The Securities and Exchange Board of India (‘SEBI’) has recently, by way of the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025 (‘Amendment’) amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI LODR Regulations’), incorporating certain changes to the corporate governance norms regime applicable to High Value Debt Listed Entities (‘HVDLEs’).

Some of the key changes brought about by the Amendment, effective from March 27, 2025, are:

i. Relaxation in Threshold for Classification as HVDLEs

Previously, entities with listed Non-Convertible Debt Securities (‘NCDs’) with an outstanding principal amount of INR 500 crores (~ USD 58,563,500) or more were classified as HVDLEs and were required to comply with corporate governance norms under Regulations 15 to 27 of the SEBI LODR Regulations.

SEBI has now increased this threshold of classification as an HVDLE from INR 500 crores (~ USD 58,563,500) to INR 1000 crores (~ USD 117,127,000).

ii. ‘Sunset Clause’ Introduced for HVDLE Classification

Prior to the Amendment, the SEBI LODR Regulations contemplated that irrespective of whether a listed entity’s outstanding listed debt securities fell below the prescribed threshold, such entity would continue to be treated as an HVDLE and would have to continue to comply with the relevant corporate governance norms, until all the listed NCDs issued by it were redeemed.

SEBI has now introduced a much needed ‘sunset clause’ by which, if the outstanding principal amount of HVDLE’s listed NCDs as of March 31 in a particular year reduces and remains below the threshold of INR 1000 crore (~ USD 117,127,000) for three consecutive financial years, the listed entity will no longer be treated as an HVDLE and the corporate governance norms will no longer apply.

iii. Introduction of a Dedicated Chapter for Corporate Governance Norms for HVDLEs

SEBI has also introduced a new chapter in the SEBI LODR Regulations i.e., Chapter VA, setting out corporate governance norms for those HVDLEs whose ‘specified securities’ are not listed. However, HVDLEs whose ‘specified securities’ are listed will continue to comply with corporate governance norms under Regulations 15 to 27 of the SEBI LODR Regulations.

While the majority of the provisions introduced under Chapter VA remain largely unchanged from the previous regime, certain crucial amendments warrant close attention and consideration. Some of these key changes are:

a. Approval of Trustee and NCDs Holders for Related Party Transactions

A major departure from the previous regime of corporate governance norms under the SEBI LODR Regulations for HVDLEs is witnessed in the process for approval of material Related Party Transactions (‘RPTs’) undertaken by the HVDLE.

Prior to the Amendment, all RPTs and the subsequent material modifications to the RPTs have required prior approval of the audit committee of the HVDLE and all material RPTs and their subsequent material modifications required the approval of shareholders of the HVDLE. SEBI has now added an additional requirement wherein, prior to seeking the approval from the shareholders, the HVDLE is required to first obtain no-objection certificates (‘NOCs’) from the debenture trustee of listed NCDs and (through the debenture trustee) the holders of such listed NCDs who are not related to the HVDLE and who hold at least 50% of the listed NCDs in value, on the basis of voting (including e-voting).

It is only after the NOCs of these debenture holders is obtained as aforesaid that the HVDLE can proceed to obtain the approval of the shareholders.

b. Flexibility in Constitution of Committees

In order to avoid constitution of multiple committees by HVDLEs and reduce the compliance burden on these entities, the board of directors of the HVDLE has been granted the flexibility to either constitute the nomination and remuneration committee, the stakeholders’ relationship committee and the risk management committee or discharge the functions of these committees by itself.

c. Quorum for Board Meetings

SEBI has now prescribed a quorum for every meeting of the board of directors of HVDLEs viz., one-third of its total strength or three directors, whichever is higher, including at least one independent director, which quorum includes directors participating by video conferencing or by other audio-visual means.

Key Takeaways

Entities which had listed their ‘specified securities’ and which also qualified as HVDLEs will not be required to undertake any changes as the previous regulatory regime continues to apply to them.

However, entities which had listed only their NCDs where the outstanding value of NCDs meets the revised threshold for qualifying as an HVDLE should carefully evaluate the Amendment and ascertain the corporate governance norms that are applicable to them.

While SEBI has certainly introduced some relaxations for HVDLEs – for example, the board of directors of HVDLEs having the flexibility to perform the functions of certain specialized committees instead of constituting these committees – the introduction of the requirement to obtain NOCs from debenture trustees and debenture holders of listed NCDs places an additional burden on HVDLEs.