor or manager of a category III AIF shall appoint such custodian irrespective of the size of corpus of the AIF. Provided further that the custodian appointed by category III AIF shall keep custody of securities and goods received in delivery against physical settlement of commodity derivatives. 3.       All AIFs shall inform SEBI in case of any change in the sponsor, manager or designated partners or any other material change from the information provided by the AIF at the time of application for registration. 4.       In case of change in control of the AIF, sponsor or manager, prior approval from SEBI shall be taken by the AIF. 5.       The books of accounts of the AIF shall be audited annually by a qualified auditor. 6.       The manager shall be responsible for investment decisions of the AIF. Provided that the manager may constitute an investment committee to approve investment decisions of the AIF, subject to the following: i.            The members of investment committee shall be equally responsible as the manager for investment decisions of the AIF. ii.            The manager and members of the investment committee shall jointly and severally ensure that the investments of the AIF are in compliance with the provisions of these regulations, the terms of the placement memorandum, agreement made with the investor, any other fund documents and any other applicable law. iii.            External members whose names are not disclosed in the placement memorandum or agreement made with the investor or any other fund documents at the time of on-boarding investors, shall be appointed to the investment committee only with the consent of at least seventy-five percent (75%)of the investors by value of their investment in the AIF or scheme. iv.             Any other conditions as specified by SEBI from time to time. Provided further that clauses (i) and (ii) shall not apply to an AIF in which each investor other than the manager, sponsor, employees or directors of the AIF or employees or directors of the manager, has committed to invest not less than seventy crore rupees (or an equivalent amount in currency other than Indian rupee) and has furnished a waiver to the AIF in respect of compliance with the said clauses, in the manner specified by SEBI.	1.       AIF, key management personnel of the AIF, trustee, trustee company, directors of the trustee company, designated partners or directors of the AIF, as the case may be, managers and key management personnel of managers shall abide by the code of conduct as specified in the Fourth Schedule. Explanation.– For the purpose of this sub-regulation, ‘key management personnel’ shall have the meaning as specified by SEBI from time to time.   2.       The manager and either the trustee or trustee company or the board of directors or the designated partners of the AIF, as the case may be, shall ensure compliance by the AIF with the code of conduct as specified in the Fourth Schedule. 3.       AIFs shall have detailed policies and procedures, as approved jointly by the manager and the trustee or trustee company or board of directors or designated partners of the AIF, as the case may be, to ensure that all the decisions of the AIF are in compliance with the provisions of these regulations, terms of the IM, agreements made with investors, other fund documents and applicable laws. 4.       All AIFs shall review the policies and procedures, other internal policies, if any, and their implementation, on a regular basis or as a result of business developments, to ensure their continued appropriateness. (5) 5.       The manager shall be responsible for every decision of the AIF, including ensuring that the decisions are in compliance with the provisions of these regulations, terms of the placement memorandum, agreements made with investors, other fund documents and applicable laws. 6.       The manager shall be responsible for ensuring that every decision of the AIF is in compliance with the policies and procedures laid down for the AIF in terms of sub regulation (3) of this regulation and other internal policies of the AIF, as applicable. 7.       The manager may constitute an investment committee to approve the decisions of the AIF and such constitution shall be subject to such conditions as specified by SEBI from time to time. 8.       The members of the investment committee shall be responsible for ensuring that the decisions of the investment committee are in compliance with the policies and procedures laid down in terms of sub regulation (3) of this regulation. Provided that sub-regulation (8) of this regulation shall not apply to an AIF in which each investor other than the manager, sponsor, employees or directors of the AIF or employees or directors of the manager, has committed to invest not less than seventy crore rupees (or an equivalent amount in currency other than Indian rupees) and has furnished a waiver to the AIF in respect of compliance with the said sub-regulation, in the manner as may be specified by SEBI. 9.       The members of the investment committee shall abide by the code of conduct applicable to them as specified in Fourth Schedule. 10.   The external members of the investment committee whose names are not disclosed in the IM or in the agreement made with the investor or any other fund document at the time of on-boarding investors shall be appointed to the investment committee only with the consent of at least seventy-five percent (75%) of the investors by the value of their investment in the AIF or scheme. 11.   The sponsor or manager of the AIFshall appoint a custodian registered with SEBI for safekeeping of the securities if the corpus of the AIF is more than five hundred crore rupees.   Provided that the sponsor or manager of a category III AIF shall appoint such a custodian, irrespective of the size of the corpus of the AIF. Provided further that the custodian appointed by category III AIF shall keep the custody of the securities and goods received in delivery against the physical settlement of commodity derivatives.   12.   All AIFs shall inform SEBI in case of any change in the sponsor, manager or designated partners or any other material change from the information provided by the AIF at the time of application for registration. 13.   In case of change in control of the AIF, sponsor or manager, prior approval from SEBI shall be taken by the AIF. 14.   The books of accounts of the AIF shall be audited annually by a qualified auditor.
7.	Code of Conduct[Fourth Schedule]	_	Inserted Fourth Schedule specifying code of conduct for: ·   AIFs; ·   Managers of AIFs and key management personnel of managers and AIFs; ·   Members of investment committee, trustee, trustee company, directors of the trustee company, directors or designated partners of the AIF.

[1] Available at https://www.sebi.gov.in/legal/regulations/may-2021/securities-and-exchange-board-of-india-alternative-investment-funds-second-amendment-regulations-2021_50089.html.

Earlier, the cap was pegged at $750 m

“Is this a good time to invest in bitcoin?”

“Should I buy cryptocurrencies instead of gold this year?”

“What are the downside risks of Dogecoin?”

“Why is Elon Musk so influential?”

These are some of the queries that a wealth adviser in India would have heard in the last few weeks.

Whether the client is a salaried individual with SIP portfolios or a High Net-worth Individual (HNI) planning their budget for FY22, this could be equally relevant.

Despite the massive demand for cryptocurrency in India, thousands of licensed advisers and wealth managers are not sure whether rendering advice about cryptocurrency trading is permitted under existing regulations of the Securities and Exchange Board of India (Sebi). The capital markets regulator’s unusual silence on cryptocurrency means that various advisory firms and lawyers have been interpreting the existing rules in different ways.

In most cases, they are shying away from offering formal guidance to clients.

This means that even a high-profile investor is left with the same source of information as a college student or a young professional—the internet. This space is being rapidly occupied by influencers, celebrities and peer circles who are outside the ambit of regulations.

According to the chief executive of a leading Indian fintech advisory firm, the number of crypto-related queries its agents have been receiving has put them on the defensive. “We are receiving anywhere between 800 and 1,000 queries every day on our platform. Even those who we typically categorize as a ‘safe’ investor are asking about various kinds of cryptocurrency,” the executive said, requesting anonymity. “We are not offering any specific advice; it’s a regulatory grey area if you ask me. Instead, we are just pointing our customers to authentic sources of information with a warning about potential risks."

According to another executive from a leading advisory firm, when they receive queries on cryptocurrency from clients, they simply offer a list of curated do’s and don’t’s rather than specific advice on trading.

The speculative nature of the asset class itself makes it challenging for anyone to offer informed guidance, experts said. “There is a massive demand and value in offering good quality advisory service for crypto. However, no firm in India is doing so. No one wants to put their reputation on the line for a speculative asset class,” says Pranjal Kamra, CEO of Finology, a financial advisory firm.

Legal experts told ET that the absence of law or regulation makes offering cryptocurrency advisory neither legal nor illegal—a situation referred to in legal parlance as a regulatory "grey area".

Also read today's ETtech Morning Dispatch for an in-depth crypto coverage

Under Sebi’s Investment Advisor Regulations, ‘investment advice’ is specific to securities or "investment products". There is no definition of the latter, which is causing the confusion. “While securities are defined in regulations, investment products are not,” explains Akshay Nagpal, Partner, L&L Partners.

“Since crypto currencies are not regulated by any regulator in India yet, Sebi may take a stance that it doesn't fall in the definition of investment products and it is likely that Sebi-registered investment advisors will err on the side of caution and not issue any advice on the same," he added.

Similarly, cryptocurrencies also do not squarely fall within the category of “commodity derivatives” or “securities” under the Securities Contracts (Regulation) Act, 1956.

“This pushes the product in an unregulated space and not strictly illegal,” says Prashaant Vikram Rajput, Partner, White & Brief Advocates and Solicitors.

“However, considering the increasing number of entities looking at crypto currencies to mobilise funds, the regulatory scrutiny over the product could surely be incisive, not sparing the investment advisers as well,” Rajput added.

Another important caveat is that under Sebi (Investment Adviser) Regulations, 2013, advisers are required to maintain a register or record containing list of clients, date of advice and nature of advice and such records have to be maintained for a minimum period of 5 years, subject to inspection by the regulator.

In the event of a retrospective ban, this could create unnecessary scrutiny from the regulator, causing firms to shy away from rendering this service as well, Rajput said.

While the Reserve Bank of India (RBI) has been clear in its prohibitive stance regarding cryptocurrency, the lack of clarity over Sebi’s approach is adding to the confusion among traders and external observers.

Meanwhile, lay investors are struggling to find authentic sources of information. Discord, Telegram and Instagram have emerged as alternative platforms for the influencer community to gain from the recent traction.

However, in recent weeks, leading exchanges are also seeing a distinctive shift in their investor profile.

Even those aged above 45 are now
venturing into this space, meaning that this asset class is gradually attaining the status of mass market in India.

“We are seeing an eclectic mix of users coming onto the platform. While millennials and GenZ constitute a large chunk of our user base, we are witnessing a rise in senior citizen signups. Another interesting trend to note is that 45% of our users come from smaller cities (Tier 2 and 3)," said Sharan Nair, Chief Business Officer, CoinSwitch Kuber.

"Most of these decisions are research-based. We are also revamping the content on our blog KuberVerse and YouTube channel to educate our users about crypto, investing and blockchain so that they can make an informed decision," added Nair.

According to data shared by Tiger Global-backed CoinSwitch Kuber, 40% of its users are in the 18-25 age group. Investors over the age of 35 make up almost a quarter of its user base. Other exchanges—including WazirX—say 62.1% of its users are below 34 years. CoinDCX's primary user base is male, between ages 25 and 40.

The cryptocurrency market in India is far from mature, as even long-term investors are not able to access professional advisory services, experts added.

“Typically, for stocks and other securities, there is a value-buying community that gets active when prices plunge. In the previous cycles of crypto boom in India in 2017 and 2019, this didn’t happen here, which means that after every crash the ecosystem goes into obscurity. It’ll be interesting to see how early Indian investors react this time,” Kamra from Finology said.

The Securities and Exchange Board of India (“SEBI”) in exercise of the powers conferred under Section 30 of the Securities and Exchange Board of India Act, 1992 has introduced certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) vide the notification number SEBI/LAD-NRO/GN/2021/22 dated May 5, 2021.[1] A brief snapshot of the changes introduced has been discussed below:

S. No.	Reference	Earlier Position	Current Position
1.	Definition [Regulation 2 (1) (zm)]	_	Insertion of clause (zn) under Regulation 2(1) pursuant to which: A working day to mean working days of the stock exchange where the securities of the entity are listed.
2.	Applicability of LODR Regulations [Regulation 3 (1)]	The LODR Regulations to apply to the listed entity which has specified securities listed on main board or SME exchange or institutional trading platform.	The LODR Regulations to apply to the listed entity which has specified securities listed on main board or SME exchange or IGP.
3.	Applicability of LODR Regulations [Regulation 3 (2)]	_	Insertion of sub-regulation (2) pursuant to which: The provisions of the LODR Regulations which become applicable to listed entities on the basis of market capitalisation criteria to continue to apply to such entities even if they fall below the mentioned thresholds.
4.	Share Transfer Agent [Regulation 7 (3)}	The listed entity shall submit a compliance certificate to the exchange, duly signed by both the compliance officer of the listed entity and the authorised representative of the share transfer agent, wherever applicable, within one month of end of each half of the financial year.	The listed entity shall submit a compliance certificate to the exchange, duly signed by both the compliance officer of the listed entity and the authorised representative of the share transfer agent, wherever applicable, within thirty days of end of the financial year.
5.	Applicability of the obligations of listed entity which has listed its specified securities [Regulation 15 (2) (a)]	The compliance with the corporate governance provisions to not apply to the listed entity having paid up equity share capital not exceeding rupees ten crore and net worth not exceeding rupees twenty-five crore, as on the last day of the previous financial year: Provided that where the provisions of the regulations specified in this regulation becomes applicable to a listed entity at a later date, such listed entity shall comply with the requirements those regulations within six months from the date on which the provisions became applicable to the listed entity.	The compliance with the corporate governance provisions to not apply to the listed entity having paid up equity share capital not exceeding rupees ten crore and net worth not exceeding rupees twenty-five crore, as on the last day of the previous financial year: Provided that where the provisions of regulations 17 to 27, clauses (b) to (i) and (t) of sub-regulation (2) of regulation 46 and paraC, D and E of Schedule V of LODR Regulations become applicable to a listed entity at a later date, it shall ensure compliance with the same within six months from such date.
6.	Applicability of the obligations of listed entity which has listed its specified securities [Regulation 15 (2) (a)]		Insertion of proviso to Regulation 15 (2) (a) pursuant to which: Provided further that once the above regulations become applicable to a listed entity, they shall continue to remain applicable till such time the equity share capital or the net-worth of such entity reduces and remains below the specified threshold for a period of three consecutive financial years.
7.	Applicability of the obligations of listed entity which has listed its specified securities [Regulation 15 (2) (b)]	The compliance with corporate governance provisions shall not apply to the listed entity which has listed its specified securities on the SME Exchange. Provided that for other listed entities which are not companies, but body corporate or are subject to regulations under other statues, the provisions of corporate governance provisions as specified in regulation 17, 14[17A,] 18, 19, 20, 21, 22, 23, 24, 15[24A,] 25, 26, 27 and clauses (b) to (i) of sub-regulation (2) of regulation 46 and para C , D and E of Schedule V of LODR Regulations shall apply to the extent that it does not violate their respective statutes and guidelines or directives issued by the relevant authorities.	Omitted with effect from September 1, 2021.
8.	Risk Management Committee [Regulation 21 (2)]	The majority of members of therisk management committee (“RMC”) shall consist of members of the board of directors and in case of a listed entity having outstanding superior rights equity shares, at least two thirds of the RMC shall comprise of independent directors.	The RMC shall have minimum three members with majority of them being members of the board of directors, including at least one independent director and in case of a listed entity having outstanding superior rights equity shares, at least two thirds of the RMC shall comprise independent directors.
9.	Risk Management Committee [Regulation 21 (3A)]	The RMC shall meet atleast once in a year.	The RMC shall meet atleast twice in a year.
10.	Risk Management Committee [Regulation 21 (3B)]	_	Insertion of sub-regulation (3B) after sub-regulation (3A) and before sub-regulation (4) pursuant to which: The quorum for a meeting of the Risk Management Committee shall be either two members or one third of the members of the committee, whichever is higher, including at least one member of the board of directors in attendance.
11.	Risk Management Committee [Regulation 21 (3C)]	_	Insertion of sub-regulation (3C) after sub-regulation (3B) and before sub-regulation (4) pursuant to which: The meetings of the risk management committee shall be conducted in such a manner that on a continuous basis not more than one hundred and eighty days shall elapse between any two consecutive meetings.
12.	Risk Management Committee [Regulation 21 (4)]	_	Insertion of proviso to Regulation 21 sub-regulation (4) pursuant to which: The role and responsibilities of the RMCto mandatorily include the performance of functions specified in under Schedule II Part D of the LODR Regulations.
13.	Risk Management Committee [Regulation 21 (5)]	LODR Regulations to be applicable to top 500 listed companiesdetermined on the basis of market capitalisation, as at the end of the immediate previous financial year.	LODR Regulations to be applicable to top 1000 listed companiesdetermined on the basis of market capitalisation, as at the end of the immediate previous financial year.
14.	Risk Management Committee [Regulation 21 (6)]	_	Insertion of sub-regulation (6) after sub-regulation (5) pursuant to which: The RMCto have powers to seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.
15.	Corporate governance requirements with respect to subsidiary of listed entity [Regulation 24 (5)]	A listed entity shall not dispose of shares in its material subsidiary resulting in reduction of its shareholding (either on its own or together with other subsidiaries) to less than fifty percent or cease the exercise of control over the subsidiary without passing a special resolution in its general meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a court/tribunal[, or under a resolution plan duly approved under section 31 of the Insolvency and Bankruptcy Code, 2016 and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved.	A listed entity shall not dispose of shares in its material subsidiary resulting in reduction of its shareholding (either on its own or together with other subsidiaries) to less thanor equal to fifty percent or cease the exercise of control over the subsidiary without passing a special resolution in its general meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a court/tribunal[, or under a resolution plan duly approved under section 31 of the Insolvency and Bankruptcy Code, 2016 and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved.
16.	Secretarial Audit[Regulation 24A (1)]	Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a company secretary in practice, in such form as may be specified with effect from the year ended March 31, 2019.	Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex a secretarial audit report given by a company secretary in practice, in such form as specified, with the annual report of the listed entity.
17.	Secretarial Audit[Regulation 24 A (2)]	_	Sub-regulation (2) inserted pursuant to which: Every listed entity to submit a secretarial compliance report in such form as specified, to stock exchanges, within sixty days from end of each financial year.
18.	Obligations with respect to employees including senior management, key managerial persons, directors and promoters[Regulation 26 (4)]	With respect to the obligations for employees including senior management, key managerial persons, directors and promoters, the non-executive directors to disclose their shareholding, held either by them or on a beneficial basis for any other persons in the listed entity in which they are proposed to be appointed as directors, in the notice to the general meeting called for appointment of such director.	Omitted
19.	Other corporate governance requirements [Regulation 27 (2) (a)]	The listed entity shall submit a quarterly compliance report on corporate governance in the format as specified by SEBI from time to time to the recognised stock exchange(s) within fifteen days from close of the quarter.	The listed entity to submit a quarterly compliance report on corporate governance in the format as specified by SEBI from time to time to the recognised stock exchange(s) within twenty-one days from end of each quarter.
20.	Prior Intimation [Regulation 29 (1) (f)]	Prior intimation to stock exchange about the meeting in which the proposal for declaration of bonus securities where such proposal is communicated to the board of directors of the listed entity as part of the agenda papers to be given by the listed entity.	Prior intimation to stock exchange about the meeting in which the proposal for declaration of bonus securities is discussed to be given by the listed entity.
21.	Disclosure of events or information [Regulation 30 (6)]	The listed entity shall first disclose to stock exchange(s) of all events, as specified in Part A of Schedule III of the LODR Regulations, or information as soon as reasonably possible and not later than twenty-four hours from the occurrence of event or information. Provided further that disclosure with respect to such events shall be made within thirty minutes of the conclusion of the board meeting.	The listed entity shall first disclose to stock exchange(s) of all events, as specified in Part A of Schedule III of the LODR Regulations, or information as soon as reasonably possible and not later than twenty-four hours from the occurrence of event or information. Provided further that disclosure with respect to such events shall be made within the timelines specified therein.
22.	Conditions for re-classification of any person as promoter/ public [Regulation 31 A (3) (a)]	Re-classification of status of a promoter/ person belonging to promoter group to public to be permitted by the stock exchanges only upon satisfaction of the following conditions: a)     an application for re-classification to the stock exchanges has been made by the listed entity consequent to the following procedures and not later than thirty days from the date of approval by shareholders in general meeting: i.     the promoter(s) seeking re-classification shall make a request for reclassification to the listed entity which shall include rationale for seeking such re-classification and how the conditions specified for re-classification are satisfied; ii.     the board of directors of the listed entity shall analyze the request and place the same before the shareholders in a general meeting for approval along with the views of the board of directors on the request:   Provided that there shall be a time gap of at least three months but not exceeding six months between the date of board meeting and the shareholder’s meeting considering the request of the promoter(s) seeking re-classification.   iii.     the request of the promoter(s) seeking re-classification shall be approved in the general meeting by an ordinary resolution in which the promoter(s) seeking re-classification and persons related to the promoter(s) seeking re-classification shall not vote to approve such re-classification request.	Reclassification of status of a promoter to public shall be permitted by the stock exchanges only upon satisfaction of the following conditions: a)      an application for reclassification has been made by the listed entity to the stock exchanges within thirty days from the date of approval by shareholders in general meeting after ensuring that the following procedural requirements have been fulfilled:   i.     the promoter(s) seeking reclassification has made a request for reclassification to the listed entity along with a rationale for the same and a description as to how the conditions specified for re-classification are satisfied; ii.     the board of directors of the listed entity has analyzed such request in the immediately next board meeting or within three months from the date of receipt of the request from its promoter(s), whichever is earlier and has placed the same before the shareholders in a general meeting for approval along with the views of the board of directors on the request.   Provided that there shall be a time gap of at least one month but not exceeding three months between the dates of the board meeting and the shareholders’ meeting considering the request of the promoter(s) seeking reclassification.   iii.     the request of the promoter(s) seeking reclassification has been approved in the general meeting by an ordinary resolution in which the promoter(s) seeking reclassification and the persons related to him/her/it have not voted to approve such reclassification request:   Provided that the provisions of this sub-clause shall not apply in cases: a)      where the promoter(s) seeking reclassification and persons related to the promoter(s) seeking reclassification, together, do not hold more than one percent of the total voting rights in the listed entity; b)      where reclassification is pursuant to a divorce.
23.	Conditions for re-classification of any person as promoter/ public [Regulation 31 A (9)]	The provisions of sub-regulations 3, 4 and clauses (a) and (b) of sub-regulation 8 of LODR Regulations shall not apply, if re-classification of promoter(s)/ promoter group of the listed entity is as per the resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 subject to the condition that such promoter(s) seeking reclassification shall not remain in control of the listed entity.	The provisions of sub-regulations (3), (4) and clauses (a) and (b) of sub-regulation (8) of LODR Regulations shall not apply if reclassification of promoter(s) is as per the resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016or pursuant to an order of a regulator under any law subject to the condition that such promoter(s) seeking reclassification shall not remain in control of the listed entity.
24.	Conditions for re-classification of any person as promoter/ public [Regulation 31 A (10)]	_	Insertion of sub-regulation (10) after sub-regulation (9) pursuant to which: In case of reclassification pursuant to an open offer or a scheme of arrangement, the provisions of clause (a) of sub-regulation (3) and clauses (a) and (b) of sub-regulation (8) of LODR Regulations shall not apply if the intent of the erstwhile promoter(s) to reclassify has been disclosed in the letter of offer or scheme of arrangement: Provided that the provisions of clause (c)(i) of sub-regulation (3) of LODR Regulations shall not apply in case of reclassification pursuant to an open offer.
25.	Statement of deviation(s) or variation(s) [Regulation 32 (6)]	Where the listed entity has appointed a monitoring agency to monitor utilisation of proceeds of a public or rights issue, the listed entity shall submit to the stock exchange(s) any comments or report received from the monitoring agency.	Where the listed entity has appointed a monitoring agency to monitor utilisation of proceeds of a public or rights issue, the listed entity shall submit to the stock exchange(s) any comments or report receivedwithin forty-five days from the monitoring agency.
26.	Financial Results [Regulation 33 (6)]	The statement on impact of audit qualifications for audit report with modified opinion and the accompanying annual audit report shall be reviewed by the stock exchange(s).	Omitted
27.	Annual Report [Regulation 34 (2) (f)]	The annual report to contain for the top one thousand listed entities based on market capitalization (calculated as on March 31 of every financial year), business responsibility report describing the initiatives taken by them from an environmental, social and governance perspective, in the format as specified by SEBI from time to time: Provided that listed entities other than top one thousand listed companies based on market capitalization and listed entities which have listed their specified securities on SME Exchange, may include these business responsibility reports on a voluntary basis in the format as specified.	The annual report to contain for the top one thousand listed entities based on market capitalization, a business responsibility report describing the initiatives taken by the listed entity from an environmental, social and governance perspective, in the format as specified by SEBI from time to time:Provided that the requirement of submitting a business responsibility report shall be discontinued after the financial year 2021–22 and thereafter, with effect from the financial year 2022–23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report in the format as specified by SEBI  from time to time: Provided further that even during the financial year 2021–22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report: Provided further that the remaining listed entities including the entities which have listed their specified securities on the SME Exchange, may voluntarily submit such reports. Explanation: For the purpose of this clause, market capitalization shall be calculated as on the 31st day of March of every financial year.
28.	Dividend Distribution Policy [Regulation 43A (1)]	The top five hundred listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed in their annual reports and on their websites.	The top one thousand listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed on the website of the listed entity and a web-link shall also be provided in their annual reports.
29.	Dividend Distribution Policy [Regulation 43A (3)]	The listed entities other than top five hundred listed entities based on market capitalization may disclose their dividend distribution policies on a voluntary basis in their annual reports and on their websites.	The listed entities other than those specified at Regulation 43A(1) may disclose their dividend distribution policies on a voluntary basis on their websites and provide a web-link in their annual reports.
30.	Change in name of listed entity [Regulation 45 (3)]	On receipt of confirmation regarding name availability from registrar of companies, before filing the request for change of name with the registrar of companies in terms of provisions laid down in the Companies Act, 2013 and rules made thereunder, the listed entity shall seek approval from stock exchange by submitting a certificate from chartered accountant stating its compliance.	Upon compliance with the conditions for change of name laid down in Companies Act, 2013 and rules made thereunder, the listed entity, in the explanatory statement to the notice seeking shareholders’ approval for change in name, shall include a certificate from a practicing-chartered accountant stating its compliance.
31.	Website [Regulation 46 (2) (o)]	The listed entity to disseminate the information relating to the schedule of analyst or institutional investor meet and presentations made by the listed entity to analysts or institutional investors simultaneously with submission to stock exchange under a separate section on the website.	The listed entity to disseminate the information relating to the schedule of analysts or institutional investors meet and presentations made by the listed entity to analysts or institutional investors under a separate section on the website.
32.	Website [Regulation 46 (2) (oa)]	_	Insertion of a new clause (oa) after clause (o) pursuant to which: Audio or video recordings and transcripts of post earnings/quarterly calls, by whatever name called, conducted physically or through digital means, simultaneously with submission to the recognized stock exchange(s), in the following manner: i.     the presentation and the audio/video recordings shall be promptly made available on the website and in any case, before the next trading day or within twenty-four hours from the conclusion of such calls, whichever is earlier; ii.     the transcripts of such calls shall be made available on the website within five working days of the conclusion of such calls: Provided that— a)    The information under sub-clause (i) shall be hosted on the website of the listed entity for a minimum period of five years and thereafter as per the archival policy of the listed entity, as disclosed on its website. b)    The information under sub-clause (ii) shall be hosted on the website of the listed entity and preserved in accordance with clause (a) of regulation 9 of LODR Regulations. The requirement for disclosure(s) of audio/video recordings and transcript shall be voluntary with effect from April 01, 2021, and mandatory with effect from April 01, 2022.
33.	Website [Regulation 46 (2) (s)]	_	Insertion of proviso to Clause (s) pursuant to which: A listed entity, which has a subsidiary incorporated outside India— a)       where such subsidiary is statutorily required to prepare consolidated financial statement under any law of the country of its incorporation, the requirement of this proviso shall be met if consolidated financial statement of such subsidiary is placed on the website of the listed entity; b)      where such subsidiary is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the holding Indian listed entity may place such unaudited financial statement on its website and where such financial statement is in a language other than english, a translated copy of the financial statement in english shall also be placed on the website.
34.	Website [Regulation 46 (2)]	_	Insertion of the following clauses under Regulation 46(2) pursuant to which: The listed entity to disseminate the following information under a separate section on its website: t)        Secretarial compliance report u)      Policy for determination of materiality of events or information v)      Disclosure of contact details of key managerial personnel who are authorized for the purpose of determining materiality of an event or information and for the purpose of making disclosures to stock exchange(s) w)     All such events or information which has been disclosed to stock exchange(s) x)      Statements of deviation(s) or variation(s) y)      Dividend distribution policy by listed entities based on market capitalisation; and z)       Annual Returns.
35.	Advertisements in Newspapers [Regulation 47 (1) (a) and (c)]	A listed entity to publish the information in the newspaper regarding notice of meeting of the board of directors where financial results are to be discussed and statements of deviation(s) or variation(s) after review by audit committee.	Omitted
36.	Financial Results [Regulation 52(3) (b)]	The statement on impact of audit qualifications for audit report with modified opinion and the accompanying annual audit report submitted by the listed entity shall be reviewed by the stock exchange(s).	Omitted
37.	Draft Scheme of Arrangement & Scheme of Arrangement [Regulation 94 (2), (3) and (4)]	2)     The stock exchange(s) shall submit to SEBI its objection letter orno-objection letter on the draft scheme of arrangement after inter-alia ascertaining whether the draft scheme of arrangement is in compliance with securities laws within thirty days of receipt of draft scheme of arrangement or within seven days of date of receipt of satisfactory reply on clarifications from the listed entity and/or opinion from independent chartered accountant, if any, sought by stock exchange(s), as applicable. 3)     The stock exchange(s) shall issue observation letter orno-objection letter to the listed entity within seven days of receipt of comments from SEBI, after suitably incorporating such comments in the observation letter or no-objection letter. Provided that the validity of the observation letter orno-objection letter of stock exchanges shall be six months from the date of issuance. 4)     The stock exchange(s) shall bring the observations or objections, as the case may be, to the notice of court or tribunal at the time of approval of the scheme of arrangement.	2)      The stock exchange(s) shall submit to SEBI its no-objection letter on the draft scheme of arrangement after inter-alia ascertaining whether the draft scheme of arrangement is in compliance with securities laws within thirty days of receipt of draft scheme of arrangement or within seven days of date of receipt of satisfactory reply on clarifications from the listed entity and/or opinion from independent chartered accountant, if any, sought by stock exchange(s), as applicable. 3)      The stock exchange(s) shall issue no-objection letter to the listed entity within seven days of receipt of comments from SEBI, after suitably incorporating such comments in the observation letter or no-objection letter.   Provided that the validity of the no-objection letter of stock exchanges shall be six months from the date of issuance.   4)      The stock exchange(s) shall bring the objections, as the case may be, to the notice of court or tribunal at the time of approval of the scheme of arrangement.
38.	Corporate Governance [Schedule II Part C Paragraph A]	_	Insertion of clause (22) after (21) pursuant to which: The role of the audit committee shall include “consider and comment on rationale, cost-benefits and impact of schemes involving merger, demerger, amalgamation etc., on the listed entity and its shareholders.”
39.	Corporate Governance [Schedule II Part D Paragraph B]	_	Insertion of new paragraph pursuant to which: The role of the RMC shall, inter alia, include the following: 1)      To formulate a detailed risk management policy which shall include: a)       A framework for identification of internal and external risks specifically faced by the listed entity, in particular including financial, operational, sectoral, sustainability (particularly, ESG related risks), information, cyber security risks or any other risk as may be determined by the RMC. b)      Measures for risk mitigation including systems and processes for internal control of identified risks. c)       Business continuity plan. 2)      To ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with the business of the company; 3)      To monitor and oversee implementation of the risk management policy, including evaluating the adequacy of risk management systems; 4)      To periodically review the risk management policy, at least once in two years, including by considering the changing industry dynamics and evolving complexity; 5)      To keep the board of directors informed about the nature and content of its discussions, recommendations and actions to be taken; 6)      The appointment, removal and terms of remuneration of the chief risk officer (if any) shall be subject to review by the RMC. The RMC shall coordinate its activities with other committees, in instances where there is any overlap with activities of such committees, as per the framework laid down by the board of directors.
40.	Disclosures of events or information: specified securities [Schedule III, Part A, Paragraph A, Clause 4]	-	Insertion of proviso pursuant to which: In case of board meetings being held for more than one day, the financial results shall be disclosed within thirty minutes of end of the meeting for the day on which it has been considered.
41.	Disclosures of events or information: specified securities [Schedule III, Part A, Paragraph A, Clause 9]	Corporate debt restructuring shall be disclosed without any application of the guidelines for materiality.	Resolution plan/Restructuring in relation to loans/borrowings from banks/financial institutions including the following details: i.     Decision to initiate resolution of loans/borrowings; ii.     Signing of Inter-Creditors Agreement (ICA) by lenders; iii.     Finalization of Resolution Plan; iv.     Implementation of Resolution Plan; and v.     Salient features, not involving commercial secrets, of the resolution/restructuring plan as decided by lenders.
42.	Disclosures of events or information: specified securities [Schedule III, Part A, Paragraph A, Clause 15]	Schedule of analyst or institutional investor meet and presentations on financial results made by the listed entity to analysts or institutional investorsshall be disclosed without any application of the guidelines for materiality.	a)       Schedule of analysts or institutional investors meet and presentations made by the listed entity to analysts or institutional investors.   Explanation: To this clause “meet” shall mean group meetings or group conference calls conducted physically or through digital means.   b)      Audio or video recordings and transcripts of post earnings/quarterly calls, by whatever name called, conducted physically or through digital means, simultaneously with submission to the recognized stock exchange(s), in the following manner: i.            the presentation and the audio/video recordings shall be promptly made available on the website and in any case, before the next trading day or within twenty-four hours from the conclusion of such calls, whichever is earlier; ii.            the transcripts of such calls shall be made available on the website within five working days of the conclusion of such calls: The requirement for disclosure(s) of audio/video recordings and transcript shall be voluntary with effect from April 01, 2021 and mandatory with effect from April 01, 2022.
43.	Annual Report[Schedule V, Paragraph C, Clause 5]	The annual report shall contain the following additional disclosures: Remuneration of Directors: a)      all pecuniary relationship or transactions of the non-executive directors visà-vis the listed entity shall be disclosed in the annual report; b)     criteria of making payments to non-executive directors. alternatively, this may be disseminated on the listed entity’s website and reference drawn thereto in the annual report; c)      disclosures with respect to remuneration: in addition to disclosures required under the Companies Act, 2013, the following disclosures shall be made: i.     all elements of remuneration package of individual directors summarized under major groups, such as salary, benefits, bonuses, stock options, pension etc; ii.     details of fixed component and performance linked incentives, along with the performance criteria; iii.     service contracts, notice period, severance fees; iv.     stock option details, if any and whether issued at a discount as well as the period over which accrued and over which exercisable.	Stakeholders’ relationship committee: a)       name of the non-executive director heading the committee; b)      name and designation of the compliance officer; c)       number of shareholders‘ complaints received during the financial year; d)      number of complaints not solved to the satisfaction of shareholders; e)       number of pending complaints.
44.	Annual Report [Schedule V, Paragraph C, Clause 5A]	_	Insertion of clause (5A) after clause 6 pursuant to which: Disclosures regarding the RMC to be made in the section of the corporate governance of the annual report: a)       brief description of terms of reference; b)      composition, name of members and chairperson; and c)       meetings and attendance during the year.
45.	Annual Report [Schedule V, Paragraph C, Clause 6]	Disclosures regarding the stakeholders’ grievance committee to be made in the section of the corporate governance of the annual report: a)       name of non-executive director heading the committee; b)      name and designation of compliance officer; c)       number of shareholders’ complaints received so far; d)      number not solved to the satisfaction of shareholders; and e)       number of pending complaints.	Disclosures regarding renumeration of directors to be made in the section of the corporate governance of the annual report: a)       all pecuniary relationship or transactions of the non-executive directors vis-à-vis the listed entity; b)      criteria of making payments to non-executive directors. Alternatively, this may be disseminated on the listed entity‘s website and reference drawn thereto in the annual report; c)       disclosures with respect to remuneration: in addition to disclosures required under the Companies Act, 2013, the following disclosures shall be made:   i.     all elements of remuneration package of individual directors summarized under major groups, such as salary, benefits, bonuses, stock options, pension etc; ii.     details of fixed component and performance linked incentives, along with the performance criteria; iii.     service contracts, notice period, severance fees; and iv.     stock option details, if any and whether issued at a discount as well as the period over which accrued and over which exercisable.

[1]Available at https://taxguru.in/sebi/sebi-listing-obligations-disclosure-requirements-second-amendment-regulations-2021.html

Overview:

The Indian capital markets have matured over the years, with a more robust disclosure framework, adoption of best international practices aimed at providing better information to investors for decision making, at the same time balancing the ease of doing business of issuers. In the aforesaid background, a proposal was received from the Association of Investment Bankers of India (“AIBI”) by the Primary Markets Advisory Committee (“PMAC”) providing views relating to the definition of ‘promoter group’ and lock-in requirements at the time when the issuer makes an issue. The AIBI recommended a reduction on lock-in periods for minimum promoter’s contribution and other shareholders for public issuance on the main board, rationalization of the definition of ‘promoter group’, streamlining the disclosures of group companies and change in concept from ‘promoter’ to ‘person in control’. Subsequently, the PMAC deliberated on the agenda and constituted a sub-group to examine the relevance of ‘concept of promoter’ and the lock-in requirements in the context of Indian securities market. The sub-group held deliberations and also interacted extensively with various stakeholders, including investors, law firms, industry associations as well as corporates, subsequent to which the recommendations of the sub-group were deliberated by the PMAC and thereafter approved by the Securities and Exchange Board of India (“SEBI”) in its board meeting held on December 16, 2020.[1] With an aim to ease the regulatory burden for the listed companies and encourage more companies to opt the listing route, the SEBI vide a consultation paper[2] dated May 11, 2021 (“Consultation Paper”) has now opened up the window for deliberations for liberalizing the SEBI (Issue of Capital and Capital Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) by easing certain restrictions which have been briefly dealt hereunder.

Proposed Changes:

The Consultation Paper proposes the changes on the following relating to the ICDR Regulations, which have been briefly discussed below:

1. Reduction in lock-in periods for minimum promoter’s contribution and other shareholders for public issuance on the main board.
2. Rationalization of the definition of ‘promoter group’

• Streamlining the disclosures of group companies; and

1. Shifting from concept of ‘promoter’ to concept of ‘person in control’.

S. No.	Reference	Present Provisions	Proposed Changes
1.	Reduction in lock-in period for minimum promoters’ contribution and other shareholders for public issuance on the main board	In terms of Regulation 16 of ICDR Regulations, the minimum promoters’ contribution of 20% to be locked-in for a period of three years from the date of commencement of commercial production or date of allotment in the initial public offer (“IPO”) whichever is later. The promoters’ holding in excess of minimum promoters’ contribution to be locked in for period of one year from the date of allotment in the IPO. In terms of Regulation 17 of ICDR Regulations, the entire pre-issue capital held by persons other than the promoters to be locked-in for a period of one year from the date of allotment in the IPO.	If the object of the issue involves offer for sale or financing other than for capital expenditure for a project, minimum promoters’ contribution (20%) shall be locked-in for a period of one year from the date of allotment in the IPO, as opposed to existing requirement of three years. Promoters’ holding in excess of minimum promoters’ contribution shall be locked in for a period of six months as opposed to the existing requirement of one year from the date of allotment in the IPO. The entire pre-issue capital held by persons other than the promoters shall be locked-in for a period of six months from the date of allotment in the IPO as opposed to the existing requirement of one year.
Rationale: The lock-in requirement was necessary to ensure continuous “skin in the game”, particularly in the case of companies that were raising public capital for project financing or setting up greenfield projects. However, as most companies going public these days are well established with mature businesses, the condition can be done away with. Besides, greenfield financing through IPOs has become practically non-existent.
2.	Rationalization of the definition of ‘promoter group’	Section 2(69) of the Companies Act, 2013 incorporates the definition of promoter, however it does not define promoter group. The definition of promoter group has been provided in Regulation 2 (1) (pp) of the ICDR Regulations. Regulation 2(1)(pp)(iii)(c) stipulates that promoter group inter-alia includes “anybody corporate in which a group of individuals or companies or combinations thereof acting in concert, which hold 20% or more of the equity share capital in that body corporate and such group of individuals or companies or combinations thereof also holds 20% or more of the equity share capital of the issuer and are also acting in concert.” The intent of capturing the promoter group was to disclose the interrelationships of various entities within the group to the entity accessing the capital market.	Proposed to do away with the requirements of including entities specified in the said regulation 2 (1) (pp) (ii) (c) in the definition of promoter group. Therefore, the said regulation needs to be deleted.
Rationale: The definition of the promoter group includes holdings by a common group of individuals or persons and often results in capturing unrelated companies with common financial investors. Capturing the details of holdings by financial investors may not result in any meaningful information to investors, apart from being a challenging task. Further, post listing, it is more relevant to identify and disclose related parties and related party transactions. Accordingly, this deletion shall rationalize the disclosure burden and bring it in line with the post listing disclosure requirements.
3.	Streamlining the disclosures of ‘group companies’	A per Regulation 2(t) of the ICDR Regulations, a ‘group company’ includes those companies (other than promoters and subsidiaries) with which the issuer company has had related party transactions during the period for which financials are disclosed in the offer document. In terms of ICDR Regulations, the information such as date of incorporation, nature of activities, equity capital, reserves, profit after tax, earnings per share and diluted earnings per share, net asset value, pending litigation involving the group company which has a material impact on the issuer etc. has to be provided for the last three years for the five largest listed group companies. In case there are no listed group companies, the financial information has to be given for the five largest unlisted group companies based on turnover.	Proposed that only the names and registered office address of all the group companies to be disclosed in the offer document. All other disclosure requirements like financials of top five listed/ unlisted group companies, litigation, etc. presently disclosed in the draft red herring prospectus to be done away with. However, such disclosures may continue to be made available on the websites of the listed companies.
Rationale: The concept of group companies ceases after listing and does not find a mention either in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011. Further, the financial investors may get covered under the umbrella of group company on account of investments made and/or dividends paid despite there being no other transactions between them and the listed company. Besides, entities which are not material to the issuer company may also get covered under the definition of group company. Also, there is a possibility where companies may have ceased to be group companies during the last three years, but issuers are required to reach out to such companies and seek their cooperation for providing information.
4.	Shifting from the concept of ‘promoter’ to concept of ‘person in control’	The ICDR Regulations define ‘promoter’ as a person who has been named as such in the offer document or in the annual return of the issuer or a person who has control over the issuer, whether directly or indirectly, or in whose advice, direction or instructions the board of directors of the issuer is accustomed to act. Thus, the definition of promoter is wide-ranging and goes beyond persons in control of the issuer.	A shift would lead to removing the reference to promoters and promoter group, at same time introducing the concept of person in control or controlling shareholders in various SEBI Regulations. It may also have implications on laws administered by other regulators as the Ministry of Corporate Affairs, the Reserve Bank of India, etc.
Rationale: In view of the changing investor landscape in India, the concentration of ownership and controlling rights does not vest completely in the hands of the promoters or the promoter group. Also, a number of new age companies do not have a distinctly identifiable promoter group. Further, a downward trend has been witnessed in the aggregate shareholding of promoters and a contrasting trend in case of institutional investors. These changes could lead to a situation where the persons with no controlling rights and minority shareholding continue to be classified as promoter. By virtue of being called promoters, such persons may have influence over the listed entity disproportionate to their economic interest, which may not be in the interests of all stakeholders. The increased focus on quality of board and management has also diluted the incisive focus on the concept of promoter. In the present scenario, the identification and updation of promoter group is required to be done for each promoter of the listed entity. Over time, this may become more challenging and even resulting in identification of persons who are not involved with the business of the issuer. These issues have resulted into an increased need to shift to the concept of ‘person in control’ or ‘controlling shareholders.’

W&B View:

SEBI’s proposal to shift from promoter to persons in control is a welcome change from the existing stand of ‘once a promoter, always a promoter’. Under current norms, until reclassification, promoter shareholders who are not in control continue to bear burden. Further, the current definition of promoter is an inclusive one and goes beyond persons who are actually in control. Hence, the proposed change of shifting the focus on persons in control is logical and good for the markets. It will avoid situations of naming shareholders as promoters, who are not in control. Further in relation to the reduction of lock-in period, it will give a boost to private equity players who seek an early exit. For non-promoters, reducing the lock-in period requirement will boost pre-IPO investments which are good for the markets. Overall, the proposed changes shall rationalize and simplify the roles and responsibilities of promoters. There will be a lesser disclosure burden on the promoter group and the group companies and shall make relevant information easier for promoters to process. The proposed changes recognise the ground realities for new age issuers and lays a stepping stone for rationalizing the listing process in India.

[1]Available at https://www.sebi.gov.in/sebiweb/about/AboutAction.do?doBoardMeeting=yes&year=2020.

[2]SEBI Consultation Paper on Review of the regulatory framework of promoter, promoter group and group companies as per the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 dated May 11, 2021. Available at https://www.sebi.gov.in/reports-and-statistics/reports/may-2021/consultation-paper-on-review-of-the-regulatory-framework-of-promoter-promoter-group-and-group-companies-as-per-securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-re-_50099.html.

Introduction:

Pursuant to an announcement made by the Hon’ble Union Minister of Finance and Corporate Affairs, Smt, Nirmala Sitharaman while presenting the union budget 2019-20 regarding social stock exchanges[1], SEBI had constituted a working group on social stock exchanges in September 2019 under the chairmanship of Shri. Ishaat Hussain (“Working Group”). The announcement was made keeping in mind the need to take the Indian capital market closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion. The purpose is to create an electronic fund raising platform- a social stock-exchange- under the regulatory ambit of SEBI for listing social enterprises and voluntary organization working for the realization of a social welfare objective so that they can raise capital as equity or debt. The broad terms of reference to the Working Group was to review possible structures and mechanisms, to facilitate raising of funds by social enterprises and voluntary organizations and to recommend an associated regulatory framework inter-alia, covering the issues relating to eligibility norms for participation, disclosures, listing, trading, oversight, etc. Based upon the meeting with various stakeholders, the Working Group submitted its report wherein it made recommendations; however, a need was felt for expert advice on certain critical operational issues. Accordingly, a technical group was constituted by SEBI on September 21, 2020 (“Technical Group”) basis the recommendations made earlier by the Working Group and subsequently vide press release dated May 6, 2021[2], SEBI sought public comments on the recommendations made by the technical group in relation the social stock exchanges.

Recommendations by the Technical Group:

The Technical Group upon several interactions with various stakeholders has made various recommendations for development of social stock exchanges which are briefly discussed below:

• Eligibility of social enterprises for social stock exchange: A social enterprise, including both For Profit Enterprises (“FPEs”) and Non-Profit Organizations (“NPOs”), in order to qualify for the social stock exchange, should be able to demonstrate that social intent and impact are its primary goals. The Technical Group has proposed that a combination of the following three (3) filters be used to establish the primacy of social impact objective of the social enterprise:

1. The following fifteen (15) broad eligible activities identified by the Technical Group to be used to demonstrate the primacy of social impactalong with sustainable development goals and priority areas identified by Niti Aayog.

• Eradicating hunger, poverty, malnutrition and inequality; promoting health care and sanitation; and making available safe drinking water
• Promoting education, employability and livelihoods
• Promoting gender equality, empowerment of women and LGBTQIA+ communities
• Ensuring sustainability, addressing climate change (mitigation and adaptation), forest and wildlife conservation
• Protection of national heritage, art and culture
• Training to promote rural sports, nationally recognised sports, Paralympicsports and Olympic sports
• Supporting incubators of social enterprises
• Supporting other platforms that strengthen the non-profit ecosystem in fundraising and capacity building
• Promoting rural livelihoods including enhancing income of small and marginal farmers and workers in the non-farm sector
• Slum area development, affordable housing, and other interventions to build sustainable and resilient cities
• Disaster management, including relief, rehabilitation and reconstruction activities
• Promotion of financial inclusion
• Facilitating access to land and property assets for disadvantaged communities
• Bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection; and
• Promoting welfare of migrants and displaced persons.

2. Activities of the social enterprise to target underserved or less privileged population segments or regions recorded lower performance in the development priorities of national/state governments.
3. Social enterprises to have at least 67% of its activities qualifying as eligible activities to the target population, which shall be established through one or more of the following: a. Revenue b. Expenditure c. Customer base.

Corporate foundations, political or religious organizations/ activities, professional or trade associations, infrastructure and housing companies not to be permitted on social stock exchange.

• Requirement of registration for NPOs: The Technical Group has recommended that the NPOs be registered with social stock exchange prior to raising funds. The entity shall be registered as an NPO and atleast two (2) years old, valid registration under Income Tax Act, registration with income tax as an NPO, valid 80G registration under income tax, minimum annual spending in past financial year must be alteast ₹50 Lakhs, minimum funds raised in past financial year must be alteast ₹10 Lakhs.
• Instruments available for NPOs: Equity, zero coupon zero principal bonds, development impact bonds, social impact fund with 100% grants-in grants out provision, and donations by investors through mutual funds to be the modes available for fund raising for NPOs.

• Instruments available for FPEs: Equity, debt, development impact bonds and social impact fund to be the modes available for fund raising for FPEs.

• Offer document content for social enterprises: The offer document filed by the social enterprises for various modes of fund raising to make disclosure with respect to the aspects called “differentiators” which covers aspects such as vision, target segment, strategy, governance, management, operations, finance, compliance, credibility, social impact and risks.
• Recasting social venture funds (“SVFs”): In order to encourage investors and philanthropists to participate in SVFs, the Technical Group recommended reducing minimum corpus size from ₹20 Crores to ₹5 Crores, reducing minimum subscription from ₹1 Crore to ₹2 Lakhs, allowing 100% grants, grants out under SVFs, allowing corporates to invest CSR funds into SVFs with a 100% grants-in, grants out model andthe changing nomenclature of SVF to social impact funds.
• Capacity Building Fund (“CBF”):A total fund of ₹ 100 Crores called the CBF is recommended by the Technical Group to improve the ability of all stakeholders to navigate the social stock exchange, its process and instruments. Stock exchanges along with developmental agencies such as SIDBI, financial institutions and donors to contribute towards development of the CBF. Further, the CBF to be governed through an advisory board.
• Social Auditors: The Technical Group envisioned a social audit having two components: a financial audit, and a non-financial audit. The latter to include the audit of social impact. In the initial phases, only reputed firms/institutions having expertise in the area of social audit to be allowed to carry out social audits. Such institutions to employ social auditors who have qualified certification course conducted by the National Institute of Securities Market. A separate code of conduct for social auditors to be developed by the Institute of Chartered Accountants of India.
• Information Repositories: Information Repositories form an important category of participants in the social stock exchange ecosystem by functioning as an aggregator of information on NGOs and provide a searchable database in comparable form. Considering early days of the social stock exchange, the Technical Group recommended that no regulatory intervention is required for the information repositories. Based on how their role shapes up later, they can be subjected to appropriate checks and balances in the form of regulations governing their role, functions, structure and such other aspects as may be deemed appropriate.
• Disclosures on social stock exchange:To bring the social entities wanting to access the social stock exchange onto a common comparable platform, the Technical Group recommended standardised disclosures and reporting requirements. Separate disclosure requirements are recommended for both FPEs and NPOs. The NPOs to disclose vision, mission, activities sale of operations, legal form, board and management, remuneration policies, stakeholders’ redressal, balance sheet, income and cash statement, auditor’s report and auditor details. Whereas, the FPE listing equity/debt, in addition to social impact reporting, to comply with disclosure requirements as per the applicable segment such as main board, SME and investor growth platform.
• Disclosure of Impact Report:The entities intending to get listed on the social stock exchange to disclose impact of its activities seen at two levels- direct impact on the target community and the systematic impact or sector wide impact. Impact report, as prepared by the management of the audited organisation, to include qualitative performance indicators and, where feasible, quantitative performance measures with the disclosure of the key underlying methodology and/or assumptions used in the quantitative determination.

W&B View:

The Hon’ble Finance Minister’s bold vision of a social stock exchange could not have come at a more opportune time for Indiain light of the economic damage inflicted by Covid-19, especially upon the poorest Indian households and large swathes of the informal sector. While entering a post- Covid world, India shall require a significant amount of capital to repair and rebuild those livelihoods which are the bedrock of the Indian economy.The social stock exchange can prove to be a possible solution to this pressing problem and become an important component of India’s policy response to Covid-19. Further, the recommendations made by the Technical Group shall not only expand the pools of capital but also establish robust standards for social impact reporting. The social stock exchange can support social enterprises, large donors like CSR contributors and retail philanthropic donors by providing a scaled-up avenue for credible social impact creating opportunities. Pairing of NPOs with the social stock exchange shall also increase the visibility of NPOs to investors and donors. Altogether, the social stock exchange shall unlock large pools of social capital so that conventional capital can partner with social capital to address the pressing financial challenges in India.

[1]Press Release no. DSM/RM/BB/SVS/MVK/YK dated July 5, 2019 issued by the Press Information Bureau, Ministry of Finance, Government of India. Available at https://pib.gov.in/Pressreleaseshare.aspx?PRID=1577396.

[2] SEBI Press Release no. PR No.17/2021 dated May 6, 2021. Available at https://www.sebi.gov.in/media/press-releases/may-2021/sebi-seeks-public-comments-on-the-report-submitted-by-the-technical-group-on-social-stock-exchange_50072.html.

Overview:
The Securities and Exchange Board of India (“SEBI”) vide its circular dated September 27, 2016¹ introduced a regulatory framework for warehouse service providers (“WSP”), warehouses, assayers and other allied service providers engaged by stock exchanges/ clearing corporations (“CCs”) in respect of agricultural and agri-processed goods. This framework mandated the commodity derivatives exchanges and the CCs to have in place a set of minimum standards and norms for compliance by the WSPs, assayers and other service providers engaged by them for ensuring delivery, clearing and settlement services for commodity derivatives. However, upon receiving the feedback from market stakeholders, SEBI subsequently noticing that there was lack of uniformity in the applicable norms as². One such issue which was brought to the notice of the securities market regulator was that varied approaches were being followed by the exchanges in conducting the process of assaying. It is used to determine the nature of commodity and to analyse whether or not the commodity meets the exchange specifications.³ released a consultation paper⁴ on November 29, 2018 seeking public comments on the framework for WSPs, warehouses, assayers and other allied service providers engaged in respect of non- agricultural goods. The regulatory intent was to strengthen the integrity of the commodities market by prescribing a broad set of standards and compliance by CC accredited storage agencies for storage of such physically delivered non-agri goods.

In the aforesaid background, SEBI vide Circular no. SEBI/HO/CDMRD/DMP/P/CIR/2021/551 dated April 16, 2021 superseded all the earlier norms and issued fresh guidelines for warehousing norms for agricultural/ agri-processed goods and non- agricultural goods (only base/ industrial metals) underlying a commodity derivatives contract having the feature of physical delivery(“Circular”).⁵

W&B View:
The revised framework prescribed by SEBI is expected to lead to greater efficiencies, improve uniformity and transparency. The Circular is an effort by SEBI to guarantee settlement of trades, ensure delivery and avoid potential default risks. The revised framework shall also enable SEBI to keep a close watch on the regulation of the commodity market allowing it with an opportunity of curbing the risks arising from any potential settlement- related default in the commodity market in an effective and timely manner.

Overview:

The Securities and Exchange Board of India (“SEBI”) vide its circular dated April 28, 2021¹ (“Circular”)² has introduced a regulatory framework for alignment of interest of the key employees (“Key Employees”) of asset management companies (“AMCs”) with that of the unitholders of the mutual fund scheme. While SEBI has taken steps to standardise the mutual fund scheme categories and characteristics of each category³, the management of risk return profile of the mutual fund schemes rests with the AMCs and the Key Employees. The Key Employees of an AMC hold the position of trust and responsibility and have access to all the price sensitive information. The code of conduct for fund managers and dealers introduced by SEBI⁴ prohibits the Key Employees from unfair use of such information and places a fiduciary duty upon the Key Employees to not engage in any unethical practices with respect to such information. However, basis various observations received from the market stakeholders and analysis of audit reports by SEBI, it was observed by that certain employees and trustees of the AMCs took undue advantage of the price sensitive information they had about the company which led to a conflict of interest between the Key Employees and the unitholders of the mutual fund schemes.⁵ This also led to abuse of individual position of trust and responsibility by the Key Employees and the trustees of the AMCs.

In the aforesaid background, SEBI, on the recommendations received from the SEBI Mutual Fund Advisory Committee, mandated the payment of compensation of the Key Employees of the AMCs in the form of units of mutual fund schemes in which they have a significant role as a good stewardship practice and to ensure an increased trust of investors in mutual funds. This article briefly with the framework prescribed under the Circular and its overall impact.

Salient Features:

The Circular prescribes the framework for compensation of the Key Employees of the AMCs in the form of units of the scheme(s). The salient features of the Circular are as under:

W&B View
The implementation of the Circular shall surely introduce greater accountability in the scheme performance as the key employees shall share the investment risk at par with the unitholders of the scheme. This shall ensure a deeper commitment from Key Employees in their own schemes, thereby positioning mutual fund investing as a preferred and trusted route for investors. However, by introducing a wide definition for who would be classified as a “Key Employee” for the purposes of the Circular, SEBI has inadvertently put small fund houses who do not offer a hefty package to its key personnel in a tough spot, particularly in the current COVID struck times as such fund houses risk losing its key talent. In other fund houses also the junior talent that squarely falls within the definition shall be forced to lock twenty percent (20%) of their income for a period of three (3) years which shall create cash flow issue. Further, creates a window of regulatory arbitrage in favour of exchange traded funds, index funds, overnight funds that have been explicitly excluded from the purview of the Circular. The clawback of the units being triggered in the event of violation of code of conduct, fraud and gross negligence shall be beneficial from a market standpoint. Overall, the Circular is a double edged sword as it introduces greater accountability which is a positive for the market, and at the same time it throws up several implementation challenges and it shall be interesting to see how the market responds and adapts to the same.

Overview:

The Securities and Exchange Board of India ("SEBI") mandated the Alternative Investment Funds ("AIFs") to submit periodical reports to SEBI relating to their activity in order to ensure transparency and disclosure of information.¹ The potential magnitude of capital which can be mobilized through these AIFs if significant for the economy and hence regulatory reporting by AIFs was felt necessary by the SEBI and market stakeholders. However, with the growth and diversification of the Indian securities market, SEBI realized the need to rationalize the existing reporting requirements for AIFs. Therefore, based on the experience gained from the current regulatory framework coupled with the consultation with various stakeholders and recommendations of Alternative Investment Policy Advisory Committee ("AIPAC"), SEBI² decided to review and rationalized the existing reporting requirements for AIFs. The SEBI, with the purpose to provide ease of compliance for AIFs in India issued the circular no. SEBI/HO/IMD/IMD-I/DOF6/CIR/2021/549 dated April 7, 2021 ("Circular")³

Background:
The mandatory periodic reporting by AIFs was introduced on the recommendations of the AIPAC report.4 The raison d'etre for developing regulatory reporting by AIFs was that the funds generate different returns at different stages of their maturity and different macro-economic conditions. Typically, in the early stages of a fund, negative or low returns occur due to capital drawdowns and a portfolio that is yet to mature. Over time returns are higher when the mature portfolio starts generating returns and distributions are made. Consequently, the funds may be classified by the stage, industry and geographical region of the fund which enables the performance of individual fund managers to be benchmarked relative to aggregate industry returns performance data. It was believed by AIPAC that the periodic- monthly or quarterly- reporting by AIFs to SEBI would result in capturing of individual fund performance data which, in turn, could be used to create industry benchmarks.

Furthermore, as per the AIPAC report, an important reason to mandate regulatory reporting by the AIFS was to differentiate between discretionary and trustworthy information. The AIPAC felt it necessary because discretionary information may be more forthcoming in good times than in bad, or when risks appear to be lower. Also, because poorly performing funds usually stop reporting, the investor only receives information about surviving funds, which leads to the problem of "survivor bias." The trust-deficit originating from such skewed information about industry performance can aggravate the concerns of potential investors and thus limit their participation in AIFs.

Therefore, the disclosure of fund level information combined with superior governance can facilitate informed decision-making among investors and can thus be instrumental in bringing a wide swath of investors to invest in AIF.

Salient features:

1. Submission of report to SEBI: All AIFs shall submit report on their activity as an AIF to SEBI on quarterly basis within 10 (ten) calendar days from the end of each quarter. The requirement to include general information about the AIF, information about the schemes of AIF, fund currency information, borrowing details of AIF, major investments by AIF, breakup of investors in AIF, sector-wise investments by AIF, information on co- investment with AIF, information on warehousing of investments by AIF, details of complaints, details of arbitration and reporting of suspension of redemptions is common for AIFs of all categories.
2. Specific requirements for Category- I AIFs: The Circular also prescribes information requirements which are particular to category- I AIF, with a further dissemination between social venture funds, venture capital funds, small and medium enterprises funds (SME funds) and infrastructure funds.
3. Reporting by Category- III AIFs: Category III AIFs shall include report on leverage undertaken on a quarterly basis.
4. Process of submission: The AIFs shall submit the reports to SEBI through SEBI intermediary portal.
5. Intimation to investors and SEBI: Any changes in terms of private placement memorandum and in the documents of the fund/ scheme shall be intimated to investors and SEBI on a consolidated basis within 1 (one) month of the end of each financial year. Such intimation shall specifically mention the changes carried-out in the private placement memorandum and the documents of the fund/scheme, along with the relevant pages of revised sections/clauses.
6. Modifications to earlier framework: The Circular has brought a partial modification to a circular5 issued by SEBI regarding guidelines on disclosures, reporting and clarifications by AIFs. The earlier framework required the changes and modifications carried in terms or documents of the fund/scheme to be intimated to investors and SEBI once every 6 (six) months on a consolidated basis. While, the Circular has brought down the timeline to 1 (one) month.
7. Effective date: The reporting requirements regarding submission of report to SEBI shall be applicable for the quarter ending December 31, 2021. Whereas the provision which requires intimation to investors and SEBI shall come into effect immediately.

W&B view:
This move by SEBI is expected to lead to greater efficiencies, improve uniformity and transparency and lower expenses in administering and monitoring of AIFs. The measures introduced by SEBI, including high level of detailing regarding information to be stated in report submitted to SEBI is highly incisive with increased level of specificity. The step is in the right direction towards ensuring that a sound information ecosystem is created for the AIFs in India given that performance measurement and reporting are key components to enable investors to make informed decisions.

Authored by: Prashaant Rajput, Partner and Arohi Londhe, Associate