SEBI working on revised listing norms

The Securities and Exchange Board of India (SEBI) is working on revised listing norms that would include enhanced corporate governance norms in accordance with the provisions of the New Companies Act.

SEBI had, in February this year, approved new corporate governance norms that require companies to justify CEO salaries, put in place whistle-blower policies and orderly succession plans.

Under the new corporate governance norms, to be effective from 1 October 2014, listed companies require greater oversight of and by independent directors, greater checks on all related party transactions involving promoters and directors and limits on directorships and remuneration of board members.

Among others, the new norms, finalised after detailed consultations over draft regulations released in January 2013, seek to exclude 'nominee directors' from the definition of independent directors.

Other proposals include compulsory whistle-blower mechanism, expanded role of audit committee, and prohibition of stock options to independent directors and enhanced disclosure of remuneration policies.

The Companies Act, 2013, enacted on 30 August 2013, provides for a major overhaul in the corporate governance norms for all companies.

The rules pertaining to corporate governance were notified on March 27, 2014.

The requirements under the Companies Act, 2013 and the rules notified there under would be applicable for every company or a class of companies (both listed and unlisted) as may be provided therein.

SEBI has decided to review the provisions of the listing agreement in this regard with the objectives to align with the provisions of the Companies Act, 2013, adopt best practices on corporate governance and to make the corporate governance framework more effective.

The revised of Clause 49 of the listing agreement would be applicable to all listed companies with effect from 1 October 2014. However, the provisions of Clause 49 (VI)(C) would apply to top 100 listed companies by market capitalisation as at the end of the immediate previous financial year.

The provisions of Clause 49(VII) would be applicable to all prospective transactions, SEBI said. All existing material related party contracts or arrangements as on date that are likely to continue beyond 31 March 2015 would be placed for approval of the shareholders in the first general meeting subsequent to 1 October 2014.

However, a company may choose to get such contracts approved by the shareholders even before 1 October 2014.

For other listed entities which are not companies, but body corporate or are subject to regulations under other statutes (eg, banks, financial institutions, insurance companies etc), Clause 49 will apply to the extent that it does not violate their respective statutes and guidelines or directives issued by the relevant regulatory authorities.

Clause 49 is not applicable to mutual funds.

The revised Clause 35B would be applicable to all listed companies and the modalities would be governed by the provisions of Companies (Management and Administration) Rules, 2014.

The monitoring cell formed by the stock exchanges would monitor the compliance with the provisions of the revised Clause 49 on corporate governance for all listed companies.

The cell will ascertain the adequacy and accuracy of disclosures in the quarterly compliance reports received from the companies and would submit a consolidated compliance report to SEBI within 60 days from the end of each quarter.