SEBI vide circular dated December 24, 2019, has prescribed the format for Statement of Deviation or Variation for proceeds of public issue, rights issue, preferential issue, Qualified Institutions Placement (QIP) etc., as required under Regulations 32 of SEBI Listing Regulations, 2015.
Reg. 32 of Listing Regulations, 2015 mandate every listed entity to submit a statement of deviation or variation, on quarterly basis, in the use of proceeds raised from the public issue, rights issue, preferential issue, Qualified Institutions Placement (QIP) etc., as against the objects as stated in the offer document or explanatory statement to the notice for the general meeting, as applicable.
However, ever since the applicability of Listing Regulations, i.e., Dec 2015, no format of statement of deviation and timing of such disclosure was there in any of the provisions. All the listed entities were making disclosure under Regulation 32 in their own formats and randomly on quarterly basis.
Therefore, in order to bring consistency in the format and frequency of reporting, SEBI has prescribed the uniform format for disclosing the statement or deviation which is as follows:
I. Frequency of Disclosure:
- Disclosure to be made on Quarterly basis;
- To be within 45 days/ 60 days along with the declaration of financial results;
- To be disclosed until funds so raised have been fully utilized for the purpose they have been raised.
II. Format of Disclosure: Enclosed as Annexure A of SEBI Circular.
III. Role of the Audit Committee:
As prescribed in Reg 32, that the statement of deviation report shall be placed before the audit committee of the listed entity for review on quarterly basis. Now, following have been clarified by SEBI:
- The comments of audit committee along with the report shall be disclosed/ submitted to the stock exchange.
- In cases where the listed entity is not required to have an audit committee under the provisions of SEBI LODR Regulations or Companies Act, 2013, the word ‘Audit Committee’ shall be replaced with ‘Board of Directors’.
IV. Applicability: To be applicable for the quarter ending December 31, 2019.
Disclosures should always be as uniform and consistent, as possible, across the table, thus leaving no room for discretion and thus, avoiding any chances of part disclosure. SEBI’s promulgation of the specified format to make the deviation disclosure is a step in this direction only. One pertinent fact needed to be considered by listed corporates is that presently, no penalty is being levied by Stock Exchange(s) in case of any delayed submission of statement of deviation since, uptil now, no due date was mentioned in Listing Regulations. However, now, with the issuance of this circular, the listed entities have to be more vigilant in making disclosure under Reg 32, because any delay in making such disclosure will attract a fine amounting to Rs. 1000/- per day (as per SEBI SOP circular dated May 03, 2018).