Calendar of Compliances Applicable on Listed Entities

 

 

Dear Professionals & Students.

 

We are in the smart era of economy with wide range of listed Companies/Entities and their compliances are very stringent here we will gain some more summarized knowledge of quarterly/half yearly compliances applicable on listed companies which has made transparency in the system also save time & avoid big data analysis.

 

Calendar of Compliance is applicable to companies whose equity shares are listed on the Stock Exchange as per LODR (Listing Obligation and Disclosure Requirements) Regulation, 2015, here we mainly discuss about companies listed on BSE (Bombay Stock Exchange) since it’s a very crucial work for a professionals to comply with the requirements of Stock exchanges for quarterly/half yearly/ annually compliances hence below readings will help us to comply with requirements smoothly.

 

Pursuant Regulation 10 of the Listing Regulations about the listed entity shall file the reports, statements, documents, filings and any other information with the recognized stock exchange(s) on the electronic platform as specified by the Board or the recognized stock exchange(s). Accordingly as per BSE Circular No. DCS/COMP/20/2015-16 dated November 30, 2015 it is mandatory for filing of various information with the exchange in electronic mode through online web portal , Effective from December 1, 2015, those filings that are not filed with the Exchange through the Listing Centre are liable to be considered as non-submission and consequent non-compliance with the Regulations. Compliance filing for entities other than those listed on the Exchange may be done through Email to the designated ID ie. corp.relations@bseindia.com. 

 

Compliances to be done twice a Year
Regulation	Purpose	Time Frame
Regulation 7 (3) –	Compliance Certificate certifying maintaining physical & electronic transfer facility	Within one month of end of each half of the financial year (i.e. 31st October & 30th April)
Regulation 40 (9) –	Certificate from  Practicing Company Secretary (PCS)	Within one month of end of each half of the financial year (i.e. 31st October & 30th April)

 

If we understand Regulation 7 (3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 that says a listed entity shall submit a compliance certificate to the exchange, duly signed by both that is by the compliance officer of the listed entity and the authorized representative of the share transfer agent, wherever applicable, within one month of end of each half of the financial year, certifying maintaining physical & electronic transfer facility either in house or RTA as applicable.

 

Further Regulation 40 (9) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires that a listed entity shall ensure that the share transfer agent and/or the in-house share transfer facility, as the case may be, produces a certificate from a practicing company secretary (PCS) within one month of the end of each half of the financial year, certifying that all certificates have been issued within thirty days of the date of lodgment for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies.

 

If we compare both regulation so we will gain that in both the regulation CS Professional is getting opportunity in Regulation 7 (3) as a Compliance Officer and in Regulation 40 (9) as a Practicing Company Secretary (PCS)

 

 

Compliances to be done 4 times a Year
Regulation	Purpose	Time Frame
Regulation 13 (3) -	Statement of Investor complaints.	Within Twenty one days from the end of each quarter (i.e. 21st July, 21st Oct, 21st Jan, 21st Apr)
Regulation 27 (2) -	Corporate Governance.	Within 15 days from quarter end (i.e. 15st July, 15st  Oct, 15st Jan, 15st Apr)
Regulation 31 -	Shareholding Pattern	Within Twenty one days from the end of each quarter (i.e. 21st July, 21st Oct, 21st Jan, 21st Apr)
Regulation 33 -	Financial Results	Within 45 days from quarter end except 4th Qtr (i.e. 14th Aug, 14th Nov, 14th Feb ,  Jan, 30th May)
SEBI- DP Reg.55A	Reconciliation of Share Capital Audit	Within 30 days from quarter end(i.e. 31st  July, 31st Oct, 30th Jan, 30th Apr)

 

Regulation 13 (3) - The listed entity shall file with the recognized stock exchange(s) on a quarterly basis, within twenty one days from the end of each quarter, a statement giving the number of investor complaints pending at the beginning of the quarter, those received during the quarter, disposed of during the quarter and those remaining unresolved at the end of the quarter

Regulation 27 (2) - The listed entity shall submit a quarterly compliance report on corporate governance within fifteen days from close of the quarter. Further it may be noted that it shall not apply, in respect of - (a) 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. (b) the listed entity which has listed its specified securities on the SME Exchange.

 

Regulation 31 - (1) The listed entity shall submit to the stock exchange(s) a statement showing holding of securities and shareholding pattern separately for each class of securities, in the format specified by the Board from time to time within the following timelines -

• one day prior to listing of its securities on the stock exchange(s);
• on a quarterly basis, within twenty one days from the end of each quarter;
• within ten days of any capital restructuring of the listed entity resulting in a
  change exceeding two per cent of the total paid-up share capital

Provided that in case of listed entities which have listed their specified securities on SME Exchange, the above statements shall be submitted on a half yearly basis within twenty one days from the end of each half year.

Regulation 33 - The listed entity shall submit quarterly and year-to-date standalone financial results to the stock exchange within forty-five days of end of each quarter, (other than last quarter) along with Limited Review Report or Audit Report as applicable & 60 days in case of 4^th Qtr

The listed entity shall submit Annual Audited standalone Financial results for the financial year, within sixty days from the end of the financial year along with the audit report and either with Statement on Impact of Audit Qualifications (applicable for audit report with modified opinion(s) ) or declaration (applicable for audit reports with unmodified opinion(s) ).

Provided that if the listed entity has subsidiaries, it shall, while submitting annual audited standalone financial results also submit annual audited consolidated financial results along with the audit report and Statement on Impact of Audit Qualifications ( applicable for audit report with modified opinion). Provided further that, in case of audit reports with unmodified opinion(s), the listed entity shall furnish a declaration to that effect to the Stock Exchange(s) along with the annual audited financial results.

For the purpose of this Financial Result regulations , any reference to "quarterly/quarter" in case of listed entity which has listed their specified securities on SME Exchange shall be respectively read as "half yearly/half year"

SEBI- DP Reg.55A- Listed entities are required to submit Reconciliation of Share Capital Audit Report on a quarterly basis to the stock exchanges audited by a qualified chartered accountant or a practicing company secretary for the purpose of reconciliation of share capital held in depositories and in physical form with the issued / listed capital. The Reconciliation of Share Capital Audit Report is required to be submitted to the stock Exchange within 30 days from the end of the Quarter under regulation 55A of the SEBI (Depositories and Participants) Regulations, 1996.

 

 

Compliances to be done once Year
Regulation	Purpose	Time Frame
Regulation 34 –	Annual Report	Within twenty one working days of it being approved and adopted in the annual general meeting.

 

Just like Companies Act, 2013 in Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 says that 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.

In case of top 500 listed entities based on market capitalization (calculated as on March 31 of every financial year), Business responsibility report is required to include in Annual Report is compulsory as per prescribed Format. However in case of other than top 500 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.

 

Further as per Regulation 43A. The top 500 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 required to disclose in their annual reports and on their websites. However 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.

 

Author Can be reached at :

Email: csannusharma123@gmail.com

Contact: 7021848742

Why DRHP is Important for Investors ?

During lockdown in India our economy was paused but not completely since the things are back to pace. Many companies will come out with their Initial Public offer specially the startups. In order to understand a firm fully, one of the most important tools is the Draft Red Herring Prospectus (DRHP). In this write up I am going share with you all that why DRHP is important for the companies coming out with public issue.

The document clarifies the reason why the company wants to raise money from the public, how the money will be used and risks involved in investing in the company. It does not contain details of either price or number of shares being offered or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later.

1.     What is a DRHP?

A Draft Red Herring Prospectus, or offer document, is when a company that is planning to raise money from the public provides detailed information about its business operations and financials. This includes details about its promoters, reason for raising money, how the money will be used, risks involved with investing in the company and so on. Investors should bear in mind that it does not provide information about the price or size of the offering.

2.     How do companies prepare a DRHP?

The issuer company approaches a merchant banker to prepare the offer document. Merchant bankers take care of the legal compliance issues as well ensure that prospective investors are aware and kept in the loop of the public issue.

The Securities and Exchange Board of India, or SEBI, has made it mandatory for companies to file a DRHP before going to the Registrar of Companies (ROC’s). SEBI reviews the offer document and checks if adequate disclosures are made. SEBI’s observations or recommendations are given to the merchant banker, who makes the changes and files the final offer document with SEBI, the ROC) and stock exchanges. Again the document is reviewed and observations are given to be implemented. Once that is done, final approval is provided and the document then becomes a RHP (Red Herring Prospectus).

3.     Where can investors find a company’s DRHP?

Investors can access a company’s DRHP on various platforms — the company website, the merchant banker website, stock exchange websites or the SEBI website. Announcements are also made in newspapers in multiple languages as per the rules.

4.     Who Makes the DRHP?

One of the most questionable aspects of the DRHP is its genuineness. While it is drafted by a team of legal counsels who are hired (independently) by the merchant bankers/ underwriters entrusted with the job of selling the securities being offered, they are all (i.e. the legal counsels and the merchant bankers) remunerated by the company. So are the auditors who compute and give opinion on the financial statements. Naturally there is an omnipresent specter of bias in making of the DRHP and on the process of due diligence itself.

 “Making honest disclosures to reveal truth about company and the issue” towards – “Creative writing to make the truth look beautiful”.

5.     How is the DRHP useful to investors?

It is a very powerful tool that provides them with all the necessary information about the company in order to help make an informed decision. Investors must go through the document carefully and can go ahead and do some research on their own about performance of other companies in the space and so on. SEBI reviews the draft document and checks if adequate disclosures are made. It gives its observations to the merchant bankers, who make the required changes and file the final offer document with SEBI, the ROC and stock exchanges.

6.     What can investors do if they notice discrepancies?

If there is any inaccurate or incomplete information in the DRHP, investors can register a complaint either with the merchant banker or SEBI. The role of the merchant banker, in this case, is to take care of the legal compliance issues and ensure that prospective investors are aware and kept in the loop of public issue.

7.     How it named as Prospectus?

An issuer can state the issue size and the number of shares are determined later. An RHP for and FPO can be filed with the ROC without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with ROC is called a prospectus.

8.     What about Wrong Disclosures in the Prospectus?

Making untrue statements of facts or omitting to state material facts in the prospectus could lead to penalties ranging from monetary fines to the merchant banker’s license being revoked. Recently however SEBI has started taking actions in this regard. There was a case where, DLF was fined Rs. 85 crores for not disclosing certain material information and facts in its IPO document.

CONCLUDING TIPS:

There are good reasons to pay attention to some sections of the DRHP. In particular you should look at the management section which covers promoters, directors and other key people in the company. Lawyers have little room to pull the wool over your eyes about these aspects. An honest and competent management is one of the most important investment tenets you should be looking for. Similarly, pay close attention to the chapter – Use of Proceeds. This will tell you what the company intends to do with the money they raise.

SEBI wants to make auditor resignation more transparent for listed companies.

In recent times, SEBI wants to ensure auditors act responsibly and their resignation does not hurt investor sentiment therefore SEBI has sought public comments on the proposals till 8 August. The role of the audit committee and disclosures to investors must be strengthened to ensure that statutory auditors act more responsibly and resign only on genuine grounds without hurting investor sentiment

There have been a significant number of instances of abrupt resignation of Statutory Auditors from listed entities in recent times. In most of the cases, the statutory auditors have suddenly resigned without completing their assignments for the year, generally citing ‘pre-occupation’ as the reason for resignation.

These policy proposals focus primarily on the following two aspects with respect to resignation of auditors:

1. Strengthening disclosures to investors

a. Conditions Prior to Resignation – Annexure A

b. Specific Format prescribed for Resignation – Annexure B

c. The listed entity shall ensure disclosure the aforesaid resignation letter to the stock exchanges. In case of resignation by the auditor of a material unlisted subsidiary, the subsidiary shall disclose the resignation letter to the listed entity which shall, in turn, disclose the same to the stock exchanges.

d. Disclosure of views of Audit Committee and the Board of Directors- It is proposed that the views of the Audit Committee and the Board of  Directors (of the listed entity/ unlisted material subsidiary, as applicable) be required to be submitted to the stock exchanges along with the disclosure of the resignation letter of the auditor in the aforesaid prescribed format.

2. Role of the Audit Committee

In order to strengthen the role of the Audit Committee in the matter, it is proposed to issue a circular/amend SEBI LODR Regulations, specifying the following as the procedure that may be followed in such cases

a. The auditor shall approach the Chairman of the Audit Committee directly and immediately in case of any concerns with the management such as non-availability of information / any non-co operation by the management. The auditor shall not specifically wait for the quarterly meetings to take place in order to raising such concerns.

b. The auditor shall bring to the Audit Committee’s notice, all the concerns the auditor has with respect to such resignation, along with relevant documents. In cases where the resignation is due to non receipt of information / explanation from the company, the auditor shall enlighten the Audit Committee of the details of information / explanation sought and not provided by the management, as applicable.

c. The Audit Committee shall deliberate on the matter and communicate its views to the management and the auditor. In communicating its views, the Audit Committee shall ensure that it fulfils its role as specified under the SEBI LODR Regulations. The listed entity shall ensure the disclosure of the Audit Committee’s views to the Stock Exchanges.

The auditor shall not specifically wait for the quarterly meetings to take place in order to raising such concerns. The auditor shall bring to the audit committee’s notice, all the concerns the auditor has with respect to such resignation, along with relevant documents.

Annexure – A :  Conditions Prior to Resignation

Current Provisions under the Companies Act 2013 Under Sec 140(2) of the Companies Act, 2013, the auditor who has resigned from the company is required to file a statement in the prescribed form with the company and the Registrar ((i.e. ADT-3) within 30 days from the date of resignation.

The reasons for resignation are also required to be disclosed in the prescribed form for resignation which is required to be filed by the auditor under the Companies (Audit and Auditors) Rules, 2014.

Current Provision under the SEBI LODR Regulation, Based on the recommendations of the Kotak Committee, amendments have been made to SEBI LODR Regulations.

Under regulation 30 the listed entities are required to disclose to the stock exchanges, the detailed reasons for the resignation of auditor, as given by the auditor, within 24 hours. These amendments are effective from April 1, 2019

Under SEBI (LODR) Schedule III, Part A, Quoted

A. “Events which shall be disclosed without any application of the guidelines for materiality as specified in sub-regulation (4) of regulation (30):

 In case of resignation of the auditor of the listed entity, detailed reasons for resignation of auditor, as given by the said auditor, shall be disclosed by the listed entities to the stock exchanges as soon as possible but not later than twenty four hours of receipt of such reasons from the auditor”.

Proposed amended provision in SEBI LODR Regulations.Insertion of sub-regulation 33(9) ;

Conditions prior to resignation: 33(9): If the auditor of a listed entity/ material unlisted subsidiary of the listed entity proposes to resign:

a. With respect to auditor of a listed entity

i. If the auditor has signed the audit report for all the quarters (limited review/ audit) of a financial year, except the last quarter, then the auditor shall finalize the audit report for the said financial year before such resignation.

ii. In all other cases, the auditor shall issue limited review/audit report for that quarter before such resignation (i.e. previous quarter in reference to the date of resignation).

b.  With respect to the auditor of a material unlisted subsidiary of the listed entity, the auditor shall issue the limited review/audit report for that financial year/ quarter, as applicable, before such resignation (i.e. previous financial year/ quarter in reference to the date of resignation).

c.  If any information is not provided to the auditor, to that extent, the auditor shall provide an appropriate disclaimer in the audit report.

Explanation: The disclaimer as specified in this clause may be in accordance with the Standards of Auditing as specified by ICAI.

Annexure – B : Format of resignation letter by a statutory auditor

1. Name of the listed entity/ material unlisted subsidiary:

2. Details of the statutory auditor:

a. Name:

b. Address:

c. Phone number:

d. Email:

3. Details of association with the listed entity/ material unlisted subsidiary:

a. Date on which the statutory auditor was appointed:

b. Date of which the term of the statutory auditor was scheduled to expire:

4. Detailed reasons for resignation:

5. In case of any concerns, efforts made by the auditor prior to resignation (including approaching the Audit Committee):

6. In case the information requested by the auditor was not provided, then following shall be disclosed.

a. Whether the inability to obtain sufficient appropriate audit evidence was due to a management-imposed limitation or circumstances beyond the control of the management.

b. Whether the lack of information would have significant impact on the financial statements/results.

c. Whether the auditor could have performed alternative procedures to obtain appropriate evidence for the purposes of audit/limited review

d. Whether the auditor communicated the matter to the Audit committee before resignation

e. Whether the lack of information was prevalent in the previous reported financial statements/results. If yes, on what basis the previous audit/limited review reports were issued.

f. Prior to resignation, the extent of audit/limited review work performed by the auditor.

Any other facts relevant to the resignation:

Declaration

1. I/ We hereby confirm that the information given in this letter and its attachments is correct and complete.

2. I/ We hereby confirm that there is no other material reason other than those provided above for my resignation/ resignation of my firm.

Signature of the authorized signatory

Date:

Place:

Encl:

AT THE END:  The proposed guidelines indicate that such cases would be scrutinized more closely by regulators and will require significantly enhanced disclosures to the investors,

CS Annu Sharma is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). She has cumulative experience of more than 3 years with Listed Company, CA and CS firms. She authored various articles on the topics of Corporate Laws, Securities Laws, DGFT, Income Tax, Start-ups among other. Articles authored by her are published on prominent Professional Websites.  

(Author be Contacted at csannusharma123@gmail.com & +91-7021848742 : CS Annu Sharma for any discrepancy.)