Regulatory Insights

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Regulatory Insights

23 January 2023

SEBI notifies amended LODR Regulations to bring about relaxation in relation to compliance with corporate governance regulations for REITs and InvITs

In brief

The Securities and Exchange Board of India (SEBI) recently notified¹ the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2023 (amended regulations) amending the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR).

By way of this amendment, SEBI has brought about relaxations in relation to compliance with corporate governance regulations for Real Estate Investment Trusts (REITs) and Inf rastructure Investment Trusts (InvITs) and widened the definition of ‘senior management’ by including functional heads. Additionally, SEBI has also specified additional disclosure in the case of material subsidiaries of a lis ted company.

In detail

The key changes in the amended regulations are listed below.

Regulations Summary of amendments Regulation 15

(Applicability) Ef fective from 1 April 2023

REITs and InvITs are no longer required to comply with the corporate governance related regulations 15 to 27 under the SEBI LODR. Such entities are required to f ollow the governance norms as would be specified under the SEBI (Inf rastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trust) Regulations, 2014, respectively.

Regulation 16 (Definitions)

Ef fective from 17 January 2023

The definition of ‘Senior Management’ under regulation 16 (definitions) has been amended to additionally include f unctional heads. The revised def inition is as f ollows:

‘“Senior management” shall mean the officers and personnel of the listed entity who are members of its core management team, excluding the Board of Directors, and shall also comprise all the members of the management one level below the Chief Executive Officer or Managing Director or Whole Time Director or Manager (including Chief Executive Officer and Manager, in case they are not part of the

1 Notification No. SEBI/LAD-NRO/GN/2023/117 dated 17 January 2023

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Regulations Summary of amendments

Board of Directors) and shall specifically include the functional heads, by whatever name called and the Company Secretary and the Chief Financial Officer’.

Regulation 17 (Board of Directors)

Ef fective from 17 January 2023

In case of appointment of a person of the Board of Directors, SEBI has clarified that the shareholder approval (at the next general meeting or within three months f rom the date of appointment, whichever is earlier) is applicable in the case of both appointment and re-appointment. Previously, the regulation did not include ‘re- appointment’.

Additionally, the amended regulations have inserted a new proviso whereby in case of a public sector company, the approval of the shareholders f or the appointment or re-appointment of a director or manager can be taken at the next general meeting.

Schedule V, Para C (Corporate Governance Report)

Applicable for annual reports for 2022–2023 and onwards

The details of material subsidiaries of the listed entity, including the date and place of incorporation and the name and date of appointment of the statutory auditors of such subsidiaries, are now required to be additionally reported in the annual report.

Key takeaways

The amendments are aimed at streamlining SEBI LODR regulations, specifically in terms of the applicability of the corporate governance regulations to REITs and InvITs, as SEBI plans on putting in place separate governance norms for such entities. Additionally, the inclusion of functional heads is done to bring out alignment with the SEBI (Issue of Capital and Disclosure Requirements), Regulations 2018, which has a wider definition of Key Managerial Personnel, inclusive of senior management and functional heads.

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In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corpora te Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.

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