Corporate Governance Norms in India : SEBI Consultative Paper

In order to keep pace with fast changing business scenario , to align with the provisions of Companies Bill 2012 and to adopt international best practices relating to Corporate Governance, SEBI has come out with a consultative paper on Corporate Governance norms in India. The paper bring suggestion which will have far reaching effect and will completely change the landscape of Corporate Governance in case of listed companies. 
As per the concept note, the objective is to is to entice a wider debate on the governance requirement for the listed companies so as to adopt better global practices. While it needs to be ensured that the proposals suggested would not result in increasing the additional cost of compliances by huge margin and that the cost should not outweigh the benefit of listing, at the same time, it is necessary to bring back the confidence of the investors back to the capital market, for channelizing savings into investment, which is the need of the hour. 

A few major proposals in this Concept Paper are as under: 
  • Appointment of independent directors by minority shareholders: listed companies beyond a market cap need to be mandated to have at least one small shareholder director 
  • Cumulative voting for appointment of Independent Director: Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors when the company has multiple openings on its board 
  • Formal letter of appointment to Non- Executive Directors (NEDs) and Independent Directors with specific roles and responsibilities 
  • Certification course and training for independent directors 
  • Treatment of nominee director as Non-Independent Director 
  • Mandate minimum and maximum age for Independent Directors 
  • Mandating maximum tenure for independent director to be two consecutive terms of 5 years in line with Companies Bill 
  • Requiring Independent directors to disclose reasons of their resignation 
  • Clarity on liabilities and on remuneration of independent directors 
  • Performance evaluation of independent director 
  • Appointment of one of the independent director as Lead Independent Director 
  • Separate meetings of Independent Directors at least once in a year 
  • Maximum number of public companies in which an individual may serve as an Independent Director should be restricted to seven 
  • Separating the position of Chairman and that of the Managing Director / CEO 
  • Diversity and formally laid out succession plan for Board 
  • Framing a risk management plan, its compulsory monitoring and reviewing by a Board/Board Committee and the disclosure thereof to the shareholders at periodic intervals (preferably on annual basis) be laid down in the Listing Agreement. 
  • Making Whistle Blower Mechanism a compulsory requirement 
  • Mandating e-voting for all resolutions of a listed company 
  • Measures for preventing abuse of related Party Transactions 
  • Lay down specific fiduciary responsibilities of controlling shareholders, mandating relationship agreement between the company and the controlling shareholder specifying the duties and responsibilities of controlling shareholders 
  • Provision for regulatory support to class action suits 
  • Detailed guidelines on Role of Institutional Investors 
  • Enforcement for non-compliance of Corporate Governance Norms
SUGGESTION FROM PUBLIC ARE INVITED ON THE CONCEPT PAPER TILL 31ST JANUARY 2013



Posted by:
Ms.Deepali A Mendiratta
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