The Securities and Exchange Board of India (“SEBI”) by way of its earlier circular dated August 3, 2020, had issued certain procedural guidelines for proxy advisors (“Guidelines”).  

Certain key provisions of the Guidelines are as follows: 

1. Proxy  advisors are required to  formulate  the  voting recommendation policies and disclose the  updated voting recommendation policies to their clients. Further, such policies should be reviewed at least once annually.
2. Proxy advisors should disclose conflict of interest on every specific document where they are giving their advice. Further, such disclosures should address possible areas of potential conflict and the safeguards that have been put in place to mitigate possible conflicts of interest.
3. Proxy advisors are required to  establish clear procedures to disclose, manage and/ or mitigate any potential conflicts of interest resulting from other business activities including consulting services undertaken by them and disclose the same to clients. 

The Guidelines were to become applicable from September 1, 2020. However, in view of the market conditions prevailing due to the CoVID-19 pandemic and representations received from the registered proxy advisors, SEBI has vide its circular dated August 27, 2020 (“Circular”), extended the timeline for compliance with the Guidelines by 4 (four) months.  

Accordingly, the provisions of the Guidelines will now become applicable with effect from January 1, 2021. 

Please find a copy of the Circular here and a copy of the Guidelines here.

This update has been contributed by Aastha (Partner) and Swaraj Singh Narula (Associate).