SEBI issues Operational Circular for listing obligations and disclosure requirements or Non- convertible Securities, Securitized Debt Instruments, and Commercial Paper

On 29-07-2022, the Securities and Exchange Board of India(‘SEBI') issued an operational circular for listing obligations and disclosure requirements or Non- convertible Securities, Securitized Debt Instruments, and/or Commercial Paper for effective regulation of the corporate bond market and to enable the issuers and other market stakeholders to get access to all the applicable circulars at one place. The provisions of this circular shall come into force with effect from 01-08-2022.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 prescribes the continuous disclosure requirements for issuers of listed Non- convertible Securities, Securitized Debt Instruments and Commercial Paper.

Key Points:

1. The operational circular has superseded the following circulars:

   • Circular dated 27-11-2015 on Format for statements/ reports to be submitted to Stock Exchange by listed entity which has listed its securitized debt instruments.

   • Circular dated 26-05-2017 on Listing of Non- Convertible Redeemable Preference Shares/ Non- Convertible Debentures through a Scheme of Arrangement.

   • Circular dated 17-01-2020 on Format for Statement indicating Deviation or Variation in the use of proceeds of issue of listed non-convertible debt securities or listed non- convertible redeemable preference shares.

   • Circular dated 05-10-2021 on Revised Format for filing financial information.

   • Circular dated 14-10-2021 on Revised Formats for Limited Review/ Audit Report for issuers of non-convertible securities.

   • Circular dated 29-12-2021 on Non-compliance with provisions related to continuous disclosures.

   • Circular dated 07-01-2022 on Disclosure obligations of listed entities in relation to Related Party Transactions.

2. The Circular contains following Chapters:

   1. Chapter I contains formats for filing financial information that should contain the items mentioned in the Statement of Profit and Loss and the extent and nature of security created and maintained in case of secured non-convertible debt securities.

   2. Chapter II contains formats for audit report for quarterly standalone financial results for entities other than Banks and NBFCs is placed in Annex- II-C and Audit Report for quarterly standalone financial results for Banks and NBFCs is placed in Annex- II-D

   3. Chapter III discloses the impact of Audit Qualifications by Listed Entities where these entities should disseminate the cumulative impact of all the audit qualifications in a separate format with the annual audited financial results to the Stock Exchange. For audit reports with modified opinion, a statement showing impact of audit qualifications shall be filed with the Stock Exchange in a format as specified in Annex – III-A

   4. Chapter IV contains format for submission of statement indicating the utilization of issue proceeds of listed Non-convertible Securities to the Stock Exchange, by the listed entities. The Audit committee will review the statement indicating deviation/ variation on quarterly basis and submit the reports to the Stock Exchange. ‘Board of Directors' will replace Audit Committee where a listed entity, under the provisions of Listing Regulations or the Companies Act, 2013, is not required to have an Audit Committee. The Format for statement indicating the utilization of issue proceeds and the Format for statement indicating deviation/ variation is placed in Annex-IV-A to this Chapter.

   5. Chapter V contains Disclosures by listed entities of defaults on payment of interest/ repayment of principal amount on loans from banks/ financial institutions and unlisted debt securities shall be made to the Stock Exchange. In case of any default, disclosure to be made not later than 24 hours from the 30th day of such default.

   6. Chapter VI contains the Schemes of Arrangement involving Non-Convertible Debentures and Non- Convertible Redeemable Preference Shares issued in lieu of specified securities.

   7. Chapter VII contains the Formats specifying disclosure of Corporate Governance by ‘high value debt listed entities' in Part C of Schedule V of the Listing Regulations.

   8. Chapter VIII contains the Disclosure obligations of listed entities in relation to its Related Party Transactions, its manner of dealing, approval by Audit Committee, disclosure of the same to the Stock Exchange and publication on the entity's website.

   9. Chapter IX specifies the conditions when the issuers do not comply with the uniform structure prescribed for levying of fines and the actions by the Stock Exchange.

   10. Chapter X contains provisions applicable to issue of Securitized Debt Instruments under the SEBI (Issue and Listing of Securitized Debt Instruments and Security Receipts) Regulations, 2008.

   11. Chapter XI has been inserted containing format for review of rating obtained by the listed entity with respect to its non-convertible securities from Credit Rating Agency registered with SEBI.