EXERCISE 1

1. Both the sister concerns of Growing Invest Management (hereinafter

“GIM”) are wholly owned subsidies of GIM. Regulation 37 of SEBI

(Listing Obligations and Disclosure Requirements) Regulations 2015

(hereinafter “LODR Regulations”) deal with compliances that are to be

taken by listed entities going through Mergers & Acquisitions (“M&A”)

Transactions. Regulation 37(1) of LODR Regulations mandate that “the

listed entity desirous of undertaking a scheme of arrangement or

involved in a scheme of arrangement, shall file the draft scheme of

arrangement, proposed to be filed before any court or tribunal under

Companies Act, 1956 or under Companies Act, 2013, whichever

applicable, along with a non-refundable fee as specified in Schedule XI,

with the stock exchange(s) for obtaining the No-objection letter, before

filing such scheme with any Court or Tribunal.”

Regulation 37(2) of LODR Regulations further provide that listed entities

shall not file any scheme of arrangement with any Court or Tribunal

unless it has obtained the No-objection letter from the stock exchange(s).

However, Regulation 37(6) provides exceptions from the above-

mentioned obligations of the LODR Regulations. Regulation 37(6) of

LODR Regulations dictates that “nothing contained in regulation 37 shall

apply to draft schemes which solely provide for merger of a wholly owned

subsidiary with its holding company. Provided that such draft schemes

shall be filed with the stock exchanges for the purpose of disclosures.”
Since Track Your Investments Private Limited (hereinafter “TYIPL”) and

Funding Venture Private Limited (hereinafter “FVPL”) are wholly owned

subsidiaries of GIM, thus, GIM would only need to file the draft scheme

of merger with its subsidiaries to BSE and NSE for disclosure purpose as

mandated under Regulation 37(6) of LODR Regulations. GIM does not

need to obtain a No-objection letter from the stock exchanges in this

present scenario.

2. Regulation 15 of SEBI (LODR) Regulations 2015 (hereinafter “LODR

Regulations”) deals with the applicability of LODR Regulations on listed

entities. Regulation 15(2)(a) of the LODR Regulations specify that “the

compliance with corporate governance provisions as specified in

regulations 17, 17A, 18, 19, 20, 21, 22, 23, 24, 24A, 25, 26, 27 and

clauses (b) to (i) and (t) of sub-regulation (2) of regulation 46 and para C,

D and E of Schedule V shall not apply, in respect of - a listed entity

having paid up equity share capital not exceeding rupees ten crore and

net worth not exceeding rupees twenty-five crore, as on the last day of

previous financial year:

Provided that where the provisions of regulations 17 to 27, clauses (b) to

(i) and (t) of sub-regulation (2) of regulation 46 and para C, D, and E of

Schedule V become applicable to a listed entity at a later date, it shall

ensure compliance with same within six months from such date:

Provided further that once the above regulations become applicable to a

listed entity, they shall continue to remain applicable till such time the
equity share capital or the net-worth of such entity reduces and remains

below the specified threshold for a period of three consecutive financial

years.”

The current paid-up capital of GIM is Rs. 9 Crore and its net worth is Rs.

20 Crore. At this stage GIM does not need to comply with regulations 17

to 27, clauses (b) to (i) and (t) of sub-regulation (2) of regulation 46 and

para C, D and E of Schedule V, as it is provided under regulation 15(2)(a)

of LODR Regulations. However, GIM will have to comply with all of the

afore-mentioned regulations after the merger of TYIPL and FVPL into it,

as GIM’s paid-up equity share capital will exceed rupees ten crore to

rupees twenty-five crore and its net worth would exceed rupees twenty-

five crore to rupees thirty crore, after the merger.

The compliances that GIM would have to go through under LODR

Regulations after the merger can be illustrated by following table:

Regulations Compliances

Regulation 17: i) “Board of directors shall have an optimum

Board of combination of executive and non-executive

Directors directors with at least one woman director and not

less than fifty per cent of the board of directors

shall comprise of non-executive directors.”

ii) “Where the chairperson of the board of directors

is a non-executive director, at least one-third of the

board of directors shall comprise of independent

directors and where the listed entity does not have

a regular non-executive chairperson, at least half of

the board of directors shall comprise of

independent directors. Provided that where the

regular non-executive chairperson is a promoter of

the listed entity or is related to any promoter or

person occupying management positions at the

level of board of director or at one level below the

board of directors, at least half of the board of

directors of the listed entity shall consist of

independent directors.”

iii) “Where the listed company has outstanding SR

equity shares, at least half of the board of directors

shall comprise of independent directors.”

iv) “No listed entity shall appoint a person or

continue the directorship of any person as a non-

executive director who has attained the age of

seventy-five years unless a special resolution is

passed to that effect, in which case the explanatory

statement annexed to the notice for such motion

shall indicate the justification for appointing such a

person.”

v) “Listed entity shall ensure that approval of

shareholders for appointment of a person on Board

of Directors or as a manager is taken at the next

general meeting or within a time period of three

months from the date of appointment, whichever is

earlier.”

vi) “The board of directors shall meet at least four

times a year, with maximum time gap of one

hundred and twenty days between any two

meetings.”

vii) “Board of directors of the listed entity shall

satisfy itself that plans are in place for orderly

succession for appointment to the board of

directors and senior management.”

viii) “Chief executive officer and chief financial

officer shall provide the compliance certificate to

the board of directors as provided in Part B of

Schedule II of LODR Regulation.

“The following compliance certificate shall be

furnished by chief executive officer and chief

financial officer:

A. They have reviewed financial statements and the

cash flow statement for the year

and that to the best of their knowledge and belief:

(1) these statements do not contain any materially

untrue statement or omit any material fact or

contain statements that might be misleading;

(2) these statements together present a true and

fair view of the listed entity’s affairs and are in

compliance with existing accounting standards,

applicable laws and regulations.

B. There are, to the best of their knowledge and

belief, no transactions entered into by the listed

entity during the year which are fraudulent, illegal

or violative of the listed entity’s code of conduct.

C. They accept responsibility for establishing and

maintaining internal controls for financial reporting

and that they have evaluated the effectiveness of

internal control systems of the listed entity

pertaining to financial reporting and they have

disclosed to the auditors and the audit committee,

deficiencies in the design or operation of such

internal controls, if any, of which they are aware

and the steps they have taken or propose to take to

rectify these deficiencies.

D. They have indicated to the auditors and the Audit

committee

(1) significant changes in internal control over

financial reporting during the year;

(2) significant changes in accounting policies during

the year and that the same have been disclosed in

the notes to the financial statements; and

(3) instances of significant fraud of which they have

become aware and the involvement therein, if any,

of the management or an employee having a

significant role in the listed entity’s internal control

system over financial reporting.”

ix) “Board of directors shall periodically review

compliance reports pertaining to all laws applicable

to the listed entity, prepared by the listed entity as

well as steps taken by the listed entity to rectify

instances of non-compliances.”

x) “The evaluation of independent directors shall be

done by the entire board of directors which shall

include – performance of directors and fulfillment of

independence criteria as specified in these

regulations and their independence from the

management:

Provided that in the above evaluation, the directors

who are subject to evaluation shall not participate.”

xi) “Statement setting out material facts concerning

each item of special business to be transacted at a

general meeting, to be annexed to the notice of

general meeting of the board shall also set forth

 clearly the recommendation of the board to

shareholders on each of specific items.”

Regulation 17A: “The directors of listed entities shall comply with

Maximum the following conditions with respect to the

number of maximum number of directorships, including any

directorships alternate directorships that can be held by them at

any point of time -

i) A person shall not be a director in more than

eight listed entities with effect from April 1, 2019

and in not more than seven listed entities with

effect from April 1, 2020.

Provided that a person shall not serve as an

independent director in more than seven listed

entities.

ii) Notwithstanding the above, any person who is

serving as a whole time director/managing director

in any listed entity shall serve as an independent

director in not more than three listed entities.”

Regulation 20: i) “The listed entity shall constitute a Stakeholders

Stakeholders Relationship Committee to specifically look into

Relationship interests of shareholders, debenture holders and

Committee
 other security holders.”

ii) “The chairperson of this committee shall be a

non-executive director.”

iii) “At least three directors with at least one being

an independent director, shall be members of the

Committee and if the listed entity is having

outstanding SR equity shares, at least two thirds of

the Stakeholders Relationship Committee shall

comprise of independent directors. Chairperson of

the Stakeholders Relationship Committee shall be

present at the annual general meetings to answer

queries of the security holders.”

iv) “Stakeholders relationship committee shall meet

at least once in a year.”

Regulation 22: i) “Listed entity shall formulate vigil mechanism or

Vigil Mechanism a whistle blower policy for directors and employees

to report genuine concerns.”

ii) “Vigil mechanism shall provide for adequate

safeguards against victimization of director(s) or

employee(s) or any other person who avail the

mechanism.”

Regulation 23: i) “Listed entity shall formulate a policy on

Related Party materiality of related party transactions and on

dealing with related party transactions including

Transactions clear threshold limits duly approved by the board of

directors and such policy shall be reviewed by

board of directors at least once every three years

and updated.”

ii) “All related party transactions and subsequent

material modifications shall require prior approval

of the audit committee.

Provided that only those members of the audit

committee, who are independent directors shall

approve related party transactions.”

iii) “All material related party transactions and

subsequent material modifications as defined by

audit committee under sub-regulation (2) shall

require prior approval of the shareholders through

resolution and no related party shall vote to

approve such resolutions whether the entity is a

related party to the particular transaction or not.”

iv) “The listed entity shall submit within 30 days

from the date of publication of its standalone and

consolidated financial results for the half year,

disclosures of related party transactions on a

consolidated basis, in the format specified in the

relevant accounting standards for annual results to

the stock exchanges and publish the same on its

 website.”

Regulation 24: i) “At least one independent director on the board

Corporate of directors of the listed entity shall be a director on

governance the board of directors of an unlisted material

requirements subsidiary, whether incorporated in India or not.”

with respect to ii) “The audit committee of the listed entity shall

subsidiary of also review the financial statements, in particular,

listed entity the investments made by the unlisted subsidiary.”

iii) “The audit committee of the listed entity shall

also review the financial statements, in particular,

the investments made by the unlisted subsidiary.”

iv) “The management of the unlisted subsidiary

shall periodically bring to the notice of the board of

directors of the listed entity, a statement of all

significant transactions and arrangements entered

into by the unlisted subsidiary.”

v) “A listed entity shall not dispose of shares in its

material subsidiary resulting in reduction of its

shareholding (either on its own or together with

other subsidiaries) to less than or equal to fifty

percent or cease the exercise of control over the

subsidiary without passing a special resolution in its

General Meeting except in cases where such

 divestment is made under Insolvency Code through

scheme of arrangement duly approved by a

Tribunal.”

vi) “Selling, disposing and leasing of assets

amounting to more than twenty percent of the

assets of the material subsidiary on an aggregate

basis during a financial year shall require prior

approval of shareholders by way of special

resolution, unless the sale/disposal/lease is made

under a scheme of arrangement duly approved by a

Court/Tribunal under Insolvency Code.

Regulation 24A: i) “Every listed entity and its material unlisted

Secretarial Audit subsidiaries incorporated in India shall undertake

and Secretarial secretarial audit and shall annex a secretarial audit

Compliance report given by a company secretary in practice, in

Report such form as specified, with the annual report of

the listed entity.”

ii) “Every listed entity shall submit a secretarial

compliance report in such form as specified, to

stock exchanges, within sixty days from end of each

financial year.”

Regulation 25: i) “Maximum tenure of independent directors shall

Obligations with be in compliance with the Companies Act, 2013 and

respect to rules made thereunder, in this regard, from time to

independent time.”
 directors ii) “The appointment, re-appointment or removal of

an independent director of a listed entity, shall be

subject to the approval of shareholders by way of a

special resolution.”

iii) “The independent directors of the listed entity

shall hold at least one meeting in a financial year,

without the presence of non-independent directors

and members of the management and all the

independent directors shall strive to be present at

such meeting.”

iv) “Listed entity shall familiarise the independent

directors through various programmes about the

listed entity, including the following:

(a) nature of the industry in which the listed entity

operates;

(b) business model of the listed entity;

(c) roles, rights, responsibilities of independent

directors; and

(d) any other relevant information.”

Regulation 27: i) “Listed entity shall submit a quarterly compliance

Other corporate report on corporate governance in the format as

governance specified by the Board from time to time to the

recognized stock exchanges(s) within twenty-one

 requirements days from the end of each quarter.”

ii) “Details of all material transactions with related

parties shall be disclosed along with the quarterly

compliance report on corporate governance.”

iii) Quarterly compliance report on corporate

governance shall be signed either by the

compliance officer or the chief executive officer of

the listed entity.

Regulation 46(2): “The listed entity shall disseminate the following

Website information in a separate section on its website:

Clause (b): terms and conditions of appointment of

independent directors;

Clause (c): composition of various committees of

board of directors;

Clause (d): code of conduct of board of directors

and senior management personnel;

Clause (e): details of establishment of vigil

mechanism/whistle blower policy;

Clause (f): criteria of making payments to non-

executive directors, if the same has not been

disclosed in annual report;

Clause (g): policy on dealing with related party

transactions;

Clause (h): policy on determining ‘material’

 subsidiaries;

Clause (i): details of familiarization programmes

imparted to independent directors including the

following details: -

 number of programmes attended by

independent directors (during the year and on

a cumulative basis till date),

 number of hours spent by independent

directors in such programmes (during the

year and on cumulative basis till date), and

 other relevant details.”

Clause (t): secretarial compliance report as

mentioned in Regulation 24A of LODR Regulations.

Schedule V Annual report shall contain the following additional

disclosures:

Para C: Corporate Governance Report

Para D: “Declaration signed by chief executive

officer stating that the members of board of

directors and senior management personnel have

affirmed compliance with the code of conduct of

board of directors and senior management.”

Para E: “Compliance certificate from either the

auditors or practicing company secretaries

regarding compliance of conditions of corporate

 governance shall be annexed with the directors’

report.”

In conclusion, GIM would have to comply with all of the above-mentioned

regulations after merging TYIPL and FVPL into it, besides all other

standard compliances that GIM was adhering to before the merger.

EXERCISE 2

1.
a. Acron Plastic Limited (hereinafter “APL”) will have to comply with

additional Corporate Governance regulations, for listing itself for an IPO,

under LODR Regulations. The additional regulations which APL would

have to comply with are:

i) Risk Management Policy and Committee under Regulation 21 and

Schedule II Part C Para D of LODR Regulations. APL would need to

institute Risk Management Committee to formulate risk management

policy which shall include:

 A framework for identification of internal and external risks

specifically faced by the listed entity, in particular including

financial, operational, sectoral, sustainability (particularly, ESG

related risks), information, cyber security risks or any other risk as

may be determined by the Committee.

 Measures for risk mitigation including systems and processes for

internal control of identified risks.

 Business continuity plan.

ii) Policy for preservation of its documents under Regulation 9 of LODR

Regulations. Regulation 9 dictates that “the listed entity shall have a

policy for preservation of documents, approved by its board of directors,

classifying them in at least two categories as follows:

 documents whose preservation shall be permanent in nature;

 documents with preservation period of not less than eight years

after completion of the relevant transactions:

 Provided that the listed entity may keep above-specified documents

in electronic mode.”

iii) Policy for determining Material Subsidiaries as mandated under

Regulation 16(1)(c) of LODR Regulations.

iv) Policy for dealing with Related Party Transactions and on Materiality

of Related Party Transactions under Regulation 23(1) of LODR

Regulations. It dictates that “listed entity shall formulate a policy on

materiality of related party transactions and on dealing with related

party transactions including clear threshold limits duly approved by the

board of directors and such policy shall be reviewed by board of directors

at least once every three years and updated. Provided that a transaction

with a related party shall be considered material, if the transaction(s) to

be entered into individually or taken together with previous transactions

during a financial year, exceeds rupees one thousand crore or ten per

cent of the annual consolidated turnover of the listed entity as per the

last audited financial statements of the listed entity, whichever is lower.”

v) Policy for determination of Materiality of events/information under

Regulation 30(5) of the LODR Regulations. This regulation provides that

“the board of directors of the listed entity shall authorize one or more

key Managerial Personnel for the purpose of determining materiality of

an event or information and for the purpose of making disclosures to

stock exchange(s) under this regulation and the contact details of such

personnel shall be also disclosed to the stock exchange(s) and as well as

on the listed entity's website.”

vi) Vigil Mechanism/Whistle Blower Policy needs to be formulated by APL

under Regulation 22 of LODR Regulation. It dictates that “listed entity

shall formulate vigil mechanism or a whistle blower policy for directors

and employees to report genuine concerns.” It also provides that “vigil

mechanism shall provide for adequate safeguards against victimization of

director(s) or employee(s) or any other person who avail the mechanism.”

vii) Policy relating to remuneration of the Directors, Key Managerial

Personnel and other Employees as mandated under Schedule II Part D

Para A sub-regulation (1) of LODR Regulation. A Remuneration

Committee needs to be formed for this purpose under Regulation 19 of

LODR Regulations.

viii) Policy on diversity of board of Directors under Schedule II Part D

Para A sub-regulation (3) of LODR Regulation.

ix) APL needs to formulate and can voluntarily disclose its dividend

distribution policy on its website under Regulation 43 of LODR

Regulations.

x) APL needs to determine code of conduct for its Board of Directors and

Senior Management Personnel under Regulation 17(5) of LODR

Regulations and disclose the same on its website under Regulation 46(2)

(d) of LODR Regulations.

xi) Insider Trading Policy under Regulation 4(2) of LODR Regulations.

xii) Policy for prevention of sexual harassment at workplace.

xiii) Archival Policy.

b. Once the IPO process is completed and APL becomes a listed entity,

there are added compliance responsibilities. Key compliance

requirements are as follows:

Frequen
Regulation Particulars
cy

13(3) of the Statement of investor complaints Quarterly

LODR

Regulations

27(2) of the Corporate governance compliance report Quarterly

LODR

Regulations

31(1) of the Shareholding pattern Quarterly

LODR

Regulations

33(3) of the Financial results Quarterly

LODR

Regulations

76 of the SEBI Reconciliation of share capital audit report Quarterly

(Depositories audited by a practising qualified chartered

and accountant or a company secretary

Participants)

Regulations,
 Frequen
Regulation Particulars
cy

2018

7(3) of the Compliance certificate signed by the Annual

LODR compliance officer and an authorised

Regulations representative of the share transfer agent

in respect of maintaining a physical and

electronic transfer facility

40(9) of the Compliance certificate from a practising Annual

LODR company secretary certifying that all

Regulations certificates have been issued within 30

days of lodgment for the transfer, sub-

division, consolidation, renewal, exchange

or endorsement of calls/allotment monies

34 of the LODR Annual report Annual

Regulations

24A of the Secretarial compliance report Annual

LODR

Regulations