DISCLOSURE OF MATERIAL EVENTS AND INFORMATION TO STOCK EXCHANGES PROMPTLY BY LISTED COMPANIES, ENSURING TRANSPARENCY AND PROTECTING INVESTOR INTERESTS

 DISCLOSURE OF MATERIAL EVENTS AND INFORMATION TO STOCK EXCHANGES PROMPTLY BY LISTED COMPANIES, ENSURING TRANSPARENCY AND PROTECTING INVESTOR INTERESTS

Listed companies in India are mandated by the Securities and Exchange Board of India (SEBI) to disclose material events and information to stock exchanges promptly, ensuring transparency and protecting investor interests.

These requirements are outlined in SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations, particularly under Regulation 30.

TIMELINES FOR DISCLOSURE

As of July 15, 2023, SEBI has specified the following timelines for disclosure:​

·       30 minutes: From the closure of a board meeting where a decision on a material event is taken.

·       12 hours: From the occurrence of a material event originating within the company (e.g., financial results, acquisitions, changes in shareholding).

·       24 hours: From the occurrence of a material event originating outside the company (e.g., media reports, regulatory actions) .​

FOR CERTAIN EVENTS, SEBI MANDATES EVEN STRICTER TIMELINES.

For instance, family settlement agreements affecting management control must be disclosed within 12 hours if the company is a party, and within 24 hours if it is not.

MATERIAL EVENTS REQUIRING DISCLOSURE

SEBI's Schedule III (Part A) lists events that require disclosure, including:​

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·       Changes in the general character or nature of business. (Merger & Acquisition)

·       Disruption of operations due to natural calamities.

·       Commencement of commercial production or operations.

·       Developments related to pricing or realization due to changes in the regulatory framework.

·       Litigation or disputes with a material impact or regulatory actions

·       Revision in credit ratings.​ 

·       Change in Key Managerial Personnel 

·       Financial restatements or significant losses

·       Bankruptcy Filings

Additionally, companies must disclose events such as resignation of directors, initiation of forensic audits, and proceedings of general meetings within specified timelines. 

Best Practices for Listed Companies

TO COMPLY WITH SEBI'S DISCLOSURE REQUIREMENTS:

·       Establish internal protocols to identify material events promptly.

·       Ensure board decisions are communicated to stock exchanges within the stipulated time.

·       Regularly monitor media reports and respond to market rumors within 24 hours if they pertain to material events .

·       Maintain an updated record of all disclosures on the company's website for a minimum of five years .​

·       Strong internal governance and compliance teams.

·       Periodic reviews of disclosure obligations.

·       Transparent communication policies.

·       Whistle blower protection for internal reporting.

ENFORCEMENT AND PENALTIES

SEBI WARNING TO OLA  ELECTRIC

SEBI enforces these disclosure norms strictly. For example, in January 2025, SEBI warned Ola Electric for sharing information about its store expansion on social media before disclosing it to investors through stock exchanges, violating the principle of equal and timely access to information.

VEDANTA LTD – ₹30 LAKH FINE

In June 2023, SEBI imposed a ₹30 lakh penalty on Vedanta Ltd for breaching disclosure norms. The company published a press release on its website suggesting a partnership with Foxconn to manufacture semiconductors in India. However, the deal was with its holding company, Volcan Investments Ltd, not Vedanta Ltd itself. SEBI found that the press release was misleading and remained on the company's website for an extended period, despite being unrelated to the listed entity.

SHAPOORJI PALLONJI AND COMPANY – ₹7 LAKH FINE

In September 2023, SEBI fined Shapoorji Pallonji and Company ₹7 lakh for violating disclosure rules. The company converted non-convertible debentures (NCDs) into a term loan in March 2021 without prior approval from the stock exchange. Additionally, it failed to submit required documents, such as the auditor's certificate on fund utilization and reports to the debenture trustee, as mandated by the LODR regulations.

BURNPUR CEMENT LTD – ₹6 LAKH FINE

In a case involving Burnpur Cement Ltd, SEBI imposed a total penalty of ₹6 lakh for non-disclosure of contingent liabilities. The company failed to disclose an undisclosed income of ₹63.11 crore and a tax liability of ₹15.53 crore in its financial statements, as required by Ind AS-37 and Regulation 48 of the LODR regulations. SEBI found that the company's financial statements did not present a true and fair view of its affairs. ​

NEW DELHI TELEVISION LTD (NDTV) – ₹2 CRORE FINE

In 2018, SEBI fined NDTV ₹2 crore for failing to disclose a ₹450 crore tax demand raised by the Income Tax Department in February 2014. The company did not inform the stock exchanges immediately, and the disclosure was made only after being prompted by the exchanges. SEBI noted that timely and accurate disclosures are essential for investor protection and the proper functioning of securities markets.

The above cases highlight the importance of adhering to disclosure norms to maintain transparency and protect investor interests in the Indian securities market.

R V SECKAR FCS,LLB 79047 19295