SEBI (LODR) Regulations 2015

Regulatory overload on Audit Committees

Background

The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (LODR) Regulations, 2015 (“LODR”) places significant emphasis on the functioning of various committees of the Board of Directors (“Board”) of a listed company. While all Board committees have been entrusted with important responsibilities, a disproportionate amount of the regulatory burden has been placed on the Audit Committee. The Audit Committee has multifarious responsibilities under Section 177 and various other provisions of the Act, the LODR, and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).

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Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test

Background

SEBI[1] has recently revised the materiality threshold for obtaining shareholder approval for related party transactions (“RPTs”) under Regulation 23(1) of the SEBI (LODR) Regulations, 2015 (“LODR”), to cover RPTs that exceed INR 1000 crore or 10% of a listed entity’s annual consolidated turnover (as per the last audited financial statements), whichever is lower.

The revised materiality threshold has come into effect on April 1, 2022, and this change assumes significance, as prior to April 1, 2022, there was no absolute numerical threshold for RPTs that require shareholders’ approval.

This also raises the question as to whether an absolute numerical threshold of INR 1000 crore could potentially be considered as violative of Article 14 of the Indian Constitution.

In this post, the authors aim to probe deeper into this constitutional aspect and examine some of the arguments that can be made from both sides of the spectrum.

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Decoding SEBI’s latest amendments to the RPT regime

Background

After a prolonged and anxious wait, on November 9, 2021, SEBI finally notified its far-reaching amendments to the regulatory regime for Related Party Transactions (“RPT”). The amendments[1] to the RPT regulatory regime under the SEBI (LODR) Regulations, 2015 (“LODR”), have their genesis in the Report of the Working Group on RPTs (“WG Report”), which was issued by SEBI on January 27, 2020.

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Extra-territorial application of India’s securities law – Has SEBI cast its net too wide?

If a connection exists, it is for the Legislature to decide how far it should go in the exercise of its powers.[1]

Introduction

The territorial application of laws made by Parliament is enshrined in Article 245 of the Constitution of India (“Constitution”). The universal presumption that laws made by a country are limited to its own territorial borders, is provided under Article 245(1) of the Constitution, which provides that “Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India.” However, Article 245(2) of the Constitution carves out a specific exception providing that a law made by Parliament, pursuant to Article 245(1), shall not be invalidated on the ground that such a law would have extra-territorial operation. Most countries have enacted extra-territorial laws with the US being the clear leader in this regard having enacted anti-corruption law, securities laws etc. which have extra-territorial application.

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