Brief Overview:

A consultation paper proposing changes to the corporate governance landscape for high value debt listed entities (“HVDLEs”) has been floated.

Technical Details:

Key highlights of the propositions made are as follows:

1) Who is an HVDLE – Changes?: As per the extant guidelines an entity having outstanding value of listed non-convertible debt securities of INR 500 Crores and above would classify as an HVDLE. This threshold is proposed to be increased to INR 1000 Crores.

2) Sunset Clause: A sunset clause is proposed to be added in the regulations which clarifies that the compliance obligations would cease if the outstanding debt remains below the threshold for three consecutive financial years.

3) Relaxation to HVDLEs not being companies : HVDLEs being body corporates or subject to regulations under other statutes or specific acts (such as NABARD, SIDBI, EXIM etc.), to be given a carve out under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). Certain LODR Regulations shall apply to such entities only to the extent that it is not conflicting with the respective parent legislation.

4) Role of Audit Committee to be expanded: It is proposed that the Board of Directors of HVDLEs may constitute various committees as per the LODR Regulations or delegate the functions of these committees to the Audit Committee. Accordingly, a company may do away with the formation of nomination and remuneration committee, stakeholder relationship committee, risk management committee etc. and their functions can be performed by the audit committee.

5) Cap on Directorship: It is proposed that directorships in HVDLEs shall be computed along with the directorships in equity listed entities, to review the cap on number of directorships.

6) Cap on Committee Chairpersonship or Membership: It is proposed that memberships of committee in HVDLEs shall be computed along with the memberships of committee in equity listed entities, to review the cap on total number of committees a director can chair or be a member.

7) Related Party Transactions (“RPT”): The consultation paper provides that HVDLEs either provide an upfront declaration for amount of RPTs the HVDLE proposes to undertake during the tenor of the debt or written consent from debenture holders be obtained on a case to case basis.

The consultation paper was issued by SEBI on October 31, 2024, and the same is open to accept comments until November 15, 2024.

Key Takeaway:

SEBI has initiated this step in order to promote ease of doing business and reduce the compliance burden on entities who are HVDLEs or who have been HVDLEs.

For further details, please see:

SEBI | HVDLE Consultation Paper

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