Governance and spot gold trading gets a boost from Sebi

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The markets regulator on Tuesday tightened standards for related party transactions to strengthen corporate governance standards, approved a framework for spot trading in gold, made it easier for startup founders to retain control and relaxed merger and acquisition (M&A) standards for listed companies.

The Securities and Exchange Board of India (Sebi) has stated that the persons or entities forming part of the promoter group and any entity holding 20% ​​or more of a listed entity, either directly or as beneficial owners, at any time at during the previous financial year or 10% or more from April 1, 2023, will be counted as related parties. Sebi said the definition of related party transactions (RPT) would include transactions between listed entities or one of their units with a related party.

Sebi required that prior shareholder approval be required for material TOR, or transactions that have a threshold value of either. ??1,000 crore or 10% of the company’s consolidated annual sales, whichever is less. “Simply put, any transaction benefiting (even indirectly) a related party would require the approval of the audit committee and shareholders of the listed company,” said Makarand Joshi, founding partner of MMJC and Associates, a compliance firm. business. “When the transaction is with a third party but can benefit the related party, it would be difficult to identify and can sometimes lead to unnecessary allegations of breach on companies.”

Vikram Raghani, a partner at law firm J Sagar and Associates, said the amended standards would help improve corporate governance standards. “From a governance perspective, this only strengthens the rules, which should work well for all stakeholders involved,” he said.

The regulator has also approved the framework for spot gold trading in India. The framework allows so-called vault managers to accept gold deposits and issue securities called electronic gold receipts (EGRs). EGRs can be traded on an exchange.

“EGRs will have similar trading, clearing and settlement characteristics as other securities. Any recognized exchange, existing or new, can initiate EGR trading in a separate segment, ”the regulator said.

Sebi also approved the modification of the Sebi (mutual funds) regulation to allow the introduction of exchange traded funds on silver, in accordance with the existing regulatory mechanism for ETFs on gold.

He also endorsed the introduction of the Social Stock Exchange (SSE) to help social enterprises raise funds. as their main goals. Social enterprises will be required to engage in a social activity on the list of 15 broad eligible social activities approved by the board of directors. Qualifying NPOs can raise funds through equity, zero coupon and zero coupon bonds, mutual funds, social impact funds and development impact bonds, ”said the board of directors.

Sebi also approved changes to the write-off rules to allow acquirers to opt for simultaneous write-off when acquiring control of a listed company, in which an open offer is triggered.

“If the acquirer wishes to delist the target company, the acquirer must offer a higher write-off price with an appropriate premium over the open offer price. If the response to the public offer leads to the crossing of the 90% delisting threshold, all the shareholders who tender their shares will receive the same delisting price, and if the response to the offer leads to non-compliance with the delisting threshold 90%, all shareholders who tender their shares will receive the same purchase price, ”said the board of directors.

The move is likely to boost M&A activity at listed companies, experts said.

“The current requirement to first sell up to 75% and then attempt a write-off process under the reverse book process has been removed. First-time buyers can attempt a write-off by offering what they believe to be a commercially reasonable price without having to worry about an exorbitant price generated by the reverse book construction method, ”said Raghani.


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