Market regulator SEBI said it is revamping the listing agreement in general and Clause 36 in particular to make it mandatory for corporates to disclose "non-events" for the benefit of investors.
"To build trust, we are reviewing Clause 36 of the listing agreement under which corporates have to disclose non-events.
We found that disclosures are just fill in the blanks now. We have issued a discussion paper on Clause 36 so that investors get meaningful information," Sebi Whole-time member Prashant Saran said at a conference here.
Corporates would be required to disclose non-events such as loss of market share or technology obsolescence on a periodic basis (annually to start with) to shareholders through an exchange filing, Saran said.
"Investors have lost trust in the last decade and right now the imperative is to build trust and we have to build it assiduously.
"We have been reviewing Clause 36 of the listing agreement (for timeliness and adequacy) and have suggested that corporates disclose all material events in a manner such that investors will get a meaningful understanding."
Outlining the future of corporate disclosures, Saran said companies would have to incorporate such information in the annual information memorandum and periodically update the prospectus filed by them at the time of IPOs.
This would provide secondary market investors with updated and vital information besides enabling companies to file for future capital raising in the form of rights or follow-on public offerings, he said.
Sebi issued the discussion paper on August 19, 2014, and it is expected to be taken up during the next board meeting of the regulator scheduled for November 19.
Clause 36 requires a listed entity to disclose details of all events, which will have a bearing on its performance/ operations, as well as price sensitive information to stock exchanges immediately.
This usually consists of information on events like labour strikes, lock-outs, closure on account of power cuts among others.
The changes are being made after taking into account suggestions made by the industry and other stakeholders, including market entities and investors.
The new norms -- to help companies save cost and time with a faster process and also check any manipulation in share price associated with a longer time-frame-- will be put up for approval at SEBI’s next board meeting.
According to sources, the board of SEBI is likely to meet next week.
It will also discuss new insider trading norms and listing regulations.
As per the proposed delisting norms, the whole exercise could be completed in more than half of 137 days presently required for completion of the process. At times, the process takes more than a year.
Besides, a company has to make a public announcement regarding the delisting process soon after the board meeting and letter of offer has to be dispatched within a week. The delisting offer would be for a
period of 4-5 days.
The new rules on the matter come against the backdrop of concerns raised by various entities about existing delisting process which at times is also seen as time-consuming.
The delisting offer will be considered successful if the holding of the promoter (or acquirer) reaches 90 per cent post offer.
Current rules require the acquirer to either reach higher of 90 per cent of the total issued share capital or acquire at least 50 per cent of the offer size.
SEBI may also do away with the requirement for shareholder's nod and bourses' approval for the delisting process.
The offer price could be determined on a 'fixed-price' basis or a two-step process through which the promoter could make a counter offer.
The current delisting regulations were put in place in 2009 and facilitates removal of the securities of a listed company from a stock exchange with promoters buying out shares held by minority shareholders.
The changes in SEBI’s delisting norms are being considered to harmonise them with other regulations, including the new Companies Act and other regulations of SEBI itself such as takeover and buybacknorms.
(Edited by Joby Puthuparampil Johnson)