Amendment in SEBI Listing Regulations

SEBI, with the intent of investor protection and enabling them to take better and well informed investment decisions, has vide its Circulars dated 25th May 2016 and 27th May 2016 brought in certain amendments to the LODR Regulations (primarily Regulations 33 & 52). These Regulations pertain to the requirements of submitting Financial Results of the Company. As per the extant provisions, alongwith the Audited results for the financial year, Form A/ Form B were needed to be submitted, depending upon there being any Auditors’ Qualifications or not.

Now, vide the above mentioned Circulars, it has been decided to streamline the process and do away with the requirement of filing these Forms. The listed Companies are now required to disseminate the cumulative impact of all the audit qualifications in a separate format, simultaneously, while submitting the annual audited financial results to the stock exchanges.

The provisions of the said Circulars are applicable for all the annual audited standalone / consolidated financial results submitted by the listed entities for the period ending on or after March 31, 2016. That is to say, even for the results for the FY 15-16-either already submitted or under the process of being submitted.

A brief gist of the said Circulars is as under:

1. The requirements of filing Form A/ Form B along with the annual financial results has been dispensed with.
2. From now on, instead of these Forms, in case of Audit Reports with modified opinions (i.e. Qualified Audit Reports), a Statement on Impact of Audit Qualifications is needed to be submitted.
3. The management of the listed entity shall have the option to explain its views on the audit qualifications
4. Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments.
5. Further, the said Statement is also needed to be given in the Company’s Annual Reports.
6. The said Statement of Impact shall be reviewed by the concerned Stock Exchange(s).
7. Further, in case of audit reports with unmodified opinion(s), the listed entity shall furnish a declaration to that effect to the Stock Exchange(s) while publishing the annual audited financial results.
8. Schedule VIII of the LODR Regulations has been deleted.
9. These requirements are applicable for both listed equity shares and also listed NCDs/ NCRPSs.
10. In case of non compliance with the requirements of this Circular, the Stock Exchange(s) may take such action, as they deem fit.

CP’s viewpoint

It’s surely an investor friendly move that will enable the investors to view and analyse the impact of any Auditors Qualifications. But the only concern from listed companys’ point of view is how to comply, if they have already submitted/ published the results; or even if yet to be submitted/ published, how to obtain quantification or impact assessment for the Qualifications, in a time gap of only 2 days for submission of results. In our opinion, the Regulators (Stock Exchanges and/ or SEBI) should provide some time extension to the Companies to comply with the said Circulars for the FY 15-16.