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SEBI Introduces Amendments related to Appointment of Independent Directors and other Regulations

The Securities and Exchange Board of India (“SEBI”) has issued a press release1 (PR No. 22/2021) dated June 29, 2021 pursuant to its recent meeting held on June 29, 2021. Some of the key decisions impacting various regulations are as under:

  1. Review and Merger of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single Regulation – SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. The provision of charge on the assets and properties of the issuer has been harmonized with the Companies Act. This will provide greater flexibility to the issuers for creation of charge.  

  1. Introduction of Framework for Accredited Investors in Securities Market: SEBI has approved the proposal to introduce a framework for ‘Accredited Investors’ in the Indian securities market, a class of investors who may be considered to be well informed or well advised about investment products. Accredited Investors shall have the flexibility to participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers Regulations.
  2. Review of Regulatory provisions related to Independent Directors: The Board approved amendments to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 pertaining to regulatory provisions related to Independent Directors (IDs). Furthermore, a cooling off period of three years has been introduced for Key Managerial Personnel (and their relatives) or employees of the promoter group companies, for appointment as an ID. These amendments will be made applicable with effect from Jan 1, 2022. The Board has also agreed to make a reference to the Ministry of Corporate Affairs (“MCA”) for giving greater flexibility to companies while deciding the renumeration for all directors (including IDs), which may include profit-linked commissions, ESOPs etc., within the overall prescribed limit under the Companies Act, 2013.
  3. Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014: The Board considered and approved the amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014, for introduction of minimum unit holders’ requirement for unlisted Infrastructure Investment Trusts (InvITs). The minimum number of unit holders, other than the sponsor, its related parties and its associates shall be five together holding not less than 25% of the total unit capital of the InvIT.
  4. Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trusts) Regulations, 2014: The SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014, have been amended to allow revision in minimum subscription and trading lot for publicly issued Real Estate Investment Trusts (REITs) and InvITs. The revised minimum application value shall be within the range of INR 10,000 – 15,000 and the revised trading lot shall be of one unit.
  5. Permitting Resident Indian fund managers to be constituents of FPIs: The Board approved the proposal to amend the SEBI (Foreign Portfolio Investors) Regulations, 2019 to permit eligible Resident Indian Fund Managers (other than individuals) to be constituents of the Foreign Portfolio Investors.
  6. Amendment to SEBI (Mutual Funds) Regulations, 1996: The Board approved amendment to SEBI (Mutual Funds) Regulations, 1996, to provide for investment of a minimum amount in the Mutual Fund schemes by the Asset Management Companies based on the risk associated with the scheme, instead of the current requirement of one percent of the amount raised in New Fund Offer or an amount of INR Fifty Lacs, whichever is less.
  7. Amendment to SEBI (Credit Rating Agencies) Regulations, 1999: SEBI (Credit Rating Agencies) Regulations have been amended to define a Credit Rating Agency (CRA) in terms of rating of securities that are listed or proposed to be listed on a recognized stock exchange, and to provide for an explanation in clause (f) of Regulation 9 specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority.
  8. Amendment to SEBI (Bankers to an Issue) Regulations, 1994: The Board approved the proposal of amending the SEBI (Bankers to an Issue) Regulations, 1994 by way of permitting such other banks, other than scheduled banks, as may be specified by SEBI from time to time, to register as a Banker to an Issue.
  9. Amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015: With a view to streamline the process of reward payment and to enhance the quantum of reward under the informant mechanism, the Board considered and approved certain amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015. Furthermore, the maximum amount of reward has been increased from Rupees One Crore to Rupees Ten Crore.

Endnotes:

[1] https://www.sebi.gov.in/media/press-releases/jun-2021/sebi-board-meeting_50771.html