The Securities and Exchange Board of India (SEBI) has notified a significant set of amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015 on March 27, 2025. These amendments are aimed at enhancing transparency, aligning regulatory thresholds, and easing the compliance burden for listed entities.
In this post, we decode the key changes with a comparison to the earlier provisions and the rationale behind each amendment.
1. Regulation 3(2)(b) Proviso: Assurance substituted with assessment or assurance
Old Provision:
Provided that the listed entity, which is required to comply for the first time or after aperiod of cessation, shall put in place systems and processes for compliance with clause (f)of sub-regulation (2) of regulation 34 within a period of three months from December 31(i.e. on or before April 1) or from the beginning of the immediate next financial year,whichever is later, and further disclose the Business Responsibility and Sustainability Report and/or assurance as per the Business Responsibility and Sustainability Report Core in the Annual Report prepared for the financial year in which systems and processes were required to be put in place in accordance with this proviso.
New Provision:
Assurance substituted with assessment or assurance of the specified parameters
Rationale:
This shall provide flexibility to listed entities to undertake either assessment (which is cost effective and not burdensome) or assurance (which may be requested by investors/ clients of listed entities).
2. Regulation 15(1A): Corporate Governance for HVDLEs
Old Provision:
Corporate governance provisions applied to entities with listed debt of ₹500 crore or more.
New Provision:
Threshold increased to ₹1,000 crore.
Entities must comply within 6 months of exceeding threshold and disclose from 3rd quarter onward. Once the corporate governance provisions become applicable to HVDLEs, it will continue to apply till value of the outstanding listed debt securities as on 31 March in a year, reduces and remains below the threshold for a period of 3 consecutive FYs.
Rationale:
To align with the Large Corporate definition and ease compliance for mid-sized issuers. This will also facilitate ease of doing business.
3. Proviso inserted after Regulation 15(2)(b): Related Party Transaction provisions applicable for companies listed on SME Exchange
New Provision:
Now Regulation 23 provisions applicable on Companies whose securities are listed on SME Exchange and which has either paid up equity share capital exceeding Rs. 10 crores or Net worth exceeding Rs. 25 crores and if the provisions of Regulation 23 become applicable at a later date, it shall ensure compliance within 6 months and once the said provisions become applicable, it will continue to apply till value equity share capital and net worth reduces and remains below the threshold for a period of 3 consecutive FYs.
Rationale:
To ensure proper compliance for SME Exchange companies which in turn will increase their compliance burden.
4. Regulation 17A: Maximum Number of Directorships
Old Provision:
Limits were applicable only to listed equity companies.
New Provision:
Now includes High-Value Debt Listed Entities (HVDLEs) within the directorship count. The Companies have been provided a period of 6 months or date of AGM, whichever is later, to ensure compliance with same.
The Director appointed on ex-officio basis due to statute or applicable contractual framework in case of PSU and entities set up under PPP arrangement shall not be included in calculating the limit.
Rationale:
To ensure directors can devote adequate attention to all the companies in which they are appointed.
5. Regulation 23: Limit of materiality for companies listed on SME Exchange
New Provision:
A transaction with a Related party shall be considered material, if transaction to be entered into individually or taken together with previous transactions exceeds Rs. 50 crore or 10% of annual consolidated turnover, whichever is lower.
Rationale:
Limit of materiality specified for determining materiality of transaction.
6. Regulation 26: Enhanced Disclosures by Directors
Old Provision:
Limit of committee memberships should not include HVDLEs.
New Provision:
Mandatory inclusion of HVDLEs in calculating maximum number of Committees in which a director may serve.
Rationale:
To increase transparency and assess potential conflicts or time commitments.
7. Regulation 34: Business Responsibility & Sustainability Reporting (BRSR)
Old Provision:
Mandatory assurance to be included in BRSR.
New Provision:
Now, it is necessary to have assessment or assurance in BRSR.
Rationale:
To facilitate ease of doing business and provide flexibility to listed entities.
8. Insertion of new Chapter VA: Corporate Governance norms inserted for Listed Entity having NCD Listed.
Final Thoughts
These LODR changes reflect SEBI’s attempt to streamline compliance, bring HVDLEs into better governance frameworks, provide flexibility to the companies and promote greater transparency in financial markets. Listed companies must review their policies and internal controls to ensure timely compliance.
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