SEBI Seeks Feedback on Easing LODR Regulations

The Securities and Exchange Board of India (SEBI), the vigilant regulator of India's capital markets, has once again demonstrated its adaptive approach by seeking feedback on proposed amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). This initiative, encapsulated in a Consultation Paper released on July 25, 2025, signals SEBI's ongoing commitment to fostering an environment of ease of doing business while simultaneously upholding the core principles of investor protection and corporate governance. For Indian lawyers specialising in corporate, securities, and compliance law, this development presents a crucial opportunity to influence regulatory evolution and proactively advise listed entities on the impending shifts in compliance paradigms. 

The Bedrock: Understanding LODR Regulations 

The LODR Regulations, 2015, serve as the comprehensive framework that governs the listing and disclosure obligations of publicly traded companies in India. They mandate transparency, accountability, and fair practices, ensuring that investors have access to timely and accurate information to make informed decisions. Key areas covered by the LODR Regulations include: 

• Corporate Governance: Requirements related to board composition, independent directors, audit committees, stakeholder relationship committees, and codes of conduct. 

• Materiality and Disclosures: Defining what constitutes "material" events or information that listed entities must disclose to stock exchanges within specific timelines (e.g., financial results, acquisitions, litigations, management changes). 

• Related Party Transactions (RPTs): Norms for identifying, approving, and disclosing transactions with related parties to prevent conflicts of interest and protect minority shareholders. 

• Shareholding Patterns: Periodic disclosures of shareholding patterns to maintain transparency about ownership structures. 

• Compliance Officer Role: Mandating the appointment and defining the responsibilities of a compliance officer. 

• Secretarial Audit and Compliance: Requirements for secretarial audits and annual compliance reports. 

Over the years, SEBI has consistently refined these regulations, aiming to align them with global best practices and respond to market dynamics. However, the rapidly evolving business landscape often necessitates a re-evaluation of existing norms to reduce unnecessary burdens without compromising regulatory objectives. 

The Rationale Behind Easing: Ease of Doing Business and Rationalisation 

SEBI's current initiative to ease LODR Regulations is driven by a multi-faceted approach, primarily focused on 'Ease of Doing Business' for listed entities. This aligns with the broader governmental thrust towards regulatory rationalisation and promoting a conducive environment for capital formation.

The key drivers for this review include: 

• Reducing Compliance Burden: Many existing regulations, while well-intentioned, may impose disproportionate compliance costs and administrative burdens, especially on smaller or mid-cap listed entities. SEBI aims to identify and streamline such requirements. 

• Streamlining Processes: Simplifying reporting formats, integrating multiple filings, and leveraging technology (e.g., system-driven disclosures) are key objectives to reduce manual effort and improve efficiency. 

• Promoting Growth: By easing certain compliance requirements, SEBI seeks to free up corporate resources, allowing companies to focus more on core business activities, innovation, and growth, thereby stimulating capital market activity. 

• Harmonisation with Other Regulations: There is an ongoing effort to harmonise provisions across various SEBI regulations (e.g., LODR and ICDR – Issue of Capital and Disclosure Requirements) to ensure consistency and avoid overlaps or conflicts. 

• Feedback from Industry: Market participants, industry associations, and listed companies have consistently provided feedback regarding practical challenges in complying with certain LODR provisions, which SEBI is now addressing. 

Key Proposed Areas for Easing/Modification 

The Consultation Paper of July 25, 2025, builds upon previous discussions and recommendations from expert committees (like the one chaired by Shri S.K. Mohanty). While the full details of all proposed changes will require a thorough review of the consultation paper itself, insights from prior discussions and the brief overview suggest the following key areas of potential relaxation or modification: 

1. Related Party Transactions (RPTs): 

2. Exemptions for Immaterial Transactions: Proposals suggest exempting certain immaterial transactions (e.g., acceptance of deposits by banks, routine retail purchases by directors/employees at arm's length terms) from the definition of RPTs requiring prior audit committee approval. This aims to reduce the compliance burden for routine, low-risk transactions. 

3. Retrospective Ratification: Allowing retrospective ratification of immaterial RPTs under specific conditions, provided they do not breach materiality thresholds. This offers flexibility in situations where prior approval was not feasible, subject to strict governance norms. 

4. Omnibus Approvals for Subsidiaries: Extending the audit committee's right to grant omnibus approvals for RPTs to transactions of the listed entity's subsidiaries as well, streamlining the approval process for group companies. 

5. Timelines for Disclosures: 

6. Outcome of Board Meetings: An increased timeline (e.g., three hours instead of 30 minutes) for disclosing the outcome of board meetings that conclude after trading hours. This provides practical relief given logistical challenges. 

7. Litigations/Disputes: Increased timeline for disclosure of material litigations or disputes where claims are made against the listed entity (e.g., 72 hours instead of 24 hours), acknowledging the time needed for verification and internal approvals. 

8. System-Driven Disclosures: 

9. Automation of Filings: Moving towards a fully automated process for disclosures of shareholding patterns and new or revised credit ratings. This is a significant step towards leveraging technology to reduce manual intervention and enhance data accuracy. 

10. Appointment/Re-Appointment of Directors: 

11. Exclusion of Regulatory Approval Time: Proposed exclusion of time taken for obtaining regulatory, statutory, or government approvals for the appointment or re-appointment of a director when determining the three-month timeline for obtaining shareholder approval under Regulation 17(1C). This addresses practical delays beyond the company's control. 

12. Reclassification of Promoters: 

13. Streamlining Framework: Proposed changes to the framework for reclassification of promoter/promoter group entities as public shareholders under Regulation 31A. This aims to simplify the process for promoters seeking to reclassify their status, often a cumbersome process. 

14. Rationalisation of Redundant Provisions: 

15. Dematerialisation Mandate: Continuing efforts to eliminate provisions related to physical share transfers (e.g., Regulations 40(4) and 40(5)) that have become redundant following the mandatory dematerialisation of securities. 

16. Proof of Delivery: Potentially removing the requirement for listed entities to maintain proof of delivery for communications related to signature differences, shifting reliance to proof of dispatch, is more practical. 

17. Harmonisation with ICDR Regulations: 

18. The consultation paper also proposes harmonising certain provisions between LODR and ICDR Regulations, aiming for a consistent regulatory approach across the lifecycle of a public company. 

Implications for Listed Entities 

The proposed easing of LODR Regulations will have direct and substantial implications for listed companies in India: 

• Reduced Compliance Costs: Simplification of RPTs, extended disclosure timelines, and automated filings are expected to reduce the time, effort, and resources spent on compliance, leading to cost savings. 

• Operational Efficiency: Streamlined processes will allow compliance teams, company secretaries, and legal departments to operate more efficiently, focusing on higher-value tasks rather than routine administrative burdens. 

• Enhanced Focus on Materiality: While some relaxations are proposed, SEBI's overarching principle of materiality remains. Companies will need to continue robust internal processes to identify and disclose truly material events. 

• Technological Upgradation: The shift towards system-driven disclosures will necessitate investment in technology and robust internal systems to ensure seamless data flow and accurate reporting. 

• Internal Policy Reviews: Companies will need to review and potentially revise their internal policies, particularly those related to materiality, RPTs, and disclosure mechanisms, to align with the amended regulations. 

Implications for Indian Lawyers and Professionals 

For corporate lawyers, company secretaries, and compliance officers, SEBI's move creates both challenges and opportunities: 

1. Advisory and Interpretation: Lawyers will be at the forefront of interpreting the new regulations and advising clients on their implications. This includes helping companies navigate the relaxed norms while ensuring adherence to the underlying spirit of governance. 

2. Policy Drafting and Review: Assisting companies in drafting or revising their internal policies, such as the Policy on Materiality of Events, Policy on Related Party Transactions, and Codes of Conduct, to reflect the amended LODR framework. 

3. Compliance Audit and Health Checks: Conducting compliance audits to ensure that systems and processes are geared towards the new disclosure requirements, particularly those moving towards automation. 

4. Training and Capacity Building: Providing training to board members, KMPs, and compliance teams of listed entities on the updated regulatory landscape and their enhanced responsibilities. 

5. Representations and Feedback: Critically analysing the Consultation Paper and submitting constructive feedback to SEBI. This is a vital role for legal professionals to contribute to the evolution of a balanced regulatory framework. Lawyers, through their practical experience, can provide nuanced perspectives on the feasibility and impact of the proposed changes. 

6. Strategic Counselling: Beyond mere compliance, lawyers will have a role in advising companies on how these changes can be leveraged strategically to improve corporate governance practices and investor relations. For instance, enhanced transparency through automated disclosures might lead to better market perception. 

Conclusion 

SEBI's invitation for feedback on easing LODR Regulations marks a progressive step towards a more pragmatic and efficient regulatory environment in India. While the proposed changes aim to reduce compliance burdens and enhance ease of doing business, they simultaneously reinforce SEBI's commitment to robust corporate governance and investor protection. For Indian lawyers, this is a critical juncture to engage with regulatory reform, offering their expertise to shape regulations that are both effective and practical. The eventual amendments will undoubtedly necessitate a thorough overhaul of internal compliance frameworks for listed entities, underscoring the indispensable role of legal and compliance professionals in ensuring seamless transition and sustained adherence to India's dynamic capital market regulations.