High-value debt listed entities: SEBI proposes doubling threshold to ₹1,000 crore

Further, SEBI has proposed tweaking framework for ESG Rating Providers, particularly for those using a subscriber-pays model

Markets regulator Securities and Exchange Board of India (SEBI) has proposed raising the threshold for identifying High Value Debt Listed Entities (HVDLEs) to ₹1,000 crore from ₹500 crore at present to reduce compliance burdens.

Currently, an entity having outstanding value of listed non-convertible debt securities of ₹500 crore and above are referred to as 'High Value Debt Listed Entities'. In its consultation paper, SEBI has proposed introducing a sunset clause that would end governance obligations if an HVDLE's outstanding debt falls below the threshold for a specified period, providing more flexibility.

It has suggested a dedicated chapter within LODR (Listing Obligations and Disclosure Requirements) Regulations focussed solely on corporate governance norms for HVDLEs distinguishing them from equity-listed entities.

Also, it has been proposed filing of governance reports in XBRL format, voluntary Business Responsibility and Sustainability Reporting (BRSR), and harmonise HVDLE reporting with equity-listed entities.

Further, SEBI has proposed relaxation for HVDLEs which are not companies as per the Companies Act, 2013, relaxation with regard to the constitution of the Nomination and Remuneration Committee (NRC), Risk Management Committee (RMC) and Stakeholders Relationship Committee (SRC).

To avoid the constitution of multiple committees by HVDLEs, SEBI has proposed that the board of directors of an HVDLE may either choose to constitute NRC/RMC/SRC or may ensure that the functions of these committees are delegated and discharged by the audit committee.

"It is proposed that the threshold of listed outstanding non-convertible securities for identification of a debt listed entity as HVDLE may be increased from ₹500 crore to ₹1,000 crore," SEBI said in its consultation paper on Thursday (October 31, 2024.)

Also, SEBI has proposed setting a cap on the total number of committees a director can serve on, whether in equity or debt-listed entities. This would help in preventing over-commitment and ensure they can fulfil their responsibilities effectively.

It has proposed that committee limits for directors should include HVDLEs, along with equity-listed companies, to protect investors and ensure directors have sufficient time for each role.

The proposals, part of corporate governance norms, for HVDLEs are aimed at promoting ease of doing business and the interest of investors in such HVDLEs the SEBI has sought public comments till November 15 on the proposals.

ESG rating providers: SEBI mulls over measures to facilitate ease of doing business

In another move, SEBI has proposed tweaking framework for ESG Rating Providers (ERPs), particularly for those using a subscriber-pays model, including an exemption from the requirement to disclose ESG ratings to stock exchanges.

Additionally, the regulator has suggested that ERPs using a subscriber-pays model should share ESG (Environmental, Social, and Governance) rating reports with both subscribers and the rated issuer simultaneously. This policy should be publicly disclosed.

“ERPs should ensure that rated entities, their group companies, or associates cannot subscribe to their own ESG ratings,” SEBI said in its consultation paper.

These proposals are aimed at enhancing the clarity, transparency, and regulatory alignment of ESG ratings within SEBI’s framework.

The SEBI had introduced regulations for ERPs in July 2023, but ERPs have sought clarifications on certain provisions, particularly for those using a subscriber-pays model, and accordingly the regulator issued a consultation paper on Thursday (October 31, 2024.).

In the paper, the regulator proposed that ERPs should allow issuers to respond to the ESG rating report within a set timeline. Any comments from the issuer should be added to the report as an addendum.

If the ERP disagrees with the issuer’s perspective, it may respond through remarks or an addendum. Further, ERPs on a subscriber-pays model should be exempted from disclosing ESG ratings to stock exchanges, provided they confirm they have no non-public information affecting the rating.

ERPs can rate unlisted issuers or other products under specific guidelines from relevant regulators. SEBI-registered ERPs should clarify the regulatory body overseeing any non-SEBI regulated ratings. The regulator has sought public comments on the proposals till November 15.

Published - November 01, 2024 11:35 am IST