All Indian businesses, startups, MSMEs, or large corporations aspire to become publicly traded companies. Listing on a stock exchange greatly increases a company's visibility and credibility, making it more appealing to clients, financiers, and business associates and creating new growth prospects. Public listing allows businesses access to capital, which can be used for various purposes, including acquisitions, debt repayment, expansion, and research and development. It also provides investors and shareholders liquidity and creates higher market capitalisation and valuation opportunities.
While getting listed is a milestone for any corporation, it comes with added responsibilities. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is a critical part of the regulatory framework for listed entities in India. It has played a central role in promoting transparency in publicly listed companies and has enhanced the standards of corporate governance. The disclosure requirements ensure that the sectoral regulators, investors and shareholders of a company are aware of material events and information that can affect the valuation and market reputation of the company. Under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI LODR Regulations’), a listed entity shall disclose to stock exchange(s) all material events or information not later than 24 hours from the occurrence of event or information. Further, Regulation 30(4) provides the criteria to verify whether the event or information is material. This includes omitting an event or information that can result in a significant market reaction if it comes to light later. The regulation also lays down the value of the information in terms of market impact. Regulation 30(6) further requires the listed entities to disclose all material information to the stock exchanges first, with decisions taken in board meetings needed to be communicated within 30 minutes of the end of the meeting.
Moreover, Regulation 29(2) requires the company to inform the exchange at least two days before the meeting. If the agenda is to discuss the financial results, the intimation must be sent five days before the meeting. Regulation 29(3) states the requirement of intimating the exchange 11 days before a meeting to alter the nature or form of the securities already issued and amend the payment date of interests or redemption amount.
Regulation 23(9) requires listed companies to file disclosures on related-party transactions to the exchange every six months. Regulation 17(2) requires 4 Board meetings for listed entities, with Regulation 17(2A) providing for the quorum of the Board of Directors meeting for the top 2,000 listed companies (by market capitalisation). Corporations must ensure the quorum of every Board meeting with a minimum of 1/3rd of the total strength or three directors, including at least one independent director.
Due to the intricate regulatory landscape, businesses have a plethora of compliance obligations to monitor and oversee. Given that a sizable majority of corporations still use manual compliance processes, there will inevitably be cases of missed, delayed, and lapsed compliance. These occurrences are frequently the result of organisations needing to remember the deadlines and realising when certain laws apply to them. The business has little to no control over its compliance functions due to the lack of an applicability assessment and visibility over current obligations.
By utilising RegTech (Regulatory Technology), businesses can gain more visibility and control over their compliance functions. These digital solutions eliminate the difficulties associated with maintaining pending obligations, continuous compliance, and monitoring regulatory updates. By adopting and adapting digital solutions to track and manage compliances, entities can significantly reduce their cost of compliance. RegTech solutions allow corporations to stay on the right side of the law with constant reminders regarding notifications, alerts, and escalations. They also introduce transparency, accountability, and timeliness in compliance processes, a key component for creating a culture of compliance within the company.