SEBI Stresses Transparency on Family Settlements

The Securities and Exchange Board of India (SEBI) clarified before the Bombay High Court that:

• Deeds of Family Settlement (DFS) and similar family agreements must be disclosed by listed companies under LODR Regulations.
• However, such disclosures do not impose binding obligations on the company itself.

Deeds of Family Settlement (DFS)

• A legal agreement between family members concerning family-owned businesses, properties, or shares.
• Purpose:
  • Resolve disputes among family members without litigation.
  • Divide assets, shares, or responsibilities among heirs.

Listing Obligations and Disclosure Requirements (LODR)

• SEBI regulations that require listed companies to maintain transparency, accountability, and fair treatment of investors.
• Purpose:
  • Protect investors’ interests.
  • Ensure disclosure of material information affecting company performance or share price.
• Examples of Disclosures under LODR:
  • Financial results, corporate governance reports.
  • Changes in shareholding, promoter pledges, and agreements like DFS.

SEBI’s Stand on DFS Disclosure

• Disclosure is Mandatory:
  • DFS agreements are considered material information under LODR.
  • Shareholders must be informed to ensure transparency.
• No Binding Effect on the Company:
  • Disclosure under Regulation 30A does not create or enforce private contractual obligations.
  • Companies are not restricted or liable due to DFS disclosures.
  • Management or control of the company is unaffected by these disclosures.

In short:

• DFS → Family agreement on assets/shares.
• LODR → SEBI rules requiring disclosure of material information.
• SEBI clarification → Disclose DFS for transparency, but it doesn’t bind or limit the company.