Streamlining Compliances: SEBI Amends and Clarifies Key LODR Provisions

Streamlining Compliances: SEBI Amends and Clarifies Key LODR Provisions

The Securities and Exchange Board of India (SEBI), through recent amendments and circulars, has introduced several changes to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). These measures are aimed at enhancing the dematerialization of securities, removing procedural redundancies, and providing important regulatory clarity to listed entities.

The key updates include, inter alia, the following:

1. Mandatory Dematerialization for Certain Corporate Actions

In its 210th board meeting on June 18, 2025 (Board Meeting, press release for which can be viewed by clicking on this link), SEBI approved an amendment to the LODR Regulations to mandate the issuance of securities only in dematerialized form for corporate actions such as the consolidation or split of the face value of securities, and schemes of arrangement. This measure builds upon SEBI’s consistent efforts to encourage 100% dematerialization of securities in the listed space.

While rights issues, bonus issues, and fresh issues by listed companies are already required to be in dematerialized form, this amendment closes a gap by preventing the creation of new physical securities during corporate restructuring activities. The move of dematerialization is aimed at reducing the risks of fraud and forgery, while enabling faster, more efficient, and transparent corporate actions.

2. Removal of ‘Proof of Delivery’ Requirement for Share Transfers

The SEBI, in the Board Meeting, also approved the deletion of the requirement for listed entities to maintain ‘proof of delivery’ for intimations sent during the physical share transfer process. Previously, Paragraph B(1) and B(2) of Schedule VII of the LODR Regulations required a listed entity to maintain proof of delivery when intimating a transferor about minor signature differences or both the transferor and transferee about major signature differences.

SEBI noted that this requirement had become redundant, as listed entities already maintain proof of dispatch through services like speed post or courier, which themselves maintain delivery records for a sufficient period. This change is expected to ease the procedural burden on listed entities and their share transfer agents.

• Clarification on the Position of the Compliance Officer

Vide a circular dated April 1, 2025 (Circular, which can be viewed by clicking on this link), SEBI provided a much-needed clarification on the interpretation of the proviso to Regulation 6(1) of the LODR Regulations. The proviso to Regulation 6(1) of the LODR Regulations, inter alia, requires the Compliance Officer (CO) of a listed entity to be a whole-time employee, designated as a Key Managerial Personnel (KMP), and positioned “not more than one level below the board of directors”. In response to queries regarding the term ‘level’, SEBI has clarified the following:

• The phrase ‘one-level below the board of directors’ refers to the CO’s position in the organizational hierarchy and means one level below the Managing Director (MD) or any Whole-time Director(s) (WTDs) who are part of the board.
• In case a listed entity does not have an MD or WTD, the CO shall not be more than one level below the chief executive officer, manager, or any other person heading the day-to-day affairs of the entity.

This clarification aligns the regulation with the definition of KMP under the Companies Act, 2013, and provides a clear hierarchical structure for this key compliance role. Further, this position was further reinforced in subsequent informal guidance letter issued on April 3, 2025 (which can be viewed by clicking on this link), to DCB Bank Limited and Pakka Limited, where SEBI reiterated that a direct reporting line to the MD is insufficient if the CO’s position in the organizational chart is several rungs lower.

3. Amendments to Framework for Securitised Debt Instruments

Through the LODR (Second Amendment) Regulations, 2025, notified on April 29, 2025 (which can be viewed by clicking on this link), SEBI has introduced targeted changes for listed Securitised Debt Instruments (SDIs):

• Simplified SCORES Registration: To ease the compliance burden, a new proviso has been inserted in Regulation 13(2). For SDIs, the registration on SEBI Complaints Redress System (SCORES) platform can now be obtained by the trustee at a consolidated level for all Special Purpose Distinct Entities (SPDEs) they manage. This provides significant operational relief by removing the need to register each SPDE individually.
• Enhanced Annual Disclosures: To enhance transparency, new clauses have been added to Schedule III, Part D. The SPDE or its trustee must now make annual disclosures to the stock exchange regarding outstanding litigations concerning the originator or servicer that could prejudice investors, and any defaults by the servicer in fulfilling their obligations.

These changes, taken together, reflect SEBI’s ongoing efforts to streamline procedural requirements, enhance the integrity of the securities market through dematerialization, remove ambiguities for listed entities, and create a more robust framework for specialized instruments like SDIs.