MERE DISCLOSURE OF AN AGREEMENT OR ARRANGEMENTS TO STOCK EXCHANGES DOES NOT BIND A LISTED COMPANY SAYS SEBI
SEBI’S STATEMENT IS A BIG RELIEF TO LISTED COMPANIES
KIRLOSKAR GROUP ENTITIES VS SEBI
SEBI’s Submission In a case involving Kirloskar group entities, SEBI clarified before the Bombay High Court that mere disclosure of an agreement or arrangements to stock exchanges does NOT bind a company.
REGULATION 30 OF SEBI LODR REGULATIONS, 2015
Under Regulation 30 of SEBI LODR Regulations, 2015 (and other disclosure requirements), companies sometimes have to disclose agreements or arrangements that are never executed or later don’t materialize.
CONTEXT
The matter arose from disputes between Kirloskar group entities concerning family settlements and their impact on listed companies.
The issue was whether the disclosure of such agreements to stock exchanges (as per SEBI’s listing obligations) makes the company automatically bound by them.
SEBI CLARIFICATION BEFORE MUMBAI HIGH COURT
In a case involving Kirloskar group entities, SEBI clarified before the Bombay High Court that:
Mere disclosure of an agreement does NOT bind a company. Disclosure does NOT create liabilities or imply management/control impact.
However, the act of disclosing an agreement does not itself mean the company has accepted or is legally bound to implement the terms.
Binding effect can only arise if the company’s Board of Directors approves and incorporates it into its decision-making.
OUTCOMES
The MUMBAI HC permitted withdrawal of petitions, and the matter will proceed before SAT on merits — but the regulator’s stand itself is a major relief to listed entities.
HOW COMPLIANCE OFFICERS HAVE TO LOOK INTO
Always disclose material agreements per regulations — but know that disclosure alone won’t create legal liabilities unless you’re actually a party to or ratify the agreement.
R V SECKAR FCS,LLB, 79047 19295
