SEBI has come out with a “stricter timeline” for disclosure of material events or information by listed companies and introduced criteria for determining the materiality of events.According to the criteria for determining materiality of events, what is one of the factors that determines the materiality of an event?

Solution

SEBI has come out with a “stricter timeline” for disclosure of material events or information by listed companies and introduced criteria for determining the materiality of events. Under the framework, the regulator asked listed companies to disclose family settlement agreements, which can impact the management and control of such firms to stock exchanges. These agreements need to be disclosed within 12 hours in case a listed entity is a party and within 24 hours where the listed entity is not a party. Further, for material events or information which emanate from the listed entity, including those related to acquisitions, Scheme of Arrangement, consolidation of shares, and buyback of securities, the timeline for disclosure by the entity has been reduced from 24 hours to 12 hours. In case of information that emanates from a decision taken in a meeting of the board of directors, the disclosure needs to be made within 30 minutes from the closure of such meeting. Besides, the timelines have been fixed 24 hours from the occurrence of the event in case the information is not emanating from within the listed entity. This included a revision in rating, fraud or defaults by a listed entity, its promoter, directors; restructuring in relation to loans from banks, one time settlement with a bank and winding-up petition filed by any party / creditors. With regard to criteria for determining the materiality of events, one of the criteria is the omission of an event, whose value or the expected impact in terms of value, exceeds the lower of 2 per cent of turnover, or 2 per cent of net worth as per the last audited consolidated financial statements or 5 per cent of the average of absolute value of profit or loss after tax, as per the last three audited consolidated financial statements of the listed entity.