Corporate Governance as per SEBI (LODR) Regulation 2015

Corporate Governance

Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

Applicable Regulation for Corporate Governance as per SEBI (Listing obligations and Disclosure Requirement) Regulation 2015:

 Regulation -17,18,19,20,21,22,23,24,25,26,27,and Regu. 46 and Para C,D and E of Schedule V

SL. NO.	PARTICULARS	REGULATION
(I)	Applicability	Regl-15
(1)	The provisions of this chapter shall apply to a listed entity which has listed its specified securities on any recognized stock exchange(s)either on the main board or on SME Exchange or on institutional trading platform:	15(1)
(2)	The compliance with the corporate governance provisions applicable in respect of whether company is listed  having paid up equity share capital exceeding  10 crores and Net worth  exceeding 25 crores , a on the last day of the previous financial year	15(2)(a)
(II)	BOARD OF DIRECTORS	Gegl-17
(A)	COMPOSITION OF THE BOARD
1.	BOD Shall have Optimum combination of executive and non-executive directors with at least one woman director and not less than fifty per cent of the board of directors shall comprise of non-executive directors;	17(1)(a)
2.	Where Chairperson is NED, at least 1/3rd BOD comprise Independent Director;	17(1)(b)
3.	Where Chairperson is not NED, at least 1/2  BOD comprise Independent Director;	17(1)(b)
4	Meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings.	17(2)
5	Board of Directors shall periodically review compliance reports pertaining to all laws applicable to the listed entity, prepared by the listed entity as well as steps taken by the listed entity to rectify instances of non-compliances.	17(3)
6	The board of directors shall lay down a code of conduct for all members of board of directors and senior management of the listed entity	17(5)(a)
7	The code of conduct shall suitably incorporate the duties of independent directors as laid down in the Companies Act, 2013	17(5)(b)
8	Board of Directors shall recommend all fees or compensation, if any, paid to non-executive directors, including independent directors and shall require approval of shareholders in general meeting.	17(6)(a)
9	The requirement of obtaining approval of share holders in general meeting shall not apply to payment of sitting fees to non-executive directors, if made within the limits prescribed under the Companies Act, 2013 for payment of sitting fees without approval of the Central Government	17(6)(b)
10	The approval of shareholders mentioned in clause (a), shall specify the limits for the maximum number of stock options that may be granted to non-executive directors, in any financial year and in aggregate.	17(6)(C)
11	Independent directors shall not be entitled to any stock option.	17(6)(d)
12	The minimum information to be placed before the board of directors is specified in Part A of Schedule II.	17(7)
13	The chief executive officer and the chief financial officer     shall provide the compliance certificate to the board of directors as specified in Part B of Schedule II.	17(8)
14	(2)    (a) The listed entity shall lay down procedures to inform members of board of directors about risk assessment and minimization procedures. (b)The board of directors shall be responsible for framing, implementing and monitoring the risk management plan for the listed entity.	17(9)
15	The performance evaluation of independent directors shall be done by the entire board of directors Provided that in the above evaluation the directors who are subject to evaluation shall not participate:	17(10)
III	Audit Committee.	Regl.-18
1	The audit committee shall have minimum three directors as members	18(1)(a)
2	Two-thirds of the members of audit committee shall be independent directors.	18(1)(b)
3	All members of audit committee shall be financially literate and at least one member shall have accounting or related financial management expertise.	18(1)(c)
4	The chairperson of the audit committee shall be an independent director and he shall be present at Annual general meeting to answer shareholder queries.	18(1)(d)
5	The Company Secretary shall act as the secretary to the audit committee.	18(1)(e)
6	The audit committee shall meet at least four times in a year and not more than one hundred and twenty days shall elapse between two meetings	18(2)(a)
7	The quorum for audit committee meeting shall either be two members or one third of the members of the audit committee, whichever is greater, with at least two independent directors.	18(2)(b)
7	The audit committee shall have powers to investigate any activity within its terms of reference, seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary	18(2)©
8	The role of the audit committee and the information to be reviewed by the audit committee shall be as specified in Part C of Schedule II.	18(3)
IV	Nomination and remuneration committee.	Regl-19
1	The committee shall comprise of at least three directors	19(1)(a)
2	All directors of the committee shall be non-executive directors	19(1)(b)
3	At least fifty percent of the directors shall be independent directors	19(1)(c)
4	The Chairperson of the nomination and remuneration committee shall be an independent director (Provided that the chairperson of the listed entity, whether executive or non-executive, may be appointed as a member of the Nomination and Remuneration Committee and shall not chair such Committee)	19(2)
5	The Chairperson of the nomination and remuneration committee may be present at the annual general meeting, to answer the shareholders' queries; however, it shall be up to the chair person to decide who shall answer the queries.	19(3)
6	The role of the nomination and remuneration committee shall be as specified as in Part D of the Schedule II.	19(4)
(V)	Stakeholders Relationship Committee.	Regl.-20
1	The listed entity shall constitute a Stakeholders Relationship Committee to specifically look into the mechanism of redressal of grievances of shareholders, debenture holders and other security holders	20(1)
2	The chairperson of this committee shall be a non-executive director	20(2)
3	The role of the Stakeholders Relationship Committee shall be as specified as in Part D of the Schedule II	20(4)
4
(VI)	Risk Management Committee.	Regl-21
1	The board of directors shall constitute a Risk Management Committee.	21(1)
2	The majority of members of Risk Management Committee shall consist of members of the board of directors.	21(2)
3.	The Chairperson of the Risk management committee shall be a member of the board of directors and senior executives of the listed entity may be members of the committee.	21(3)
4	The board of directors shall define the role and responsibility of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to the committee and such other functions as it may deem fit.	21(4)
5	The provisions of this regulation shall be applicable to top 100 listed entities, determined on the basis of market capitalization, as at the end of the immediate previous financial year.	21(5)
(VII)	Vigil mechanism.	Regl.-22
1.	The listed entity shall formulate a vigil mechanism for directors and employees to report genuine concerns	22(1)
2.	The vigil mechanism shall provide for adequate safeguards against victimization of director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases.	22(2)
(VIII)	Related party transactions.	Regl.-23
	The listed entity shall formulate a policy on materiality of related party transactions and on dealing with related party transactions	23(1)
	All related party transactions shall require prior approval of the audit committee	23(2)
	Audit committee may grant omnibus approval for related party transactions proposed to be Enentered into by the    Listed entity subject  to the following conditions, namely-	23(3)
	The audit committee shall lay down the criteria for granting the omnibus approval in line with the policy on related party transactions of the listed entity and such approval shall be applicable in respect of transactions which are repetitive in nature;	23(3)(a)
	the audit committee shall satisfy itself regarding the need for such omnibus approval and that such approval is in the interest of the listed entity;	23(3)(b)
	(a)       the omnibus approval shall specify: (i)             the name(s) of the related party, nature of transaction, period of transaction, maximum amount of transactions that shall be entered into, (ii)            the indicative base price / current contracted price and the formula for variation in the price if any ;and (iii)          such other conditions as the audit committee may deem fit: Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may grant omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction
	the audit committee shall review, at least on a quarterly basis, the details of related party transactions entered into by the listed entity pursuant to each of the omnibus approvals given	23(3)
	(a)       Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year
	All material related party transactions shall require approval of the shareholders through resolution and the related parties shall abstain from voting on such resolutions whether the entity is a related party to the particular transaction or not	23(4)
	(2)   The provisions of sub-regulations (2), (3) and (4) shall not be applicable in the following cases: (a) transactions entered into between two government companies; (b)Transactions     entered into between a holding company and it’s wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. Explanation.-For the purpose of clause (a), "government company (ies)" means Government company as defined in sub-section (45) of section 2 of the Companies Act, 2013.	23(5)
	The provisions of this regulation shall be applicable to all prospective transactions	23(6)
	(2)   For the purpose of this regulation, all entities falling under the definition of related parties shall abstain from voting irrespective of whether the entity is a party to the particular transaction or not.	23(7)
	All existing material related party contracts or arrangement s entered into prior to the date of notification of these regulations and which may continue beyond such date shall be placed for approval of the shareholders in the first General Meeting subsequent to -notification of these regulations	23(8)
(IX)	Corporate governance requirements with respect to subsidiary of listed entity.	Regl.-24
1	At least one independent director on the board of directors of the listed entity shall be a director on the board of directors of an unlisted material subsidiary, incorporated in India.	24(1)
	The audit committee of the listed entity shall also review the financial statements, in particular, the investments made by the unlisted subsidiary	24(2)
2	The minutes of the meetings of the board of directors of the unlisted subsidiary shall be placed at the meeting of the board of directors of the listed entity.	24(3)
3	The management of the unlisted subsidiary shall periodically bring to the notice of the board of directors of the listed entity, a statement of all significant transactions and arrangements entered into by the unlisted subsidiary. Explanation.-For the purpose of this regulation, the term “significant transaction or arrangement” shall mean any individual transaction or arrangement that exceeds or is likely to exceed ten percent of the total revenues or total expenses or total assets or total liabilities, as the case may be, of the unlisted material subsidiary for the immediately preceding accounting year	24(4)
4	A listed entity shall not dispose of shares in its material subsidiary resulting in reduction of its shareholding (either on its own or together with other subsidiaries) to less than fifty percent or cease the exercise of control over the subsidiary without passing a special resolution in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court / Tribunal.	24(5)
	Selling, disposing and leasing of assets amounting to more than twenty percent of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of special resolution, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court / Tribunal	24(6)
	(2)   Where a listed entity has a listed subsidiary, which is itself a holding company, the provisions of this regulation shall apply to the listed subsidiary in so far as its subsidiaries are concerned.	24(7)
(X)	Obligations with respect to independent directors.	Regl.-25
	A person shall not serve as an independent director in more than seven listed entities:	25(1)
	Provided that any person who is serving as a whole time director in any listed entity shall serve as an independent director in not more than three listed entities.	25(1)
	The independent directors of the listed entity shall hold at least one meeting in a year, without the presence of non-independent directors and members of the management and all the independent directors shall strive to be present at such meeting.	25(3)
	The independent directors in the meeting referred in sub-regulation (3) shall, inter alia- (a) review the performance of non-independent directors and the board of directors as a whole; (b) review the performance of the chairperson of the listed entity, taking into account the views of executive directors and non-executive directors; (c) assess the quality, quantity and timeliness of flow of information between the management of the listed entity and the board of directors that is necessary for the board of directors to effectively and reasonably perform their duties.	25(4)
	An independent director shall be held liable, only in respect of such acts of omission or commission by the listed entity which had occurred with his knowledge, attributable through processes of board of directors, and with his consent or connivance or where he had not acted diligently with respect to the provisions contained in these regulations.	25(5)
	An independent director who resigns or is removed from the board of directors of the listed entity shall be replaced by a new independent director by listed entity at the earliest but not later than the immediate next meeting of the board of directors or three months from the date of such vacancy, whichever is later: Provided that where the listed entity fulfils the requirement of independent directors in its board of directors without filling the vacancy created by such resignation or removal, the requirement of replacement by a new independent directors hall not apply	25(6)
	(2)   The listed entity shall familiarize the independent directors through various programmes about the listed entity, including the following: (a)   Nature of the industry in which the listed entity operates; (b)   Business model of the listed entity; (c)   roles, rights, responsibilities of independent directors; and any other relevant information	25(7)
(XI)	Obligations with respect to directors and senior management.	Regl.-26
	A director shall not be a member in more than ten committees or act as chairperson of more than five committees  across all listed entities	26(1)
	The limit of the committees on which a director may serve in all public limited companies, whether listed or not, shall be included and all other companies including private limited companies, foreign companies and companies under Section 8 of the Companies Act, 2013 shall be excluded	26(1)(a)
	For the purpose of determination of limit, chairpersonship and membership of the audit committee and the Stakeholders' Relationship Committee alone shall be considered.	26(1)(b)
	Every director shall inform the listed entity about the committee positions he or she occupies in other listed entities and notify changes as and when they take place	26(2)
	All members of the board of directors and senior management personnel shall affirm compliance with the code of conduct of board of directors and senior management on an annual basis.	26(3)
	Non-executive directors shall disclose their shareholding, held either by them or on a beneficial basis for any other persons in the listed entity in which they are proposed to be appointed as directors, in the notice to the general meeting called for appointment of such director	26(4)
	Senior management shall make disclosures to the board of directors relating to all material, financial and commercial transactions, where they have personal interest that may have a potential conflict with the interest of the listed entity at large. Explanation.-For the purpose of this sub-regulation, conflict of interest relates to dealing in the shares of listed entity, commercial dealings with bodies, which have shareholding of management and their relatives etc.	26(5)
(XII)	Other corporate governance requirements.	Regl.-27
1	The listed entity may, at its discretion ,comply with requirements as specified in Part E of Schedule II	27(1)
2	The listed entity shall submit a quarterly compliance report on corporate governance in the format as specified by the Board from time to time to the recognized stock exchange(s) within fifteen days from close of the quarter.	27(2)(a)
3	Details of all material transactions with related parties shall be disclosed along with the report mentioned in clause (a) of sub-regulation (2).	27(2)(b)
4	The report mentioned in clause (a) of sub-regulation (2) shall be signed either by the compliance officer or the chief executive officer of the listed entity	27(2)(c)
(XII)	WEBSITE DISCLOSURE	Regl.-46
1	The listed entity shall maintain a functional website containing the basic information about the listed entity	46(1)
2	(a) details of its business; (b) terms and conditions of appointment of independent directors; (c) composition of various committees of board of directors; (d) code of conduct of board of directors and senior management personnel; (e) details of establishment of vigil mechanism /Whistle Blower policy; (f)  criteria of making payments to non-executive directors , if the same has not been disclosed in annual report; (g) policy on dealing with related party transactions; (h) policy for determining ‘material’ subsidiaries; (i)  details of familiarization Programmes imparted to independent directors including the following details:- (i)  number of programmes attended by independent directors (during the year and on a cumulative basis till date), (ii) number of hours spent by independent directors in such programmes (during the year and on cumulative basis till date),and (iii)  other relevant details	46(2)
3	The listed entity shall ensure that the contents of the website are correct. The listed entity shall update any change in the content of its website within two working days from the date of such change in content.	46(3)
4	Disclosure and Compliance of   Para C, D and E of Schedule V	Schedule V

The entire contents of above document have been prepared on the basis of SEBI (Listing obligations and Disclosure Requirement) Regulation 2015.  Whereas deep care has been taken by author to ensure the correctness and completeness of the information provided.

This is nothing but a knowledge sharing initiative by author and author do not intend to accost any business or profession.