The Securities and Exchange Board of India (SEBI) has recently released a consultation paper seeking public feedback on a key regulatory reform aimed at simplifying compliance for issuers of non-convertible securities (NCS). This proposal focuses on aligning the rules for sending annual reports to debenture holders with those applicable to shareholders of specified securities. The objective is to reduce operational burdens, enhance digital communication, and promote Ease of Doing Business (EoDB).
The Core of the Proposal
Currently, under Regulation 58(1)(b) of SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, issuers of non-convertible securities are required to send hard copies of the annual report—summarized under Section 136 of the Companies Act, 2013—to all debenture holders who haven’t registered their email addresses. While this approach ensures transparency, it also imposes logistical and financial burdens on issuers.
In contrast, for specified securities (such as equity shares), recent amendments to Regulation 36(1)(b) of the LODR Regulations have eliminated the mandatory dispatch of physical copies of the annual report to shareholders without registered emails. Instead, companies now send a letter containing a web link to access the full report digitally, thereby streamlining communication and promoting sustainability.
The proposal now under consultation seeks to extend this digital-first approach to holders of non-convertible securities. If implemented, companies would only be required to:
Send soft copies of the annual report to debenture holders who have registered emails.
Send a simple letter with a web link to those without email registration.
Dispatch physical copies of the full report only upon specific request.
Legal and Regulatory Backdrop
This alignment would be consistent with:
Section 136 of the Companies Act, 2013, which allows companies to send financial documents to members and trustees at least 21 days prior to the AGM.
Regulation 53(2) and 62(1) of the LODR, which already mandate disclosure of the annual report on both company and stock exchange websites.
Moreover, the Ministry of Corporate Affairs (MCA) has repeatedly extended pandemic-era relaxations that allowed for electronic AGMs and waived the requirement of sending physical copies. The current extension lasts through September 30, 2025, giving issuers a clear precedent and operational framework for digital distribution.
Why This Matters
The proposed alignment reflects the regulator’s ongoing commitment to making Indian capital markets more agile and cost-efficient. For issuers, especially those with a wide base of debenture holders, this change can result in significant savings in printing and postage. For investors, the shift ensures quicker, easier access to essential documents through digital means.
Most importantly, this move signals a broader regulatory shift toward harmonizing compliance requirements across security types—creating a more predictable, investor-friendly regulatory ecosystem.