Presently, a private agreement between Stock Exchange and listed company govern all listing obligation and disclosure requirement. This listing agreement like any other agreement among parties creates civil obligation in case of any violation of the agreement.
Securities and Exchange Board of India had standardized this listing agreement using its regulatory powers over the stock exchanges. SEBI from time to time also proposed changes in this agreement among private parties and even decided effective dates of all these proposed amendment to the agreement. This was an interesting case, where a private agreement was directed upon the parties not drafted by them with their free consent. This may however, would have been a case to determine whether and when free consent was actually there and when not. As any courts in India never got the opportunity to examine these issues, we may not come to a verdict.
However, listing was so important for the listed entities, none of them ever think about violation. Yes, there was civil violation of the listing agreement actionable under the law as in case of any non – compliance, most of these listed entities paid penalties as per the agreement. Whenever a non – compliance of an agreement made good by mutual agreement among parties as per the agreement, it do not result in any civil litigation. Same time, Securities and Exchange Board of India played a regulatory role over stock exchanges very strongly. Many time, Securities and Exchange Board of India directed a party of this listing agreement to act harshly upon another party. These directions given by their regulatory authority was binding for stock exchanges, who always acted upon these directions.
In this manner, Securities and Exchange Board of India, indirectly regulated Listed Entities listed on the stock exchanges in India. These listed entities include Private sector companies, public sector companies, private companies, municipalities among other.
Now, Securities and Exchange Board of India took direct regulatory role over the listed entities in India. Securities and Exchange Board of India notified in official gazette its SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 on 2nd September 2015.
These regulations shall come into force on the ninetieth day from the date of their publication in the Official Gazette. This date come to 1st December 2015. However, the provisions of sub-regulation (4) of regulation 23 and regulation 31A shall come into force on the date of notification of these regulations.
Regulation 23 deals with Related Party Transactions (RTPs). According to sub – regulation (4) of Regulation 23, all material related party transactions shall require approval of the shareholders through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party to the particular transaction or not. There is a similar but relaxed requirement related parties in Companies Act, 2013.
Regulation 31A deals with Disclosure of Class of shareholders and Conditions for Reclassification. All entities falling under promoter and promoter group shall be disclosed separately in the shareholding pattern appearing on the website of all stock exchanges having nationwide trading terminals where the specified securities of the entity are listed, in accordance with the formats specified by SEBI. We will discuss this in detail in future