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
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SL. NO.
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PARTICULARS
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REGULATION
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(I)
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Applicability
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Regl-15
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(1)
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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:
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15(1)
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(2)
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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
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15(2)(a)
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(II)
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BOARD OF DIRECTORS
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Gegl-17
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(A)
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COMPOSITION OF THE BOARD
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1.
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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;
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17(1)(a)
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2.
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Where
Chairperson is NED, at least 1/3rd BOD
comprise Independent Director;
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17(1)(b)
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3.
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Where
Chairperson is not NED, at least 1/2 BOD comprise Independent Director;
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17(1)(b)
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4
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Meet at least four times a year, with a maximum time gap of one hundred and twenty
days between any two meetings.
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17(2)
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5
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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.
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17(3)
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6
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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
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17(5)(a)
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7
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The code of conduct shall suitably incorporate the duties of independent directors as laid down in the
Companies Act, 2013
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17(5)(b)
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8
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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.
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17(6)(a)
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9
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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
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17(6)(b)
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10
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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.
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17(6)(C)
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11
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Independent directors shall not be entitled to
any stock option.
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17(6)(d)
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12
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The minimum information to
be placed before the board of directors is specified in Part A of Schedule II.
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17(7)
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13
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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.
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17(8)
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14
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(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.
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17(9)
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15
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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:
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17(10)
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III
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Audit
Committee.
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Regl.-18
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1
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The audit
committee shall have minimum three
directors as members
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18(1)(a)
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2
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Two-thirds of the members of audit committee shall be independent directors.
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18(1)(b)
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3
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All members of
audit committee shall be financially
literate and at least one member shall have accounting or related
financial management expertise.
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18(1)(c)
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4
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The chairperson of the audit committee shall
be an independent director and he shall be present at Annual general meeting to answer shareholder queries.
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18(1)(d)
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5
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The Company Secretary shall act as the
secretary to the audit committee.
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18(1)(e)
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6
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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
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18(2)(a)
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7
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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.
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18(2)(b)
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7
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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
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18(2)©
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8
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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.
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18(3)
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IV
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Nomination and
remuneration committee.
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Regl-19
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1
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The committee
shall comprise of at least three
directors
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19(1)(a)
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2
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All directors of the committee shall be non-executive
directors
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19(1)(b)
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3
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At least fifty percent of the directors shall be
independent directors
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19(1)(c)
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4
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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)
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19(2)
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5
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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.
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19(3)
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6
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The role of the nomination and remuneration committee shall be as specified
as in Part D of the Schedule II.
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19(4)
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(V)
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Stakeholders
Relationship Committee.
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Regl.-20
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1
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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
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20(1)
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2
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The chairperson of this committee shall be a
non-executive director
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20(2)
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3
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The role of the Stakeholders Relationship Committee shall be as specified
as in Part D of the Schedule II
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20(4)
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4
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(VI)
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Risk
Management Committee.
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Regl-21
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1
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The board of directors shall
constitute a Risk Management Committee.
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21(1)
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2
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The majority of members of Risk
Management Committee shall consist of members
of the board of directors.
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21(2)
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3.
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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.
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21(3)
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4
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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.
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21(4)
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5
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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.
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21(5)
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(VII)
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Vigil
mechanism.
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Regl.-22
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1.
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The listed entity shall
formulate a vigil mechanism for directors and employees
to report genuine concerns
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22(1)
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2.
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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.
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22(2)
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(VIII)
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Related party
transactions.
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Regl.-23
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The listed
entity shall formulate a policy on
materiality of related party transactions and on dealing with related
party transactions
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23(1)
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All related
party transactions shall require prior approval of the audit committee
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23(2)
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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-
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23(3)
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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;
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23(3)(a)
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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;
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23(3)(b)
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(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
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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
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23(3)
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(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
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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
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23(4)
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(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.
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23(5)
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The provisions of this regulation shall be applicable to
all prospective transactions
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23(6)
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(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.
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23(7)
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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
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23(8)
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(IX)
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Corporate
governance requirements with respect to subsidiary of listed entity.
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Regl.-24
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1
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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.
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24(1)
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The audit committee of the listed entity shall also review the
financial statements, in particular, the investments made by the unlisted
subsidiary
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24(2)
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2
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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.
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24(3)
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3
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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
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24(4)
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4
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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.
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24(5)
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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
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24(6)
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(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.
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24(7)
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(X)
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Obligations
with respect to independent directors.
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Regl.-25
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A person shall not serve as an independent director in more than seven
listed entities:
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25(1)
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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)
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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.
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25(3)
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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)
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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.
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25(5)
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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
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25(6)
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(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
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25(7)
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(XI)
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Obligations
with respect to directors and senior management.
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Regl.-26
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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
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26(1)
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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
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26(1)(a)
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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)
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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
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26(2)
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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.
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26(3)
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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
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26(4)
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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.
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26(5)
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(XII)
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Other
corporate governance requirements.
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Regl.-27
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1
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The listed entity may, at its discretion ,comply with requirements as specified in
Part E of Schedule II
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27(1)
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2
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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.
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27(2)(a)
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3
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Details of all material transactions with related parties shall be
disclosed along with the report mentioned in clause (a) of sub-regulation
(2).
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27(2)(b)
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4
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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
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27(2)(c)
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(XII)
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WEBSITE DISCLOSURE
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Regl.-46
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1
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The listed entity shall maintain a functional website containing the
basic information about the listed entity
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46(1)
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2
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(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
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46(2)
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3
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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.
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46(3)
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4
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Disclosure and Compliance of Para C, D and E of Schedule V
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Schedule V
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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.
