Advisory on disclosure of material impact of Covid–19 pandemic on listed entities under SEBI Listing Obligations and Disclosure Requirements) Regulations, 2015(‘LODR Regulations/‘LODR’)
The Covid–19 pandemic and the consequent lockdown restrictions imposed by
national governments has impacted
businesses not only in India but all
over the world. In view of the same, SEBI has granted several relaxations to
the listed entities in terms of timelines for filing of various reports/disclosures
under LODR Regulations
While such a lockdown and disruption is unforeseen and beyond
the control of the entities, such events
can lead to
distortions in the market due
to the gaps in information available about the operations of a listed entity. Hence, it is important for a listed entity to
ensure that all available information about the impact of these events on the
company and its operations is communicated in a timely and cogent manner to its
investors and stakeholders.
SEBI vide
Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/84 dated May 20, 2020 states:
Various provisions under the LODR
Regulations already require listed
entities to disclose material events which have a bearing on its performance / operations.
These provisions are reiterated below:
a. Regulation 30(3) of the LODR specifies that
a listed entity
shall make disclosures
of events specified in Para
B of Part A of Schedule III of
LODR, based on application of the guidelines
for materiality.
Clause 6 of Para
B of Part A of
Schedule III of
LODR specifies events such as “Disruption of operations
of any one or more units or division of the listed entity
due to natural calamity (earthquake, flood,
fire etc.), force majeure or events such as strikes, lockouts etc.” that shall be disclosed upon application of the guidelines for materiality referred in Regulation 30(4).
b. SEBI vide Circular No. CIR/CFD/CMD/4/2015 dated September 9, 2015,hasprovided further guidance to
the listed entities
on such disclosures.
Annexure I to the circular, specifically provides the details
to be disclosed
in cases of
disruptions of operations due to natural calamity, force majeure
and other events.
Similarly, for non-convertibles, Regulation 51(1)of the LODR
requires prompt dissemination to the
stock exchange(s) of all information having
bearing on the performance/operation of the
listed entity, price
sensitive information or any action that
shall affect payment
of interest or
dividend
As per Clause
16 of Part
B of Schedule III
read with Regulation
51(2) of the
LODR, a listed
entity shall promptly inform to
the stock exchange(s)
of any other
information having bearing
on the operation/performance of the listed entity.
4. It is observed
that many listed
entities have made
disclosures under LODR Regulations, primarily intimating shutdown of operations owing to the
pandemic and resultant lockdowns.
Some listed entities
have provided information
relating to actions taken towards
sanitation, safety etc.; the number of entities that have disclosed the
financial impact, however, is small.
5. Listed entities around
the world have
been making disclosures
regarding the impact of the
pandemic, including that on
financial condition and
results of operations,
future operations, capital and
financial resources, liquidity,
assets, internal financial
control over financial reporting and
disclosure controls and
procedures, demand for
products/services etc.
Regulators have encouraged
timely reporting as well as
complete and accurate
disclosure of the impact, as far as possible.
6. Listed entities should endeavour to ensure that all investors have
access to timely, adequate and updated
information. Towards this end,
entities are encouraged to evaluate
the impact of the CoVID-19
pandemic on their business, performance
and financials, both
qualitatively and quantitatively, to
the extent possible
and disseminate the
same.
An illustrative list of information
that listed entities
may consider disclosing, subject
to the application
of materiality is given below:
•impact of the CoVID-19 pandemic on the business;
•Ability to maintain
operations including the factories/units/office spaces functioning and closed down;
•Schedule, if any, for restarting
the operations;
•Steps taken to ensure smooth
functioning of operations;
•Estimation of the future impact
of CoVID-19 on its operations;
•Details of impact of CoVID-19 on listed entity’s-
o capital
and financial resources;
o profitability;
o liquidity
position;
o ability
to service debt and other financing arrangements;
o assets;
o internal
financial reporting and control;
o supply
chain;
o demand
for its products/services;
•Existing contracts/agreements where non-fulfilment of
the obligations by any party will have significant impact on the
listed entity’s business;
•Other relevant material
updates about the listed entity’s business.
The above list is only illustrative
and not exhaustive.
Further, to have continuous
information about the impact of
CoVID-19 on operations, listed entities
may provide regular updates, as and when there are material developments
7. Additionally, while submitting
financial statements under
Regulation 33 of the LODR,
listed entities may specify/include
the impact of
the CoVID-19 pandemic
on their financial statements, to the extent possible.
8. When listed entities
disclose material information
related to the
impact of CoVID-19,
they should not resort to
selective disclosures, keeping
in mind the
principles governing disclosures and
obligations of a
listed entity as
prescribed in LODRRegulations, more specifically, having regard
to the requirements of Regulation
4(2)(e) of the LODR on disclosure and transparency.
Depending on circumstances peculiar
to a listed entity and on account
of passage of
time, the listed
entity shall revisit,
refresh, or update its previous disclosures.
9. This Circular shall come into force with immediate effect. The Stock Exchanges are advised to
bring the provisions of this
circular to the notice of all listed
entities and also disseminate the same on
their websites.
10. The Circular is
issued in exercise
of the powers
conferred under Section
11(1) of the ecurities
and Exchange Board
of India Act,
1992 read with
Regulation 101 of the LODR Regulations.
11. This Circular is available at www.sebi.gov.inunder the link “Legal→Circulars”
DISCLAIMER: THE
ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING
AT THE TIME OF THE PREPARATION. IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT
AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING
INITIATIVE.
THE AUTHOR
– CS DEEPAK SETH (ASSOCIATE PARTNER HELPINGHANDS PROFESSIONALS LLP) AND
CAN BE REACHED AT CONTACTHHPRO@GMAIL.COM OR 9910248911.
 Regulations, 2015(‘LODR Regulations/‘LODR’)){kind=link}
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