Sebi Moots New Norms On Listed Entities

A revamped ASCR with explicit securities law compliance, mandatory report inclusion, and streamlined auditor appointment disclosures. Suggest eligibility criteria for statutory auditors ensuring qualifications match firm size and complexity, and require key appointment information disclosure. Recommends establishing monetary thresholds for Related Party Transaction approvals for subsidiaries

New Delhi: To strengthen corporate governance at listed firms, Sebi has proposed a revised format for annual secretarial compliance report, eligibility criteria for the appointment of auditors and inclusion of monetary thresholds for Related Party Transactions (RPTs) approvals. These proposals are aimed at ensuring that listed entities maintain high standards of compliance and transparency in their dealings.

In its consultation paper, Sebi has proposed changes to improve the format and content of the Annual Secretarial Compliance Report (ASCR), aiming for more explicit confirmation of compliance with securities law. The suggestions have been made for exemptions related to corporate governance certifications and secretarial auditor reports when ASCR is attached to the annual report. The proposals include better enforcement mechanisms and making the ASCR a mandatory part of the annual report.

On specifying eligibility criteria for the appointment of statutory auditors, the regulator has proposed incorporating provisions in the LODR Regulations similar to those in the Companies (Audit and Auditors) Rules 2014, which ensure that auditors’ qualifications and experience match the listed entity’s size and complexity. It has proposed that the audit committee consider the qualifications and experience of the signing partner(s) to ensure alignment with the listed entity’s needs. “While there is no provision in the LODR Regulations regarding the size, qualification or experience of the statutory auditor, Companies (Audit and Auditors) Rules, 2014 requires that audit committee/ board of directors should consider that the qualifications and experience of the auditor are commensurate with the size and requirements of the company,” Sebi said in its consultation paper floated on Friday.

With regards to disclosures related to auditor appointments, Sebi has proposed mandating the disclosure of key information related to the appointment or re-appointment of statutory and secretarial auditors to the audit committee, board of directors, and shareholders at the time of such appointments. It also suggested for standardising the format for these disclosures to improve transparency. Further, Sebi has recommend monetary thresholds for RPTs conducted by subsidiaries of listed entities to determine whether approval from the audit committee is required. The proposal suggested setting two approval thresholds for RPTs by the audit committee of listed entities’ subsidiaries.