On 27th March 2025, the Securities and Exchange Board of India (“SEBI”) introduced sweeping changes to the corporate governance framework applicable to High Value Debt Listed Entities (“HVDLEs”) under the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025 (“LODR Amendment Regulations”). HVDLEs are entities that have listed non-convertible debt securities with an outstanding value exceeding a prescribed threshold. Traditionally, these entities operated under a relatively light-touch governance regime, meaning that while certain corporate governance norms were prescribed, compliance was not strictly enforced and entities had the flexibility to operate on a ‘comply or explain’ basis. However, in recent years, concerns have arisen regarding transparency in related party transactions (“RPTs”), concentration of control, and investor protection in the debt market, which prompted SEBI to reevaluate its norms.
Pursuant to the recommendations of a working group constituted by SEBI in this regard and the subsequent consultation paper dated 31 October 2024, SEBI introduced Chapter VA to the LODR Regulations, making corporate governance norms mandatory for HVDLEs with listed debt securities of INR 1,000 crore and above. Additionally, on 1 May 2025, SEBI issued a draft circular proposing further modifications to the reporting and disclosure formats for RPTs, secretarial compliance, and corporate governance, with the aim of streamlining compliance and enhancing stakeholder visibility.
This article argues that the amendments signal a shift in how regulatory accountability is conceived for debt-listed entities in India. While the framework introduces mandatory governance obligations for HVDLEs, it borrows heavily from equity-oriented norms without adequately adapting them to the creditor-driven structure of debt markets. This may lead to a regime of formal compliance in contrast to substantive oversight. To that end, this article is structured into three parts. Part I outlines the evolution of the regulatory framework for HVDLEs. Part II moves further and delves into the key elements of the 2025 Amendment and draft circular and the areas of inconsistencies in the new framework. Finally Part III examines andevaluates the conceptual misalignment between the adopted model and the governance rationale appropriate to debt markets while focusing on the normative implications of India’s emerging governance model for debt markets.
The Evolution of the Regulatory Framework for HVDLEs
The corporate governance framework for HVDLEs has evolved in a staggered yet deliberate manner, with SEBI progressively expanding the compliance norms applicable to them. HVDLEs were brought into the scope of the LODR Regulations through the insertion of Regulation 15(1A) vide an amendment dated 7th September 2021. This provision introduced a ‘comply or explain’ regime, whereby HVDLEs were expected to adhere to corporate governance norms akin to equity-listed companies but without a strict enforcement mandate.
This framework was rooted in regulatory caution and in the assumption that debt instruments, unlike equity, did not traditionally invite the same degree of public participation or day-to-day trading interest. As a result of this assumption, HVDLEs were primarily seen as institutional-grade issuers with sophisticated investor bases who did not require the same level of regulatory protection as retail shareholders. Therefore, SEBI refrained from imposing strict governance obligations on these entities viewing such oversight as not essential.
However, over time, it became evident that this assumption failed to account for real governance risks. Cases involving increased lack of transparency in RPTs, lopsided shareholding patterns, and insufficient oversight mechanisms flagged the limitations of a voluntary model. The fact that some HVDLEs had highly concentrated control structures, with a handful of related parties effectively running operations, meant that the safeguards of board composition, audit scrutiny, and stakeholder disclosures needed to be more than aspirational.
To this end, SEBI set up a Working Group on Corporate Governance for HVDLEs in May 2023, comprising stakeholders from across the industry and professional domains. Its mandate was to assess whether the existing regime adequately protected investor interests and upheld accountability. The Working Group’s findings, published in the form of a Consultation Paper dated 31 October 2024, laid the groundwork for a more binding compliance structure.
Consequently, on 27 March 2025, SEBI notified amendments to Regulation 15(1A) and introduced a standalone Chapter VA under the LODR Regulations. The revised framework mandates that all HVDLEs with listed non-convertible debt securities of INR 1,000 crore and above (as on 31 March 2025) must comply with enhanced corporate governance norms from 1 April 2025. Importantly, these norms are no longer qualified by a ‘comply or explain’ caveat and they now carry binding legal force.
Fragmentation within the Revised Compliance Framework
Having set out the background of the regulatory framework relating to HVDLEs, this part turns to the amendments introduced to this framework. The insertion of Chapter VA was intended to strengthen governance among the HVDLEs and bring greater alignment with equity market standards. However, despite their breadth, the reforms do not adopt a fully integrated approach. While the amendments raise the bar for compliance, several of their features remain either partial or internally inconsistent.
The compliance requirements under Chapter VA include requirements on board composition, committee formation, risk oversight, and transparency in RPTs. However, certain crucial elements that apply to equity-listed entities under Regulations 15 to 27 have not been mirrored in Chapter VA. This creates a dual framework that risks operational confusion. One instance of this selective replication relates to the treatment of RPTs. Chapter VA requires that material RPTs by HVDLEs be approved by the audit committee and shareholders, and be accompanied by a no-objection certificate (“NOC”) from the debenture trustee. While these provisions represent progress, there are key omissions. Certain amendments made to Regulation 23—such as the possibility of audit committee ratification of RPTs under prescribed conditions, or exemptions for transactions involving remuneration to non-promoter KMPs—are not included in Chapter VA. This leaves it unclear whether such transactions are permitted or if HVDLEs are expected to comply with overlapping standards.
Another issue lies in the manner in which committee responsibilities have been addressed. The 2025 amendments allow the audit committee of HVDLEs to discharge the functions of the Nomination and Remuneration Committee (“NRC”), Stakeholders Relationship Committee (“SRC”), and Risk Management Committee (“RMC”) through existing structures, including the Board itself or the audit committee. While this relaxation is aimed at avoiding duplication, it introduces ambiguity in responsibility allocation. If the board assumes multiple roles without appropriate segregation of duties, it may lead to dilution of accountability rather than its enhancement.
The draft circular issued by SEBI in May 2025 attempts to streamline reporting formats and clarify procedural expectations by providing standardised templates for secretarial compliance, corporate governance disclosures, and RPT reporting. However, these changes are largely administrative in nature. They do not address the interpretive gaps in substantive provisions, such as the precise timelines for NOC procurement or the treatment of transactions prior to 1 April 2025. The absence of clarity on such aspects may hinder uniform implementation, especially for entities transitioning from the earlier ‘comply or explain’ regime. Without clear regulatory guidance, there remains a risk that HVDLEs may adopt inconsistent internal procedures, thereby weakening the objective of standardised governance practices that the amendments seek to achieve.
A further layer of inconsistency arises from the treatment of unlisted subsidiaries. While Chapter VA extends certain governance obligations to material unlisted subsidiaries of HVDLEs, it does not specify which reporting and audit standards are applicable in full. This raises the possibility that material subsidiaries may be subject to only partial oversight, undermining the intent behind consolidated governance. Therefore, while the 2025 framework represents a step forward, it retains a patchwork structure. The next part will discuss how these gaps can impair the long-term objective of ensuring parity in governance standards across market instruments.
Departure from Intended Governance Rationale
The 2025 Amendments aim to create parallel governance obligations between HVDLEs and equity-listed companies. However, in the view of the authors, in doing so, the framework assumes that the rationale for governance in both contexts is identical. This assumption is misplaced. The role that governance plays in debt markets is structurally different, and the amendments do not fully reflect this distinction.
Debt investors, unlike shareholders, do not exercise control rights over management. Their protection comes from covenants and regulatory safeguards rather than participation in corporate decisions. In this context, governance norms should function as an external risk-control mechanism. However, the 2025 framework draws directly from equity models, without accounting for the absence of shareholder oversight in debt-heavy capital structures. The use of tools such as shareholder resolutions and board-level approvals presumes an active, dispersed investor base, which may not exist in HVDLEs.
This is reflected in the procedure for the approval of an RPT. While the requirement of approval by the audit committee and an NOC from the debenture trustee appears procedurally sound, it lacks normative clarity. Debenture trustees are not governance watchdogs—they are contractual agents with limited ability to interrogate the commercial merits of transactions. Requiring their approval without a defined evaluative standard risks reducing the process to formality.
Further, the thresholds prescribed for materiality—₹1,000 crore or 10% of consolidated turnover—also follow a one-size-fits-all model. For companies with thin margins or concentrated ownership, these benchmarks may not capture true financial risk. In substance, the governance model under Chapter VA treats debt-listed companies as equity analogues. However, the foundational assumptions in both cases differ. Without acknowledging these risks, the new regime may lack normativity.
Conclusion
The amendment to the LODR Regulations and the insertion of Chapter VA marks a significant shift in SEBI’s regulatory posture towards HVDLEs by moving from a voluntary to a mandatory governance regime. However, the framework suffers from conceptual and structural inconsistencies. By extending equity-style norms without adapting them to the distinct nature of debt markets, the regulations risk becoming a procedural formality rather than a substantive safeguard. The emphasis on formal thresholds, committee structures, and shareholder approvals fails to acknowledge that creditor protection requires a different lens—one centered on prudential oversight, not participatory governance. Without addressing this normative gap, the reforms may only partially achieve SEBI’s objective of accountability in India’s growing debt capital markets. It remains to be seen whether future reforms will bring conceptual clarity to this hybrid framework.
This article is a part of the DNLU-SLJ (Online) series, for submissions click here.
Student, National Law Institute University, Bhopal
