In the attached order dated September 6, 2018, Securities and Exchange Board of India (“SEBI”) has imposed monetary penalty on Mr. Ashok Shival Rupani (“Noticee 1”), Mr. Naresh Shivlal Rupani (“Noticee 2”) and Utam Ravji Gada (“Noticee 3”) (collectively, “Noticees”), directors of Sainand Commercial Limited (“Company”) for violation of regulation 30 (4) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”).

Applicable Regulations: 

Under regulation 30(4) of the LODR Regulations, every listed entity is required to consider the following criteria for determination of materiality of events/information:

a) the omission of an event or information, which is likely to result in discontinuity or alteration of event or information already available publicly;

b) the omission of an event or information is likely to result in significant market reaction if the said omission came to light at a later date;

c) in case where the criteria specified in sub-clauses (a) and (b) are not applicable, an event/information may be treated as being material if in the opinion of the board of directors of listed entity, the event / information is considered material.

Further, it requires every listed entity to frame a policy for determination of materiality, based on criteria specified in this sub-regulation, duly approved by its board of directors, which shall be disclosed on its website. 

Facts:

The board of directors of the Company consisting of the Noticees in its meeting dated July 22, 2010 recommended for change in management and the proposal was moved through postal ballot. However, no corporate announcement was made by the Company to the stock exchange regarding the board meeting and such recommendation of change in management.  

Noticee 1 and Noticee 2 submitted before SEBI that they could not locate the copy of the corporate announcement made for change of management. Noticee 3 submitted that he was not involved in day to day management of the Company, however, he had consulted the other directors who were part of the day to day management who had assured him that all the necessary compliances have been carried out. 

Order:

SEBI noted that the recommendation of the Board of Directors in regard to change in management of the company is a very vital information. Not only shareholders but the entire market needs to be made aware of such a change. For this reason, it is essential that a corporate announcement is made by a company to the exchange in this regard. As the Company did not make such change, all the directors at the relevant time are liable for the non-compliance.