By way of a circular dated 15 September, the Securities and Exchange Board of India (SEBI) has streamlined and clarified the corporate governance compliance requirements of listed companies. Clause 49 of the Listing Agreement has been amended to bring it in line with the provisions of the Companies Act, 2013, and the rules and circulars issued under the act.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”3″ ihc_mb_template=”2″ ]
The amended provisions of clause 49 will apply to all listed companies from 1 October (except for the provision relating to the appointment of woman directors, which will come into force on 1 April 2015). However, under the amendment, compliance with the provisions of clause 49 will not be mandatory for: (a) companies with a paid-up equity capital not exceeding ₹100 million (US$1.6 million) and net worth not exceeding ₹250 million; (b) companies with an equity share capital that is listed exclusively on the small and medium enterprise (SME) and SME-institutional trading platforms.
In addition, SEBI has introduced the following amendments:
(i) Alignment of the tenure of independent directors with the Companies Act, 2013;
(ii) Introduction of a familiarization programme for independent directors;
(iii) Provision for every company to constitute a nomination and remuneration committee comprising at least three directors, all of whom must be non-executive, with at least one-half of the members (including the chairman) as independent directors;
(iv) Requirement of a special resolution where disposal by a company of shares in its subsidiary would result in a reduction of its shareholding in that subsidiary to less than 50%;
(v) Requirement of every company to formulate a policy on materiality of related-party transactions, with such transactions requiring the approval of the company’s audit committee.
[/ihc-hide-content]
The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.
