SEBI announced disclosure rules, requiring top 100 listed companies to provide clarifications on market rumors

The Securities and Exchange Board of India (SEBI) announced regulations demanding the top 100 listed companies by market capitalization to confirm, deny, or clarify every market-related rumour reported in the mainstream media beginning on October 1. This is done to guarantee that sound disclosure requirements are met.

The legislation would be in effect for the top 250 listed businesses starting on April 1, 2024, according to the SEBI.

The goal of the rule

Sebi made the decision to create a framework to address the problem of few shareholders constantly enjoying their special privileges in order to strengthen and increase the reliability of corporate governance at all listed companies.

Any special privilege provided to shareholders of a listed business going forward must first receive approval from shareholders in a public meeting, according to Sebi. Every five years, starting from the day the special right was granted, a special resolution will be placed to approve the special right.

What worries are underlying this?

Such a law was introduced at a time when institutional public shareholders were raising objections to the promoters, founders, and specific persons of the firms’ special privileges at an increasing rate.

A director’s continued service on the board of directors of a listed entity will, starting on April 1, 2024, require shareholder approval at a general meeting at least once every five years from the date of their appointment or reappointment, as applicable.

In order to protect the interests of minority shareholders, the market regulator also established regulations to strengthen the framework for slump sales carried out outside of the scheme of arrangement framework.

The LODR (Listing of Obligations and Disclosure Requirements) rules have been revised by Sebi to this effect, and they will take effect on July 14.

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