SEBI Proposes Listed Companies Disclose Payment Delays for Debt Securities in 24 Hours

New Delhi: Sebi on Monday proposed that listed companies have to disclose any delay or expected delay in payment related to their debt securities within 24 hours from occurrence of such an event.

The proposal comes against the backdrop of various instances regarding non-compliance with listing norms by issuers of non-convertible debt securities (NCDs) or non-convertible redeemable preference shares (NCRPS).

Besides, Sebi has received representations from various stakeholders flagging difficulties in complying with various provisions of Listing Obligations and Disclosure Requirement.

The new proposals regarding NCDs and NCRPs are aimed at ensuring ease of compliance on the part of the issuers who have listed their debt securities, according to Sebi.

In a consultation paper, Sebi has suggested that any delay or expected delay in payment of interest or dividend or principal amount as per the due date for these instruments should be disclosed by the listed entity as soon as reasonably possible.

The disclosures should not be "later than 24 hours from occurrence of event or information", it added.

The disclosures should include details about nature of NCDs or NCRPS, periodic ratings obtained from credit rating agencies and status update with respect to reference to NCLT under the Insolvency and Bankruptcy Code.

"The disclosure of information having bearing on performance/ operation of listed entity and/or price sensitive information needs a review because an event which may be material on its own need not necessarily be material event/information even though it may be price sensitive," Sebi said in the consultation paper.

At present, listed firms are required to make timely payment of interests and principal obligations with respect to the NCDs.

Sebi has noted that listed companies are submitting certificates to the exchanges only when they have made timely payment of their debt obligations and not otherwise.

However, the legislative intent of the provision is that disclosures have to be made to the exchanges irrespective of payment being made by the listed entity, it added.

The proposed disclosure requirements would ensure alignment with listed entities who have listed their specified securities and would also provide a defined timeline for disclosure of material information.

It would also help in ensuring timely availability of crucial information to all the stakeholders regarding NCDs or NCRPS which might affect the investment decisions of the investors.

With regard to intimation for material deviation in the use of proceeds, Sebi has proposed that the same might be required to be submitted quarterly instead of half yearly basis.

The listed entity should submit a certificate to the stock exchange within two days of the interest or principal or both becoming due in case of NCDs.

Further, the regulator has proposed that the listed entity should not make any material modification in structure of the class of securities unless there is consent of at least three-fourths of total number of holders of such securities.

In this regard, consent has to be an affirmative one and a mere non-response should not be treated as deemed consent, it added.

"The consent so received from the prescribed number of holders shall be vetted by the debenture trustee who shall then issue a certificate to the issuer confirming the same. The certificate shall then be submitted by the listed entity to the stock exchange," Sebi noted.

The listed entity should disclose on its website all material information which has been disclosed to exchanges.

Such disclosures may be hosted on the website of the listed firm for a minimum period of five years and thereafter as per the archival policy of the listed entity, as per the consultation paper.

The regulator has sought public comments till June 11 on the proposals.

In March, Sebi had said the decision on the proposed norms necessitating listed companies to make urgent disclosures about all major loan defaults lies with the regulator's board.

The new rules were to come into effect initially from October 1 last year but were deferred after banks had asked for more time.