Corporate Quarterly Milestones (April-June 2025) 

Partner: Ankush Goyal, Senior Associate: Rohan Kohli

Key Developments

Revised threshold for mandating additional disclosures by foreign portfolio investors

The Securities and Exchange Board of India (SEBI) has recently revised the criteria for foreign portfolio investors (FPI) to make additional granular disclosures. These disclosures entail providing detailed information on all entities holding any ownership or economic interest or exercising control in the FPI up to the level of all natural persons.

The additional disclosures were first mandated on 24 August 2023 for FPIs that exceeded either of two thresholds:

• Holding more than 50% of their Indian equity assets under management (AUM) in a single Indian corporate group; or
• Holding INR 25,000 crore of equity AUM in the Indian markets.

(To read our earlier update on these additional disclosures, click here.)

On 9 April 2025, SEBI revised the second threshold, increasing it to INR 50,000 crore of equity AUM in the Indian markets. This update aligns with the proposal approved in the SEBI board meeting on 24 March 2025, reflecting evolving market dynamics and aiming to ease compliance burdens on FPIs that pose minimal systemic risk.

SEBI introduces reforms to increase market efficiency and improve ease of doing business

In its board meeting held on 18 June 2025, SEBI approved a comprehensive set of reforms across key regulations. These amendments are designed to bolster market efficiency, improve ease of doing business, and encourage greater market participation.

Key highlights include:

• Relaxations under the Issue of Capital and Disclosure Requirements Regulations, 2018 and the Share Based Employee Benefits and Sweat Equity Regulations, 2021
1. Harmonising holding period requirement for offer for sale: The SEBI Issue of Capital and Disclosure Requirements Regulations, 2018 (ICDR Regulations) mandate a one-year holding period for equity securities to be offered towards the offer for sale (OFS) portion in a public issue. Previously, any equity shares acquired through an approved scheme of arrangement (e.g., for merger, demerger, etc.) were exempt from this one-year holding period. However, this exemption did not extend to any equity shares converted from compulsorily convertible securities (CCS), even if such CCS were acquired through an approved scheme. The reform aims to rectify this regulatory arbitrage by clarifying that equity shares converted from CCS acquired through an approved scheme will also be exempt from the one-year holding requirement for OFS, harmonising the two regulatory treatments.
2. Broadening the scope of minimum promoter contribution: Previously, only equity shares arising from the conversion of CCS held by promoters were eligible to be counted towards the Minimum Promoter Contribution (MPC) at the time of an Initial Public Offering (IPO). The proposed reform expands this scope to also include equity shares resulting from the conversion of CCS held by ‘relevant persons’—such as Alternative Investment Funds (AIF), Foreign Venture Capital Investors (FVCI), banks, Public Financial Institutions (PFI), insurance companies, and promoter group entities. This change is expected to ease compliance with MPC requirements, particularly for start-ups and companies with diversified cap tables.
3. Retention of employee stock options and sweat equity of founders: Earlier, founders had to liquidate their Employee Stock Options or sweat equity before filing the Draft Red Herring Prospectus (DRHP) in order to be classified as promoters. Under the revised framework, founders may now retain or exercise such share-based benefits, provided they were granted at least one year before DRHP filing. This move supports continuity in incentive structures for founders and aligns promoter classification requirements with the commercial realities of founder-led companies.

These amendments aim to facilitate new-age start-up companies looking to undertake reverse flip transactions and list on the Indian stock markets.

• Simplification of the Qualified Institutional Placement process: The proposed reforms seek to streamline the Qualified Institutional Placement process by limiting disclosure requirements to only material, issue-specific risk factors and summarised financial information. This aims to reduce duplication and enhance efficiency in capital raising.
• Rationalisation of the Merchant Bankers Regulations, 1992: These regulations have been streamlined to permit merchant bankers to offer non-SEBI regulated, fee-based financial services under the same legal entity, provided they comply with the requirements of the respective sectoral regulators. Additionally, merchant bankers are now categorised into Category I and Category II, based on criteria such as net worth and underwriting capacity, enabling more proportionate regulatory oversight.

Amendments to the Listing Obligations and Disclosure Requirements Regulations, 2015 to strengthen transparency, oversight and grievance redressal mechanisms

SEBI has notified amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The amendment regulations came into force on the date of their publication in the official gazette, i.e., 29 April 2025.

The key changes introduced by the amendment regulations include:

• Grievance redressal through SCORES: Trustees managing securitised debt instruments must now register on SCORES, SEBI’s online complaint resolution platform, at the level of each Special Purpose Distinct Entity (SPDE). This allows trustees to address investor complaints directly and more efficiently.
• Stronger disclosure obligations for trustees: Alongside registration, trustees are also required to provide enhanced disclosures related to the SPDEs they oversee—strengthening transparency and accountability in the securitised debt ecosystem.
• Governance-related provisions: While the main focus is on investor grievance redressal and disclosures, the amendment regulations also support SEBI’s broader push to tighten corporate governance. This includes reinforcing rules around board composition, director appointments, and committee structures—especially for High Value Debt-Listed Entities.

Ministry of Corporate Affairs updates accounting standards to improve currency-related disclosures

On 7 May 2025, the Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2025, bringing important changes to how companies assess and disclose information related to foreign currencies. These changes aim to improve transparency and align with global best practices.

Key highlights include:

• Definition of ‘exchangeability’: A currency is now considered ‘exchangeable’ if it can be obtained within a normal administrative timeframe through a market that provides enforceable rights and obligations. If only a negligible amount is available, the currency is treated as non-exchangeable. Entities must now assess exchangeability at each reporting date and for every relevant transaction.
• Estimating the spot exchange rate: When a currency is deemed non-exchangeable, companies are required to estimate a spot exchange rate based on a hypothetical, orderly market transaction between willing participants. The earlier rule of using the ‘first subsequent exchangeable rate’ has been removed.
• Mandatory disclosures: When estimating the spot exchange rate for a non-exchangeable currency, entities must disclose the:
1. nature and impact of non-exchangeability,
2. spot rates used,
3. estimation process, and
4. associated risks.

This would enhance transparency and help users assess the financial position of the entity.

• Foreign operations reporting: Entities must disclose the identity and financials of any foreign operations using non-exchangeable currencies, along with any contractual commitments to financially support such operations.

These changes are a step forward in improving clarity for investors and regulators, especially for companies operating across complex global markets.

MCA proposes expansion of the fast-track merger route to boost corporate restructuring

On 5 April 2025, MCA released a draft notification proposing amendments to Rule 25 of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016. The proposed changes aim to significantly expand the scope of fast-track mergers under Section 233 of the Companies Act, 2013—making the process quicker and more accessible for a broader range of entities. Currently, fast-track mergers are limited to small companies, wholly owned subsidiaries, and start-ups.

The draft amendment proposes to extend this facility to include:

• Unlisted companies: Companies with borrowings under INR 500 million and no defaults, subject to an auditor’s certification. This does not include non-profits under Section 8 of the Companies Act, 2013.
• Holding companies: This includes both listed and unlisted companies, and their unlisted subsidiaries, even if not wholly owned.
• Intra-group mergers: Mergers between fellow unlisted subsidiaries under the same parent entity.
• Cross-border mergers: Mergers involving a foreign holding company merging into its wholly-owned Indian subsidiary, aligning Rule 25 with Rule 25A.

These proposals reflect the government’s ongoing efforts, announced in the Union Budget 2025–26, to simplify corporate restructuring and improve the ease of doing business. These proposals will also ease deal structuring for reverse flip transactions, which have gained significant traction over the last year. Stakeholders were invited to submit comments on the proposed amendments on the MCA’s e-Consultation portal by 5 May 2025.

Companies (Accounts) Rules, 2014 amended to promote transparency in welfare, inclusivity and financial disclosures

On 30 May 2025, the MCA notified the Companies (Accounts) Second Amendment Rules, 2025, which became effective on 14 July 2025. These amendments are designed to significantly enhance transparency, standardise data reporting, and promote digital compliance.

The key changes include:

• Expansion of disclosure requirements: Companies must now mandatorily report the number of sexual harassment complaints received, resolved, and pending beyond 90 days in a financial year, as well as provide a formal declaration of compliance with the Maternity Benefit Act, 1961.
• Digitisation of forms: Forms AOC-1 and AOC-2 have been officially reclassified as e-Forms, and companies are now required to file electronic extracts of the Board’s Report and Auditor’s Report along with the signed financial statements through Form AOC-4. These rules will allow regulators to analyse compliance and performance data more efficiently.

These amendments reflect the MCA’s broader push toward digitisation, governance, and a more data-driven regulatory framework, particularly with respect to social inclusivity, employee welfare, and corporate transparency. (To read our detailed update on the amendment rules, click here.)

RBI issues draft directions to operationalise regulatory measures under its Statement on Developmental and Regulatory Practices

Following the Statement on Developmental and Regulatory Policies dated 9 April 2024, the Reserve Bank of India (RBI) has issued draft directions aimed at deepening credit markets, strengthening risk management, and enhancing flexibility in the structuring of loan exposures.

Key directions are:

• Draft RBI (Securitisation of Stressed Assets) Directions, 2025

To broaden the securitisation avenues for regulated entities (RE), RBI has proposed a new framework for securitisation of stressed loan exposures, similar to the framework under the Master Direction for securitisation of standard assets. This new framework will supplement the specific areas covered under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

These directions propose a more flexible framework for lenders dealing with stressed exposures. As per the draft, there will be no minimum risk retention (MRR) unless the lender also acts as the Resolution Manager (ReM), in which case, a 5% MRR will apply. ReMs—such as insolvency professionals—must meet performance standards set by SEBI and the Insolvency and Bankruptcy Board of India. Only stressed loans (categorised as non-performing accounts (NPA) or special mention accounts (SMA-2)) will be eligible, and the asset pool must be uniform in type, with standard assets allowed only as a small balancing portion (up to 10%). The directions also propose independent dual valuations, transparent pricing, and ongoing reporting obligations to promote transparency and market discipline.

• Draft RBI (Non-Fund Based Credit Facilities) Directions, 2025

These draft directions introduce a comprehensive framework for regulating non-fund based credit exposures, such as guarantees, letters of credit, and other contingent liabilities, by REs, with a focus on prudential risk management and improved transparency.

As per these directions, non-fund based facilities can only be extended to existing borrowers, following a board-approved appraisal and due diligence process. All guarantees must be irrevocable and unconditional. Exposure limits are capped at 5% of total assets for Urban Cooperative Banks and Non-Banking Financial Companies, with unsecured guarantees limited to 25%. The maximum tenor of these guarantees is proposed to be set at 10 years. Eligible REs may provide partial credit enhancements up to 20% of the issue size and their Tier-I capital. Annual public disclosures on guarantee structures and contingent liabilities have also been proposed.

• Draft RBI (Co-Lending Arrangements) Directions, 2025

A comprehensive draft framework for co-lending arrangements has been released, focused on prudential safeguards and borrower transparency.

Co-lending will be permitted only under the CLM-1 model, where participating lenders contribute from the outset and jointly disburse the funds. The CLM-2 model, which is a discretionary funding model where one lender disburses and the other reimburses, is proposed to be phased out. Operational safeguards such as mandatory escrow accounts, defined credit policies on co-lending limits, and due diligence standards are prescribed. Borrowers must be clearly informed of a blended interest rate reflecting each lender’s contribution and risk exposure. The draft directions also permit Default Loss Guarantees of up to 5% of the loan amount. Public disclosures of co-lending partnerships, blended rate ranges, and sectoral exposures will be required.

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