Monday, September 21, 2015



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Posted: 21 Sep 2015 07:58 PM PDT
[The following guest post is contributed by Yogesh Chande, Partner and Malek-ul-Ashtar Shipchandler, Associate, at Shardul Amarchand Mangaldas. Views expressed herein are personal and solely that of the authors.
A related post by Somasekhar Sundaresan is available here.]
Regulations to stock exchange(s)
While the Listing Regulations appear to style the determination of materiality as more objective compared to clause 36 of the equity listing agreement, the ultimate decision (and the onus to prove, should SEBI take a contrary view) to determine whether there will be a “significant market reaction” (the determination of which itself is subjective) and classify certain information as material is that of the board of directors under regulation 30(1), 30(4)(ii) and point D of Para B of Schedule III of the Listing Regulations.

Under regulation 30(4)(ii) of the Listing Regulations, the board of directors are required to approve a policy framed by the listed entity for determination of materiality based on the criteria specified in regulation 30(4)(i) of the Listing Regulations.

The determination by the board of directors of what is a “material” disclosure is crucial in complying with the Listing Regulations. SEBI may not necessarily agree with the determination of the board directors as is clear from a recent case wherein SEBI fined New Delhi Television (“NDTV”) Rs. 20 million for not disclosing to the stock exchanges that the Income Tax Department had raised a tax demand of Rs. 4.5 billion on NDTV. Since the amount involved in the income tax demand was larger than the revenue of NDTV and significantly larger than its net profit, SEBI held that information was material in nature, which required prompt disclosure under Clause 36 of the listing agreement.

Reminiscent:  law of the jungle – lion and mouse  story – SWAMILOOK BLOG

The terms on which companies get listed on Indian stock exchanges just got codified into regulations. The Securities and Exchange Board of India (Sebi) has notified the Securities and Exchange Board of India (Listing obligations and disclosure requirements) Regulations, 2015, (Listing Regulations). They will take effect on December 1, 2015.

I have written about this and other related aspects in my column in the Business Standard today:

The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.

SPORADIC 9to share own thoughts, impromptu)

The  term 'material' is, as is expected to have been noted, being used, liberally, in respect of a company, in several contexts, for varying purposes.

One such instance of vital significance, hence calling for a focused attention , is the use of the term in the context of the so called  'disclosure requirements' under the company law, in the matter of  'final accounts' of a company,  And , in turn, that is used in the prescribed form of statutory report to be made annually  by its auditors of the final accounts to the management.

In the nature of things, the term by itself, in one's perspective, is, conceptually or otherwise, amenable to being interpreted and adopted for the intended purpose not uniformly but differently. To be precise, as field experience might have demonstrated, what is material or not in a given case or context/ situation , more often than not, happens, for the said purposes, to be construed , based on individual judgment, 'subjectively' (as opposed to 'objectively').

That is the seemingly unquestionable basic premise on which, one considers, as to what is the better view to ideally take on the subject controversy  needs to be decided, although in an academic exercise such as herein.

(May have more to share)

NOTE: The personal viewpoints on the subject  have been shared in detail in the previous Blogs, marked with Spl. Label - "MATERIALITY"; and similar related others  elsewhere as well.

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