Mail or link? Understanding SEBI’s New Rules on Annual Report Distribution - MMJC

Original Provision Prior to December 12, 2024 Amendment:

Before the amendment dated December 12, 2024, Regulation 36(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandated that listed entities must send a hard copy of the statement containing the salient features of all documents as prescribed in Section 136 of the Companies Act, 2013 viz. financial statements and annual report, to those shareholders who had not registered their email addresses with the company or depositories.

Subsequently, SEBI issued Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2024/133 dated October 3, 2024, providing relaxation from compliance of Regulation 36(1)(b) for companies conducting their AGMs through Video Conferencing (VC) or Other Audio-Visual Means (OAVM) on or before September 30, 2025. As per this circular, such companies are not required to send physical copies of the annual report to shareholders who had not registered their email addresses. Instead, they were to send physical copies only upon specific requests from such shareholders.

Rationale Behind the Change:

SEBI’s Consultation Paper dated June 26, 2024, highlighted the need to modernize and streamline the process of disseminating annual reports. The paper noted that the mandatory dispatch of physical copies to shareholders without registered email addresses was inefficient and costly. It proposed that, in the digital age, providing a physical letter containing a web link to access the annual report would be a more effective and environmentally friendly approach. This change aimed to balance the need for shareholder access to information with the benefits of digital communication.

New Provision Post December 12, 2024 Amendment:

The SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2024, notified on December 12, 2024, and effective from December 31, 2024, amended Regulation 36(1)(b). The revised provision states:

“A letter providing the web-link, including the exact path, where complete details of the Annual Report is available to those shareholder(s) who have not so registered”

This amendment eliminates the requirement to send document containing salient features of all documents as prescribed in Section 136 of the Companies Act, 2013 to shareholders who have not registered their email addresses. Instead, companies must send a physical letter containing the web link directing shareholders to the digital version of the annual report.

So, the question that arises is whether the exemption provided as per SEBI circular dt: October 4, 2024 would apply to the revised provision under regulation 36(1)(b) of LODR regulations?

Analysis:

Applying the principle of Lex posterior derogat priori (latter law prevails), the amendment to Regulation 36(1)(b) supersedes the earlier provisions and associated circulars. This principle has also been applied in Ashoka Marketing Ltd. v/s Punjab National Bank, (1990) 4 SCC 406. Consequently, the relaxation provided under Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2024/133 dated October 3, 2024, becomes redundant post the amendment’s effective date. Therefore, companies are now required to send physical letters containing the web link to shareholders who have not registered their email addresses, enabling them to access the company’s annual report digitally.