No family secrets now: Sebi

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Sebi has mandated that the promoters will have to disclose their family agreements or arrangements to the stock exchanges. The stock market will have to be informed about such deals which have an impact or effect on the management control of listed companies. This new rule will come into effect from July 15. SEBI had notified the new rules only on 14 June 2023. According to this rule of SEBI, the existing agreements till the date of notification will also have to be disclosed to the stock exchanges. Earlier it was understood that only forward agreements had to be disclosed and not retrospective ones.

Why this order In fact, many businesses in our country are family-owned, and many family members have business disputes, for example, between the Kirloskar brothers of Pune, Baba Kalyani and his sister Sugandha Hiremath, over the pharma company Hikal, Prakash. There are disputes between Deepak Chhabria regarding Finolex Cables and Solar Industries between Kailas Chandra Nuwal and Satyanarayan Nuwal. The new rules will strengthen corporate governance in listed companies, as has happened in many previous instances.

Disclosure of all secret agreements between major shareholders will increase transparency for investors. In a notification dated June 14, 2023, SEBI had said that the new rule would come into effect from the 30th day of gazette publication i.e. from July 15.

According to experts, these rules or amendments in the present form are so broad that they will probably cover all agreements, including unintended categories of contracts in its purview.

In its board meeting held on March 29 this year, SEBI approved amendments to the Listing Obligations and Disclosure Requirements Regulations, 2023. The listed entity should also disclose the number of agreements in existence as on the date of notification, including a link to the webpage where details of such agreements are available.