Corporate Policies and Disclosures – Governance, Risk Management, Compliances and Ethics Important Questions
Question 1.
Write short note on the following; Continual disclosure.
Answer:
According to Regulation 30 of the SEBI (SAST) Regulation, 2011:
1. Every person, who together with persons acting in concert with him, holds shares or voting rights entitling him to exercise twenty-five per cent or more of the voting rights in a target company, shall disclose their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company in the prescribed format.
2. The promoter of every target company shall together with persons acting in concert with him, disclose their aggregate shareholding and voting rights as of the thirty-first day of March, m such target company in such form as may be specified.
3. The disclosures required under sub-regulations (1) and (2) shall be made within seven working days from the end of each financial year to:
- Every stock exchange where the shares of the target company are listed.
- The target company at its registered office.
Question 2.
What are the guidelines provided in the Listing Obligation and Dis-closure Requirements (LODR) Rules, 2015 related to annual report of companies?
Answer:
Regulation 34 of the SEBI (LODR) Regulations, 2015 provides that the listed entity shall submit the annual report to the stock exchange within twenty one working days of it being approved and adopted in the annual general meeting as per the provisions of the Companies Act, 2013.
The annual report shall contain the following:
a. Audited financial statements i e. balance sheets, profit and loss accounts etc., and Statement on Impact of Audit Qualifications as stipulated in regulation 33(3)(d), if applicable.
b. Consolidated financial statements audited by its statutory auditors.
c. Cash flow statement presented only under the indirect method as prescribed in Accounting Standard-3 or Indian Accounting Standard 7, as applicable, specified in Section 133 of the Companies Act, 2013 read with relevant rules framed thereunder or as specified by the Institute of Chartered Accountants of India, whichever is applicable.
d. Directors report
e. Management discussion and analysis report – either as a part of directors report or addition thereto.
f. Business Responsibility Reports describing the initiatives taken by them from an environmental, social and governance perspective, in the format as specified by the Board from time to time by the top one thousand listed entities based on market capitalization (calculated as on March 31 of every financial year).
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. [SEBI (LODR) (Fifth Amendment) Regulations, 2019]
Additional Disclosures in Annual Report:
The annual report shall contain any other disclosures specified in the Companies Act, 2013 along with the following additional disclosures as specified in Schedule V:-
- Related Party Disclosure
- Management Discussion and Analysis
- Corporate Governance Report
- Declaration signed by the chief executive officer stating that the members of board of directors and senior management personnel have affirmed compliance with the code of conduct of board of directors and senior management.
- Compliance certificate from either auditors or practicing company secretaries regarding compliance of conditions of corporate governance be annexed with the directors’ report.
- Disclosures with respect to demat suspense account/unclaimed suspense account.
Question 3.
You are Company Secretary of a listed company. You have been asked to prepare report on corporate governance to be included in the annual report of the company. Briefly explain the major contents of such report.
Answer:
The following disclosures shall be made in the section on the corporate governance of the annual report:
1. A brief statement on listed entity’s philosophy on code of governance.
2. Board of directors : Composition and category of directors, attendance, number of other board of directors, Disclosure of relationships between directors etc.
3. Audit committee: Brief description of terms of reference, composition, name of members and chairperson, Meetings and attendance during the year.
4. Nomination and Remuneration Committee: Brief description of terms of reference, composition, name of members and chairperson, meeting and attendance during
the year, performance evaluation criteria for independent directors.
5. Remuneration of Directors: 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.
6. Stakeholders’ grievance committee: Name of non-executive director heading the committee, Name and designation of compliance officer, No. of shareholders’ complaints received so far, No. of pending complaints.
7. General body meetings: Location and time, where last three annual general meetings held, whether any special resolutions passed in the previous three annual general meetings or through postal ballot, details of voting pattern, person who conducted the postal ballot exercise etc.
8. Means of communication: Quarterly results, newspapers wherein results normally published, Any website, where displayed, Whether it also displays official news releases, presentations made to institutional investors or to the analysts etc.
9. General shareholder information: Annual general meeting – date, time and venue, financial year, dividend payment date, stock code, market price data- high, low during each month in last financial year.
10. Other Disclosures: Web link where policy for determining ‘material’ subsidiaries is disclosed.
Question 4.
Discuss provisions relating to prior intimation of Board meeting to Stock Exchange as per SEBI (LODR) Regulations, 2015.
Answer:
As per Regulation 29 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a listed entity shall give prior intimation to stock exchange about the meeting of the board of directors in the following manner:
A. At least two working days in advance, excluding the date of the intimation and date of the meeting in which any of the following proposals is due to be considered:
- Proposal for buyback of securities.
- Proposal for voluntary delisting by the listed entity from the stock exchange.
- Fund raising by way of further public offer, rights issue, American Depository Receipts/Global Depository Receipts/Foreign Currency Convertible Bonds, or any other method and for determination of issue price.
- Declaration/recommendation of dividend, issue of convertible securities including convertible debentures or of debentures carrying a right to subscribe to equity shares or the passing over of dividend.
- 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.
B. At least five days in advance excluding the date of the intimation and date of the meeting in which following proposal is due to be considered:
- Financial results viz. quarterly, half yearly, or annual, as the case may be; (the intimation shall include the date of such meeting of board of directors also)
C. At least eleven working days before any of the following proposal is placed before the board of directors:
- Any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof.
- Any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable.
Question 5.
What are the Financial Information which are required to be disclosed on website of the company as per Regulation 46 of SEBI (LODR) Regulations, 2015?
Answer:
The listed entity shall maintain a functional website containing the basic information about the listed entity. The listed entity shall disseminate the following financial information under a separate section on its website:
i. Financial information including:
- Notice of meeting of the board of directors where financial results shall be discussed.
- Financial results, on conclusion of the meeting of the board of directors where the financial results were approved.
- Complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance g report etc.
ii Shareholding pattern.
iii. Details of agreements entered into with the media companies and/or their associates, etc.
iv. 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.
v. New name and the old name of the listed entity for a continuous period of one year, from the date of the last name change.
vi. With effect from October 1, 2018, all credit ratings obtained by the entity for all its outstanding instruments, updated immediately as and when there is any revision in any of the ratings.
vii. Separate audited financial statements of each subsidiary of the listed entity in respect of a relevant financial year, uploaded at least 21 days prior to the date of the annual general meeting which has been called to inter alia consider accounts of that financial year.
The listed entity shall ensure that the contents of the website are correct. The listed entity shall update any change in the content of its website within two working days
from the date of such change in content.
Question 6.
To protect the interest of the Stakeholders, SEBI has taken various initiatives and Code of Fair Disclosure is one of the important steps under Regulation 8 of SEBI (Prohibition of Insider Trading) Regulations, 2015. Prepare a note on Code of Fair Disclosure. [December 2019, 5 Marks]
Answer:
As per Code of Fair Disclosure under Regulation 8 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015:
1. The board of directors of every company, whose securities are listed on a stock exchange, shall formulate and publish on its official website, a code of practices and procedures for fair disclosure of unpublished price sensitive information that it would follow in order to adhere to each of the principles set out in Schedule A to these regulations, without diluting the provisions of these regulations in any manner.
2. Every such code of practices and procedures for fair disclosure of unpublished price sensitive information and every amendment thereto shall be promptly intimated to the stock exchanges where the securities are listed. The board of directors of a listed company shall make a policy for determination of “legitimate purposes” as a part of “Codes of Fair Disclosure and Conduct” formulated under Regulation 8.
Principles of Fair Disclosure for purposes of Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information, Regulation 8(1) are as under:
1. Prompt public disclosure of unpublished price sensitive information that would impact price discovery no sooner than credible and concrete information comes into being in order to make such information generally available.
2. Uniform and universal dissemination of unpublished price sensitive information to avoid selective disclosure.
3. Designation of a senior officer as a chief investor relations officer to deal with dissemination of information and disclosure of unpublished price sensitive information.
4. Prompt dissemination of unpublished price sensitive information that gets disclosed selectively, inadvertently or otherwise to make such information generally available.
5. Appropriate and fair response to queries on news reports and requests for verification of market rumours by regulatory authorities.
6. Ensuring that information shared with analysts and research personnel is not unpublished price sensitive information.
7. Developing best practices to make transcripts or records of proceedings of meetings with analysts and other investor relations conferences on the official website to ensure official confirmation and documentation of disclosures made.
8. Handling of all unpublished price sensitive information on a need-to-know basis.
Question 7.
ABC Ltd. is a public limited company listed on NSE and BSE. The company is enjoying cash credit limit of ₹ 10 crores with Trust Bank against the book debts. The said cash credit limit is renewed from time to time and for this purpose the Trust Bank requires the financial papers from the company which include the Balance Sheet and Profit and Loss Account, list of sundry debtors (with age-wise outstanding) and projected financial data viz: Turnover, Profit, Non-performing debtors etc.
The company was in the process of the finalisation of its annual accounts as of 31st March, 2018 and the same was to be put before the Audit Com-mittee of Board (ACB), meeting of which was schedule to be held on 5th July, 2018, for recommendation to the Board of Directors. The CC limit with the Trust Bank which was due for renewal from 31st March, 2018, renewed on ad-hoc basis for three months only on the basis of provisional data, subject to the submission of final papers, else the CC limit account of the company will turned in to non-performing account.
Since the Trust Bank also wants the CC Limit account in performing status, it insisted the company to submit the final data even before the approval of the ACB/ Board in order to renew the limit and prevent the account from turning into NPA.
Based on the above facts the Company approaches you, being a Corporate Law Consultant.
Answer the following queries raised by the ABC Ltd :
(i) Whether HP Ltd. can provide the financial information (which is price sensitive information) to its banker without getting it perused and approved by the ACB and Board? Quote your answer with relevant provisions of law.
(ii) If the Manager of the Trust Bank Branch, where the CC Limit account is maintained, is provided the unapproved financial papers and on the basis of these financial papers, he comes to know that company has shown profit with a rise of 20% from the previous year, so he pur-chased the shares of the company from the market with lesser price (in expectation of high jump in price after declaration of the result).
When the results were officially declared by the company, the shares jumped to 30% and the branch manager off loaded the purchases so made. Whether the Manager will be treated as Insider as per the SEBI (Prohibition of Insider Trading) Regulations, 2015?
(iii) What are the provisions relating to the trading when a person is in possession of unpublished price sensitive information as per the SEBI (Prohibition of Insider Trading) Regulations, 2015?
(xv) What are the penal provisions for insider trading as prescribed in the Companies Act, 2013 and SEBI Act, 1992.
Answer:
(i) In terms of Sub-Regulation (1) of Regulation 3 of SEBI (Prohibition of Insider Trading) Regulations, 2015, no insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
Sub-Regulation (2) of Regulation 3 states that no person shall pro-cure from or cause the communication by any insider of unpublished price sensitive information relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
Sub-Regulation (2A) of Regulation 3 provides that the board of directors of a listed company shall make a policy for determination – of “legitimate purposes” as a part of “Codes of Fair Disclosure and Conduct” formulated under Regulation 8.
Thus, as a prudent rule the price sensitive information should not be passed on until it is for legitimate purposes. However, as per Explanation to Sub-Regulation (2A), unpublished price sensitive information can be shared with banker/lender for legitimate purposes like renewal of Credit limits provided that such sharing has not been carried out to evade or circumvent the prohibitions of these regulations.
(ii) Sub-Regulation (2B) of Regulation 3 of SEBI (Prohibition of Insider Trading) Regulations, 2015 provides that any person in receipt of unpublished price sensitive information pursuant to a “legitimate purpose” shall be considered an “insider” for purposes of these regulations and due notice shall be given to such persons to maintain confidentiality of such unpublished price sensitive information in compliance with these regulations.
According to the above para, the branch manager who is in receipt of unpublished price sensitive information for the legitimate purpose is an insider under the regulations.
(iii) Regulation 4 of SEBI (Prohibition of Insider Trading) Regulations, 2015 deals with the provisions relating to trading when in possession of unpublished price sensitive information.
Regulation 4(1) : No insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information.
Explanation – When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession:
Provided that the insider may prove his innocence by demonstrating the circumstances including the following:
i. The transaction is an off-market inter transfer between insiders who were in possession of the same unpublished price sensitive information without being in breach of regulation 3 and both parties had made a conscious and informed trade decision.
ii. The transaction was carried out through the block deal window mechanism between persons who were in possession of the unpublished price sensitive information without being in breach of regulation 3 and both parties had made a conscious and in-formed trade decision.
iii. The transaction in question was carried out pursuant to a statutory or regulatory obligation to carry out a bona fide transaction.
iv. The transaction in question was undertaken pursuant to the exercise of stock options in respect of which the exercise price was pre-determined in compliance with applicable regulations.
v. In the case of non-individual insiders:
- The individuals who were in possession of such unpublished price sensitive information were different from the individuals taking trading decisions and such decision-making individuals were not in possession of such unpublished price sensitive information when they took the decision to trade.
- Appropriate and adequate arrangements were in place to ensure that these regulations are not violated and no unpublished price sensitive information was communicated by the individuals
- Possessing the information to the individuals taking trading decisions and there is no evidence of such arrangements having been breached.
vi The trades were pursuant to a trading plan set up in accordance with Regulation 5.
- Regulation 4(2): In the case of connected persons the onus of establishing, that they were not in possession of unpublished price sensitive information, shall be on such connected persons and in other cases, the onus would be on the Board.
- Regulation 4(3): The Board may specify such standards and requirements, from time to time, as it may deem necessary for the purpose of these regulations.
(iv) Section 195 of the Companies Act, 2013, dealing with the matter relating to insider trading has been omitted by the Companies Amendment Act, 2017 w.e.f. 09/02/2018.
However, penalty for insider trading is provided under Section 15G of the SEBI Act, 1992. It provides that if any insider who,:
- Either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price-sensitive information.
- Communicates any unpublished price sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law.
- Counsels, or procures for any other person to deal in any securities of anybody corporate on the basis of unpublished price-sensitive information, shall be liable to a penalty which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher.
Question 8.
What are the material disclosures of which information should be disclosed to Stock Exchange within 24 hours of conclusion of the Board Meeting as per SEBI (LODR) Regulations, 2015?
Answer:
As per Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the listed entity shall first disclose to stock exchange(s) of all events, as specified in Part A of Schedule III, or information as soon as reasonably possible and not later than twenty four hours from the occurrence of event or information. Following events shall be disclosed:
1. Commencement or any postponement in the date of commencement of commercial production or commercial operations of any unit/ division.
2. Change in the general character or nature of business brought about by arrangements for strategic, technical, manufacturing, or marketing tie-up, adoption of new lines of business or closure of operations of any unit/division (entirety or piecemeal).
3. Capacity addition or product launch.
4. Awarding, bagging/receiving, amendment or termination of awarded/ bagged orders/contracts not in the normal course of business.
5. Agreements (viz. loan agreement(s) (as a borrower) or any other agreement(s) which are binding and not in normal course of business) and revision(s) or amendment(s) or termination(s) thereof.
6. Disruption of operations of any one or more units or division of the listed entity due to natural calamity (earthquake, flood, fire etc.), force majeure or events such as strikes, lockouts etc.
7. Effect(s) arising out of change in the regulatory framework applicable to the listed entity.
8. Litigation(s)/dispute(,s)/regulatory action(s) with impact.
9. Fraud/defaults etc. by directors (other than key managerial personnel) or employees of listed entity.
10. Options to purchase securities including any ESOP/ESPS Scheme.
11. Giving of guarantees or indemnity or becoming a surety for any third party.
12. Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals.
Question 9.
Ms. Nidhi is the Company Secretary of ZYCO Bank, the merchant banker for Synergy Ltd., which had recently carried out an issue and allotment of Equity Shares. Draft a post issue advertisement to be circulated in daily newspapers.
Answer:
The post-issue merchant banker shall ensure that advertisement giving details relating to oversubscription, basis of allotment, number, value and percentage of all applications including ASBA (Application Supported by Blocked Amount) number, value and percentage of successful allottees for all applications, date of completion of despatch of refund orders or instructions to Self Certified Syndicate Banks by the Registrar, date of despatch of certificates and date of filing of listing application, etc. is released.
Format of an advertisement is as under:
Post Issue Advertisement of Synergy Ltd. (Equity Shares) – Carried out by Zyco Bank was a huge success
- Shares issued : 100,000
- Shares subscribed : 328,000
- Over subscription : 3.28 times
- Basis of Allotment : Pro rata allotment made to 150,000 share (Green Shoe Option)
- Applied through ASBA : 80%
- Process complete : 30/09/2016
- Date of completion of despatch of refund orders : 08/10/16
- Date of despatch of Certificates : 15/10/16
- Date of filing of listing application : 10/10/16
Merchant Banker to the Issue
Place: _________
Date: _________
Question 10.
“Without proper policies, it is extremely tough for the business to continue and policies work as guide and help the manager to direct all the actions towards the same goal.” In light of the aforesaid statement; highlight the importance of corporate policies.
Answer:
Corporate Policy is a formal declaration of the guiding principles by which an organization will function. Policies are developed by the board of directors or a senior management policy committee.
Policies are an essential component of every organisation and address important issues. Therefore, must be effectively communicated amongst stakeholders.
Following are the points highlighting the importance of corporate policies:
- Policies are necessary to perform the business activities in a smooth way.
- Policies promote delegation of the power of making decisions.
- Policies help in analysis of performance by serving as a standard.
- It helps in dealing with the issues for optimal utilization of limited resources.
- Sound policies aid in developing good public image of an organization.
Question 11.
Briefly explain the following; Corporate Social Responsibility Policy.
Answer:
Section 135(4) of the Companies Act, 2013, contains that the Board of every company which is required to constitute a CSR Committee shall after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company.
The contents of such Policy shall be disclosed in board’s report and also place it on the company’s website.
The CSR Policy of the company includes the following:
- A list of CSR projects or programs which a company plans to under-take within the areas or subjects specified in Schedule VII of the Act, specifying modalities of execution of such project or programs and implementation schedules for the same.
- Monitoring process of such projects or programs
- A clause specifying that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of the company.
Question 12.
Briefly explain the following; Risk Management Policy.
Answer:
Section 134(3)(n) of the Companies Act, 2013, provides that a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company should be included in the report by its Board of Directors. This indicates that framing a risk management policy is also envisaged under the provisions of the Companies Act, 2013.
Question 13.
Briefly explain the following; Vigil Mechanism Policy.
Answer:
Section 177(10) of the Companies Act, 2013 provides that the vigil mechanism under sub-section (9) of the said section shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases and the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board’s report. This mechanism is herein referred as a policy.
Question 14.
Briefly explain the following; Nomination and Remuneration policy.
Answer:
Section 178(3) and (4) of the Companies Act, 2013 provides that the Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees. The Nomination and Remuneration Committee shall, while formulating the policy shall ensure that –
- The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully.
- Relationship of remuneration to performance is clear and meets appropriate performance benchmarks.
- Remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.
The policy shall be placed on the website of the company, if any, and the salient features of the policy and changes therein, if any, along with the web address of the policy, if any, shall be disclosed in the Board’s report.
Question 15.
Explain any five policies which a company is required to formulate under SEBI (LODR) Regulations, 2015.
Answer:
The key policies required for companies under the SEBI (LODR) Regulations, 2015 are:
1. Risk policy – As per Regulation 4(2)(/)(ii)(l), a listed entity is required to have a risk policy which shall be reviewed and guided by the board of directors.
2. Policy for preservation of documents As per Regulation 9, a listed entity is required to have a policy for preservation of documents, approved by its board of directors, classifying them in at least two categories as follows:
a. Documents whose preservation shall be permanent in nature.
b. Documents with preservation period of not less than eight years after completion of the relevant transactions. The documents may be preserved in electronic mode.
3. Policy for Determining ‘Material’ Subsidiary As per Regulation 16(2)(c), a listed entity is required to formulate a policy for determining ‘material’ subsidiary. “Material subsidiary” means a subsidiary, whose income or net worth exceeds 10% of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.
4. Whistle Blower Policy – As per Regulation 22 and Regulation 46(2)(e), a listed entity is required to formulate a vigil mechanism for directors and employees to report genuine concerns under which they can have direct access to the chairperson of the audit committee in appropriate or exceptional cases. This mechanism/policy should be disclosed on the website of the listed entity.
5. Policy relating to the remuneration of the directors, key managerial personnel and other employees A listed entity is required to formulate a policy on the remuneration of the directors, key managerial personnel and other employees. [Part D, Schedule II (1)].
Question 16.
What are the contents to be incorporated in a director’s responsibility statement?
Answer:
As per Section 134(5), the Directors’ Responsibility Statement shall state that –
a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.
b. The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period
c. The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.
d. The directors had prepared the annual accounts on a going concern basis.
e. The directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
f. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Question 17.
What are the disclosures required to be made by a company under SEBI rules and regulations?
Answer:
Following disclosures are made by a company under various regulations of SEBI :
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018:
- Disclosures in the draft off er document and offer document (Regulation 24)
- Filing of the draft offer document and offer document (Regulation 25)
- Draft offer document and offer document to be available to the public (Regulation 26)
- Issue-related advertisements (Regulation 43)
- Post-issue advertisements (Regulation 51)
- Post-issue reports (Regulation 55)
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011:
- Disclosure of acquisition and disposal (Regulation 29)
- Continual disclosures (Regulation 30)
- Disclosure of encumbered shares (Regulation 31)
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
- Prior Intimations (Regulation 29)
- Disclosures of Financial Results [Regulation 33]
- Annual Report Disclosures [Regulation 34]
- Website Disclosures [Regulation 46]
- Disclosure of Events or Information [Regulation 30]
- Disclosure of Material Events
- Disclosures of events upon application of the Materiality Guidelines
- Disclosure of Other Events
SEBI (Prohibition Of Insider Trading) Regulations, 2015
1. Disclosures of Trading By Insiders [Regulation 6]
2. Disclosures by Certain Persons – Initial Disclosure [Regulation 7(1)]
3. Continual Disclosures: [Regulation 7(2)]
4. Code of Fair Disclosure [Regulation 5]
5. Code of Conduct [Regulation 9]
6. Institutional Mechanism for Prevention of Insider trading [Regulation 9A]
Question 18.
What are the disclosures required to be made by a company for encumbered shares?
Answer:
According to Regulation 31 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the following disclosures are necessary if the company’s shares are encumbered:
1. The promoter of every target company shall disclose details of shares in such target company encumbered by him or by persons acting in concert with him in the prescribed format.
2. The promoter of every target company shall disclose details of any invocation of such encumbrance or release of such encumbrance of shares in prescribed format.
3. The disclosures required under sub-regulation (1) and sub-regulation (2) shall be made within seven working days from the creation or invocation or release of encumbrance, as the case may be to,- (a) every stock exchange where the shares of the target company are listed; and (b) the target company at its registered office.
4. The promoter of every target company shall declare on a yearly basis that he, along with persons acting in concert, has not made any encumbrance, directly or indirectly, other than those already disclosed during the financial year.
5. The declaration required under sub-regulation (4) shall be made within seven working days from the end of each financial year to:
- Every stock exchange where the shares of the target company are listed.
- The audit committee of the target company.
Question 19.
Distinguish between Initial Disclosures and Continual Disclosures under SEBI (Prohibition of Insider Trading) Regulations, 2015
Answer:
Regulation 7(1): Initial Disclosure – Initial Disclosures are required to be made by :
a. Every promoter or member of the promoter group, key managerial personnel and director of every company whose securities are listed on any recognised stock exchange shall disclose his holding of securities of the company as on the date of these regulations taking effect, to’ the company within thirty days of these regulations taking effect.
b. Every person on appointment as a key managerial personnel or a director of the company or upon becoming a promoter or member of the promoter group shall disclose his holding of securities of the company as on the date of appointment or becoming a promoter, to the company within seven days of such appointment or becoming a promoter.
Regulation 7(2): Continual Disclosures – Continual Disclosures are required to be made by :
a. Every promoter or member of the promoter group, designated person and director of every company shall disclose to the company the number of such securities acquired or disposed of within two trading days of such transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of ten lakh rupees or such other value as may be specified.
b. Every company shall notify the particulars of such trading to the stock exchange on which the securities are listed within two trading days of receipt of the disclosure or from becoming aware of such information.
c. The above disclosures shall be made in such form and such manner as may be specified by the Board from time to time.