SEBI Mulls Raising Threshold for High-Value Debt-Listed Entities to ₹5,000 Cr to Ease Compliance

Markets regulator Sebi on Monday proposed a framework to reduce the compliance burden of companies with large debts, by raising the threshold for identifying High Value Debt Listed Entities (HVDLEs) to Rs 5,000 crore from the current Rs 1,000 crore.

The move would reduce the number of entities classified as HVDLEs from 137 to 48, effectively bringing down around 64 per cent of companies currently falling under the category, Sebi said in its consultation paper.

The proposal aims to reduce the compliance burden and promote ease of doing business.

Corporate governance norms for HVDLEs were first introduced in September 2021, on a comply-or-explain basis until March 31, 2025, and became mandatory from April 2025. These norms apply to all entities with listed outstanding non-convertible debt securities of Rs 1,000 crore or more.

Following the rollout of these rules, several market participants approached Sebi seeking a higher threshold for classification. Once designated as an HVDLE, a company is required to comply with governance standards similar to those of equity-listed firms, including the submission of quarterly governance reports, annual secretarial compliance reports, and adherence to board composition norms.

Industry representatives argued that meeting these requirements increases costs substantially. The need for additional independent directors, committee-specific experts, and higher legal, secretarial, and audit expenses adds to the burden, especially for NBFCs and frequent issuers that primarily raise funds through private placements. They noted that the existing Rs 1,000 crore threshold is disproportionately low for such entities.

Accordingly, it has  been suggested to "increase the threshold for identification for HVDLEs from Rs 1,000 crore to Rs 5,000 crore".

In addition to revising the HVDLE threshold, Sebi has proposed aligning corporate governance norms for HVDLEs with those applicable to equity-listed companies.

Among the suggested changes is a revision in financial terminology, replacing the term "income" with "turnover" in defining material subsidiaries to maintain consistency with similar amendments made earlier for equity-listed entities.

The regulator has also proposed requiring shareholders’ special approval before a director crosses the age of 75 years. Further, Sebi recommended excluding time taken for regulatory or statutory approvals from the timeline for obtaining shareholder consent for the appointment or reappointment of directors. It also suggested exempting the requirement of shareholder approval for nominee directors appointed by financial regulators, courts, or tribunals.

To strengthen governance continuity, Sebi has proposed a three-month window to fill vacancies in key board committees such as the audit committee, nomination and remuneration committee, stakeholders relationship committee, and risk management committee.

The regulator also suggested that recommendations made by boards to shareholders should explicitly include the board’s rationale.

Another proposed amendment would remove the requirement that an independent director's vacancy should be filled within three months, provided the entity continues to meet the minimum board composition requirements. Sebi also suggested exempting HVDLEs from seeking shareholder approval for intra-group asset transfers between subsidiaries.

Additionally, companies emerging from the corporate insolvency resolution process (CIRP) would be given three months to fill key managerial positions (KMPs), as long as they have at least one full-time KMP during the transition period, Sebi proposed.

Sebi has further recommended replacing the fixed 21-day deadline for submitting periodic compliance reports with a more flexible provision, allowing the Board to prescribe timelines as needed.

It also proposed removing the requirement for HVDLEs to disclose related party transactions (RPTs) with their periodic compliance reports, noting that such details are already covered in half-yearly filings for equity-listed entities.

The regulator has also suggested introducing provisions for the appointment, reappointment, removal, and disqualification of secretarial auditors of HVDLEs.

On related party transactions, Sebi has proposed retaining the need for no-objection certificates (NOCs) from debenture trustees and debenture holders.

The Securities and Exchange Board of India (Sebi) has invited public comments on these proposals until November 17. PTI SP ANU ANU