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Securities Exchange Board of India (SEBI) is the regulatory body that governs companies whose shares are listed at the Stock Exchange for trading. SEBI monitors all the reporting and disclosure requirements for Listed Companies. Hence in times of this pandemic and crisis situation of COVID – 19, SEBI has mandated listed companies to disclose all the material impact of COVID – 19, under the SEBI LODR Regulations 2015 (Listing Obligations and Disclosure Requirements).

  • Need For Disclosures
  • Disclosures Mandated As Per LODR
  • Financial Disclosures Warranted By the Circular
  • Disclosure in Financial Statements
  • 1. Need For Disclosures

    In these times of uncertainty of the future and the restrictions of the present, all shareholders are seeking explanations and information from the companies they have a stake in. While these unforeseen circumstances have made it difficult for companies to cope up, shareholders must be given a clear picture so as to avoid any panic regarding their investments.

    2. Disclosures Mandated As Per LODR

    The Listing Obligations and Disclosure Requirements (LODR) Regulations 2015 has already spelt out the disclosures required by listed companies. They are as follows:

    Sr.No

    Regulations of the LODR

    Particulars

    1

    Regulation 30(3)

    Schedule III

    A listed entity shall disclose the events specified in Para B of Part A of Schedule III of LODR based on materiality.

    2

    Clause 6 of Para B of Part A

    It specifies that the entity must disclose based on guidelines of materiality specified in regulation 30 (4) the disruption in the activities of one or any units or divisions of the listed company arising due to force majeure or natural calamities or strikes.

    3

    Regulation 51(1)

    For non-convertibles, as per the regulation, the listed companies must make prompt dissemination of all information having an impact on the performance, or any other price-sensitive information or actions having an impact on the dividend or interest payments.

    4

    Regulation 51 (2)

    Clause 16 of Part B of Schedule III

    The said clause read along with the regulation requires the listed company to promptly inform the stock exchanges of any other information having an impact on the operation or performance of the listed entity.

    Additionally, Circular No. CIR/CFD/CMD/4/2015 dated September 9, 2015, provides guidelines to listed companies to make such disclosures. Annexure 1 provides the details to be disclosed in times of a force majeure event, natural calamities and other events.

    3. Financial Disclosures Warranted By the Circular

    Listed companies have been forthcoming in sharing information about the lockdown, about the precautionary measures taken to sanitize premises and other safety measures. However, disclosures regarding financial impact have been inadequate. Therefore SEBI encourages the listed companies to assess the impact of COVID-19 and provide the required information on financials.

    The list of information that may be disclosed, subject to the clause of materiality is as follows:

    • Impact of the pandemic on business.
    • The ability to maintain operations given that offices/ units/ factories could be functioning or closed.
    • Steps taken for smooth functioning.
    • Schedule for restarting operations, if any.
    • Estimation of the impact of COVID – 19 on future operations.
    • Details of the impact of lockdown and pandemic on the:

      – Profitability

      – Assets

      – Capital and financial resources

      – Liquidity position

      – Ability to service debt and financial arrangements

      – Internal financial reporting and control

      – Supply chain

      – Demand for its products
    • Existing agreements where failure to meet obligations could impact the overall business.
    • Any other material information about the listed entity‚Äôs business.

    The circular also states the above list is only illustrative, and the entity must disclose all the relevant information that is material. Listed companies must devise a methodology to regularly update all material information.

    4. Disclosure in Financial Statements

    The circular also requires listed entities to disclose information about the impact of COVID – 19 on the financial statements, while submitting under Regulations 33 of the LODR.

    The COVID – 19 is a reality of our world, and its impact will dwell on for a considerable time. Hence the listed companies must be transparent in their reporting mechanism and disclose keeping in mind the principles governing the disclosures and obligations of a listed entity as prescribed in LODR Regulations. Also, attention must be paid to the requirements of Regulation 4(2)(e) of the LODR on the disclosure and transparency. The listed companies must not resort to selective disclosure and must be as credible in these times as any other.

    Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.

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