Key Takeaways: Related party transactions Obligations of directors including independent directors, employees including KMPs Corporate Governance requirements

1. CS Meenakshi Jayaraman
SEBI (LODR) Regulations:
Obligations on listing of specified
securities- Part II

2. 2
Credits and Acknowledgments
Iswariya BS

3. 3
Legends used in the Presentation
ADR American Depository Receipts LODR Listing Obligations and Disclosure
Requirements
BOD Board of Directors PCS Practicing Company Secretary
FCCB Foreign Currency Convertible
Bonds
QIP Qualified Institutions Placement
GDR Global Depository Receipts RPT Related Party Transactions
GM General Meeting SE Stock Exchange
IBC Insolvency and Bankruptcy
Code
SEBI Securities and Exchange Board of
India
ID Independent Director w.e.f. with effect from
KMP Key Managerial Personnel WTD Whole Time Director

4. 4
Presentation Schema
Vigil Mechanism
Related party
transaction
Corporate Governance
requirements of
subsidiary company
Obligations of IDs
Obligations of
employees
Corporate Governance
requirements as
specified in Part E of
Schedule II
In principle approval
from SE(s)
Prior intimations to
SE(s)

5. Regulation 22 – Vigil Mechanism
5
The listed entity shall formulate a vigil mechanism for directors and employees to
report genuine concerns
The vigil mechanism
shall provide for
adequate safeguards
against victimization of
director(s) or
employee(s) or any
other person who avail
the mechanism
and also provide for direct
access to the chairperson of
the audit committee in
appropriate or exceptional
case
The vigil mechanism
shall provide for
adequate safeguards
against victimization of
director(s) or
employee(s) or any
other person who avail
the mechanism and
also provide for direct access
to the chairperson of the
audit committee in
appropriate or exceptional
case

6. Regulation 23- Related party transaction
6
(1) The listed entity
shall formulate a
policy on materiality
of RPT and on
dealing with RPT
including clear
threshold limits duly
approved by the
BOD and
such policy shall be
reviewed by the
BOD at least once in
every 3 years and
updated accordingly
A transaction with a related party shall be considered material if -
the transaction(s)
entered individually or
taken together with
previous transactions in
a FY
of the annual consolidated
turnover of the listed entity as
per the last audited financial
statements
>10%
https://www.infosys.com/investors/corporate-governance/documents/related-
party-transaction-policy.pdf

7. 7
Key definitions relevant to Regulation 23
1. Related Party – Reg. 2(1)(zb):
Related party means,
 a related party as defined under Sec 2 (76) of the Act or
 under the applicable accounting standards
i. Any person or entity belonging to the promoter or promoter group of the listed entity
and
ii. holding 20% or more of shareholding in the listed entity
shall be deemed to be a related party
This definition shall not be applicable for the units issued by mutual funds which
are listed on a recognised stock exchange(s)

8. 8
2. Related Party Transaction – Reg. 2(1)(zc):
Contd.
 Transfer of resources, services or obligations between a listed entity and a related
party, regardless of whether a price is charged and
 a transaction with a related party shall be construed to include a single transaction or
a group of transactions in a contract
The above two definitions shall not be applicable for the units issued by mutual
funds which are listed on a recognised stock exchange(s)
3. Relative – Reg. 2(1)(zd):
Relative means a relative as defined under Sec 2 (77) of the Act
and rules prescribed there under

9. Contd.
9
if the transaction(s) to
be entered into
individually or taken
together with previous
transactions during a FY
of the annual
consolidated turnover of
the listed entity as per
the last audited financial
statements
(1A) w.e.f. 01/07/2019-A
transaction involving
payments made to a
related party with
respect to brand usage
or royalty shall be
considered material
>5%*
*Substituted by SEBI(LODR) Regulations, 2019 w.e.f. 27/06/2019 –in place of 2%
(2) All related party transactions shall require prior approval of audit committee
(3) Audit committee may grant omnibus approval for RPT proposed to be entered into by the
listed entity subject to the following conditions-
a) the committee shall lay down the criteria for granting the omnibus approval in line with
the policy on RPT of the listed entity and such approval shall be applicable in respect of
transactions which are repetitive in nature
b) the committee shall satisfy itself regarding the need for such omnibus approval and such
approval shall be in the interest of the listed entity

10. Contd.
10
c) The omnibus approval shall specify the following details-
d) Review of Omnibus approval- at least on a quarterly basis
e) Validity- maximum 1 year, after that require fresh approval
where the need for RPT cannot be foreseen and aforesaid details are not
available, audit committee may grant omnibus approval for such transactions
subject to their value not exceeding rupees 1 crore per transaction
(i) the name(s) of the related parties, nature of transaction, period of
transaction, maximum amount of transactions that shall be entered into,
(ii) the indicative base price / current contracted price and the formula for
variation in the price if any, and
(iii) such other conditions as the audit committee may deem fit

11. Contd.
11
(4) All material RPT shall
require approval of the
shareholders through
resolution
no related party shall vote to
approve such resolutions
whether the entity is a
related party to the
particular transaction or not
Exception - If a resolution plan approved under section 31 of the IBC, subject to the
event being disclosed to the recognized SE(s) within 1 day of the resolution plan being
approved
and
(5) Non-applicability of sub-regulations (2), (3) and (4)-
Government Company means a government company as defined under section 2 (45) of the
Companies Act,2013
a) transactions entered into between 2 government companies
b) transactions entered into between a holding company and its wholly
owned subsidiary whose accounts are consolidated with such holding
company and placed before the shareholders at the GM for approval

12. Contd.
12
(6) Applicability of this Regulation - to all prospective transactions
(7) All entities falling under the definition of related party shall not vote to
approve the relevant transaction irrespective of whether the entity is a related
party to the particular transaction or not
(8) All existing material related
party contracts or arrangements
entered into prior to the date of
notification of these regulations
and which may continue beyond
such date
(9) The listed entity shall disclose RPT on a consolidated basis, within 30 days from the
date of publication of its standalone and consolidated financial results for the half year,
in the format specified in the relevant accounting standards for annual results to the
SE(s) and publish the same on its website
shall be placed for approval of
the shareholders in the first GM
subsequent to notification of
these regulations

13. Regulation 24- Corporate governance requirements
with respect to subsidiary of listed entity
13
 At least one ID on the BOD of the listed entity shall be a director on the BOD
of an unlisted material subsidiary, whether incorporated in India or not
Material Subsidiary
Subsidiary
whose income
or net worth
of consolidated income or net
worth respectively, in the
immediately preceding
accounting year
>20%

14. Contd.
14
 The audit committee of the listed entity shall also review the financial
statements, in particular, the investments made by the unlisted subsidiary
 The minutes of the meetings of the BOD of the unlisted subsidiary shall be
placed at the meeting of the BOD of the listed entity
 A statement of all significant transactions and arrangements entered into by the
unlisted subsidiary shall be informed to the BOD of listed entity periodically by
the management of unlisted subsidiary
Significant transactions
Any individual
transaction or
arrangement
of the total revenues or total expenses
or total assets or total liabilities, as the
case may be, of the unlisted * subsidiary
for the immediately preceding
accounting year.
>10%
* Word ‘material’ omitted w.e.f. 01/04/2019

15. Contd.
15
 A listed entity shall not dispose of shares in its material subsidiary
resulting in reduction of its shareholding (either on its own or together with
other subsidiaries)
to less than 50% or cease the exercise of control over the subsidiary
without passing a special resolution in the General Meeting
If divestment is made
under a scheme of
arrangement duly
approved by a
Court/Tribunal
or under a resolution plan duly approved
under section 31 of the IBC and such an
event is disclosed to the recognized SEs
within 1 day of the resolution plan being
approved
Exception
If divestment is made
under a scheme of
arrangement duly
approved by a
Court/Tribunal or
under a resolution plan duly approved
under section 31 of the IBC and such an
event is disclosed to the recognized SEs
within 1 day of the resolution plan being
approved

16. Contd.
16
 Prior approval of shareholders by way of passing special resolution is required, if
Amount of
selling,
disposing and
leasing of assets
of the assets of the material subsidiary
on an aggregate basis during a financial
year
>20%
Exception
If the sale/ disposal/
lease is made under a
scheme of
arrangement duly
approved by a
Court/Tribunal
or under a resolution plan duly approved
under section 31 of the IBC and such an
event is disclosed to the recognized SEs
within 1 day of the resolution plan being
approved

17. Contd.
17
 Where a listed entity has a listed subsidiary, which is itself a holding company, the
provisions of this regulation shall apply to the listed subsidiary in so far as its subsidiaries
are concerned
Regulation 24A- Secretarial Audit
Form for secretarial audit report as may be specified w.e.f. the year ended 31/03/2019
A secretarial audit shall
be undertaken by
every listed company
and its material
unlisted subsidiaries
incorporated in India
and
a secretarial audit
report given by a PCS
shall be annexed with
the annual report of
the company

18. Regulation 25- Obligations with respect to
independent directors
18
No person shall be appointed or continue as an alternate director for an ID of a listed
entity w.e.f. 01/10/2018 *
The maximum tenure of ID shall be in accordance with the Companies Act, 2013
and rules made thereunder
The ID of the listed entity shall hold at least 1 meeting in a year, without the
presence of non-IDs and members of the management and all the IDs shall strive to
be present at such meeting
* Substituted by SEBI(LODR) Regulations, 2018
A person shall not serve as an ID in more than 7 listed entities. Provided that any
person who is serving as a WTD in any listed entity shall serve as an ID in not more
than 3 listed entities

19. Contd.
19
The IDs in the meeting referred above shall among other things-
a) review the performance of non-IDs and the BODs as a whole
b) review the performance of the chairperson of the listed entity, taking into account
the views of executive directors and non-executive directors
c) assess the quality, quantity and timeliness of flow of information between the
management and the BODs of the listed entity, which is necessary for the BOD to
perform their duties effectively and reasonably
An ID shall be held liable only in respect of such acts of omission or commission by the listed
entity which had occurred -
with his knowledge, attributable through
processes of BODs and
with his consent or connivance or
where he had not acted diligently with respect to the provisions
contained in these regulations

20. Contd.
20
An ID who resigns or is removed from the BODs of the listed entity shall be replaced
by a new ID by listed entity at the earliest but not later than -
Immediate next board meeting
3 months from the date of such
vacancyOR
whichever is later
Exception
If the listed entity fulfils the requirement of IDs in its BOD without filling the vacancy
created by such resignation or removal
The listed entity shall familiarize the IDs through various programs about the listed entity,
including the following-
a) nature of the industry in which
the listed entity operates
b) business model of the listed entity
c) roles, rights, responsibilities of IDs
and
d) any other relevant information

21. Contd.
21
Every ID shall submit a declaration that he meets the criteria of independence as
provided in Regulation 16(1)(b) and
he is not aware of any circumstance or situation, which exist or may be reasonably
anticipated, that could impair or impact his ability to discharge his duties with an
objective independent judgment and without any external influence
at the first meeting of the board in every FY
at the first meeting of the board in which he participates as a director
whenever there is any change in the circumstances which may affect his status as an ID
The BOD of the listed entity shall take on record the declaration and confirmation submitted by
the ID as stated above after undertaking due assessment of the veracity of the same
The top 500 listed entities by market capitalization calculated as on March 31 of the preceding
FY, shall undertake Directors and Officers insurance for all their IDs of such quantum and for such
risks as may be determined by its BOD- w.e.f. 01/10/2018

22. Regulation 26- Obligations with respect to employees
including senior management, key managerial
persons, directors and promoters*
22
*Substituted by SEBI(LODR) Regulations,2016 – w.e.f. 04/01/2017
Obligations with respect to directors and senior management
A director shall not be a member in more than 10 committees or act as chairperson of more than 5
committees across all listed entities in which he is a director and the same shall be determined as
follows-
Includes-
• All public limited companies
whether listed or not
Excludes-
• Private limited Companies
• Foreign Companies
• Section 8 Companies
• Any other company
Includes-
• Audit Committee
• Stakeholders
Relationship Committee
Companies Committees

23. Contd.
23
Every director shall inform the listed entity about the committee positions he or she
occupies in other listed entities and notify changes as and when they take place
All members of the BOD and senior management personnel shall affirm compliance with
the code of conduct of BOD and senior management on an annual basis
Non-executive directors shall disclose their shareholding, held either by them or on a
beneficial basis for any other persons in the listed entity in which they are proposed to be
appointed as directors, in the notice to the GM called for appointment of such director
Senior management shall make disclosures to the BOD relating to all material, financial
and commercial transactions, where they have personal interest that may have a
potential conflict with the interest* of the listed entity at large
*Conflict of interest relates to dealing in the shares of listed entity, commercial dealings with
bodies, which have shareholding of management and their relatives, etc.

24. Contd.
24
Prior approval from-
BOD and public shareholders by way of passing ordinary
resolution is required if,
Any employee including KMP/ director/ promoter of a listed entity enters into any agreement for
himself/ on behalf of any other person, with any shareholder/ any other third party with regard to
compensation/ profit sharing in connection with dealings in the securities of such listed entity
If any agreement, whether subsisting or expired, entered during the preceding 3 years from the
effective date, shall be disclosed to the SEs for public dissemination
If any agreement, as on the effective date shall be placed for approval before the BOD in the
forthcoming Board meeting
If the BOD approves such agreement, the same shall be placed before the public shareholders
for approval by way of an ordinary resolution in the forthcoming GM
All interested persons involved in the transaction covered under the agreement shall not vote in
the GM
*w.e.f. 04/01/2017

25. Contd.
25
Interested person shall mean any person holding voting rights in the listed entity and
who is in any manner, whether directly or indirectly, interested in an agreement or
proposed agreement, entered into or to be entered into by such a person or by any
employee or KMP or director or promoter of such listed entity with any shareholder
or any other third party with respect to compensation or profit sharing in connection
with the securities of such listed entity

26. Regulation 27-Other corporate governance
requirements
26
Sub-section 1
The listed entity may, at its discretion, comply with requirements as specified in
Part E of Schedule II
Sub-section 2
The report mentioned above shall be signed either by the compliance officer or
the CEO of the listed entity
Details of all material transactions with RP shall be disclosed along with the
report mentioned above
The listed entity shall submit a quarterly compliance report on corporate
governance in the format as specified by the Board from time to time to the
recognized SE(s) within 15 days from close of the quarter

27. Schedule II
27
Part E - Discretionary Requirements
A) The Board
A non-executive chairperson may
be entitled to maintain a
chairperson's office at the listed
entity's expense and also allowed
for reimbursement of expenses
incurred in performance of his
duties
C) Modified opinion(s) in auditors
report
The listed entity may move
towards a regime of financial
statements with unmodified audit
opinion
B) Shareholder Rights
A half-yearly declaration of
financial performance including
summary of the significant events
in last 6 months, may be sent to
each household of shareholders
E) Reporting of Internal auditor
The internal auditor may report
directly to the audit committee
D) Omitted w.e.f. 01/04/2020- Separate post for chairman and CEO
The listed entity may appoint separate persons to the post of chairperson and
managing director or CEO

28. Regulation 28-In-principle approval of recognized
stock exchange(s)
28
The listed entity, before issuing securities, shall obtain an ‘in-principle’ approval from
recognized SE(s) in the following manner-
The requirement of obtaining in-principle approval from recognized SE(s), shall not be
applicable for securities issued pursuant to the scheme of arrangement for which the listed
entity has already obtained No-Objection Letter from recognized SE(s) in accordance with
regulation 37.
o where the securities are listed only on recognized SE(s) having nationwide
trading terminals, from all such SE(s)
o where the securities are not listed on any recognized SE having
nationwide trading terminals, from all the SE(s) in which the securities of
the issuer are proposed to be listed
o where the securities are listed on recognized SE(s) having nationwide
trading terminals as well as on the recognized SE(s) not having nationwide
trading terminals, from all recognized SE(s) having nationwide trading
terminals

29. Regulation 29-Prior Intimations
29
 The listed entity shall give prior intimation to SE about the meeting of the BOD in
which any of the following proposals is due to be considered-
a) Financial results (quarterly, half-
yearly or annual)
c) Proposal for voluntary delisting by
the listed entity from the SE(s)
e) Declaration / recommendation of
dividend, issue of convertible
securities including convertible
debentures or of debentures carrying
a right to subscribe to equity shares or
the passing over of dividend
b) Proposal for buy back of securities
d) Fund raising by any method* and
determination of issue price
f) the proposal for declaration of
bonus securities where such
proposal is communicated to the
board of directors of the listed
entity as part of the agenda papers
*If any AGM/ EGM/ Postal ballot is
held for further fund raising indicating
type of issuance
Omitted by SEBI(LODR)Regulation, 2018 w.e.f. 01/10/2018-declaration of bonus by the listed entity which is not
on the agenda of the meeting of BOD, prior intimation is not required to be given to the SE(s)
*Public issue / rights issue / ADR / GDR
/ FCCB / QIP / debt issue / preferential
issue / any other method

30. Contd.
30
 The intimation stated above shall be given at least 2 working days in advance
excluding the date of intimation and the date of meeting of board
 The listed entity shall give intimation to the SE(s) at least 11 working days before
any of the following proposal is placed before the BOD-
a) any alteration in the form/ nature of any of its securities that are listed on
the SE or in the rights or privileges of the holders thereof
b) any alteration in the date on which, the interest on debentures/ bonds, or
the redemption amount of redeemable shares/ of debentures/ bonds, shall
be payable
But for clause (a) alone the intimation shall be given at least 5 days in
advance including the date of meeting of board

31. 31
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