Background:
SEBI formed a committee on corporate governance in June 2017 under the Chairmanship of Mr. Uday Kotak with a view to enhancing the standards of corporate governance of listed entities in India. The committee comprised of stalwarts from diverse fields viz. the government, industry, professional bodies, stock exchanges, academicians, lawyers, proxy advisors, etc. The committee submitted its report on October 5th 2017. The recommendations of the committee were discussed and deliberated by SEBI in its meeting dated 28th March 2017.
Some of the recommendations were accepted by SEBI without any modifications, some were accepted with modifications and for the remaining, SEBI is in the course of consultations with the relevant stakeholders.
Consequently, SEBI has amended the SEBI (LODR) Regulations 2015, notified on 9th May 2018. As has been the practice of SEBI, though the amendments have been notified, they would be implemented in a staggered manner. This is to allow the listed companies time to take the requisite steps to comply with the amendments.
This part deals with amendments pertaining to the Board Committees and the actions to be taken thereof. The Part I (amendments in definitions) and Part II (amendments in Board of Directors) have been published.
III. Committees of Board of Directors
1. Quorum for Nomination and remuneration committee
The amendment has laid down the quorum for Nomination and Remuneration committee. The quorum for a meeting of the nomination and remuneration committee shall be two or one third of the members of the committee, whichever is greater, with at least one independent director in attendance.
As per Regulation 19(2A),
“The quorum for a meeting of the nomination and remuneration committee shall be either two members or one third of the members of the committee, whichever is greater, including at least one independent director in attendance.”
Applicability- all listed companies.
Effective date- 1st April 2019.
Actions to be taken
W.e.f 1st April 2019, all meetings of NRC shall be convened with a quorum of at least 2 directors or 1/3rd of total strength, which ever is higher. There should be at least one independent director in attendance.
2. Meetings of Nomination and Remuneration committee
The amendment specifies the minimum number of meetings of NRC. As per the amendment, the NRC shall meet at least once a year.
Applicability- all listed companies.
Effective date- 1st April 2019.
Actions to be taken
W.e.f. 1st April 2019, the NRC of the listed company meet at least once a year.
3. Role of Stakeholders Relationship Committee
The amendment has widened the role of the Stakeholders Relationship Committee.
As per amended Regulation 20(1):
“(1) The listed entity shall constitute a Stakeholders Relationship Committee to specifically look into the various aspects of interest of shareholders, debenture holders and other security holders”.
Applicability- all listed companies
Effective date- 1st April 2019
Actions to be taken
The scope of the SRC has been widened. After the amendment, companies shall constitute SRC to look into all aspects of shareholders, debenture holders and other security holders and not only address their grievances.
4. Composition of SRC
The amendment has specified the composition of the SRC for the first time. This was earlier left to the discretion of the Board of Directors.
As per amended Regulation 20(2A):
“(2A) At least three directors, with at least one being an independent director, shall
be members of the Committee.”
Applicability- all listed companies
Effective date- 1st April 2019
Actions to be taken
W.e.f 1st April 2019, the SRC of every listed company shall comprise of at least 3 directors with at least 1 independent director.
5. Meetings of SRC
The amendment has specified the minimum number of meetings of the SRC.
As per amended Regulations 20(3) and 20(3A)
“(3) The Chairperson of the Stakeholders Relationship Committee shall be present at the annual general meetings to answer queries of the security holders.”
(3A)The stakeholders relationship committee shall meet at least once in a year”
Applicability- all listed companies
Effective date- 1st April 2019
Actions to be taken
1. The Chairperson of the SRC shall be present in all AGMs after 1st April 2019 to answer shareholder queries.
2. The SRC shall meet at least once in a year.
6. Meeting of Risk Management Committee
The amendment has specified the minimum number of meetings of RMC.
As per amended Regulation 21(3A):
“(3A) The risk management committee shall meet at least once in a year.”
Applicability- Top 500 listed companies as per market capitalisation
Effective date- 1st April 2019
Actions to be taken
W.e.f 1st April 2019, RMC shall meet at least once a year.
7. Role of RMC
After the amendment, role of RMC has been specified to include cyber security.
Applicability- Top 500 listed Companies as per market capitalisation
Effective date- 1st April 2019
Actions to be taken
The Board of directors shall while defining the role and responsibilities of the RMC ensure that its functions cover reviewing cyber security.
8. Applicability of RMC
After the amendment, the applicability of RMC has been enhanced.
Applicability- Top 500 listed as per market capitalisation
Effective date- 1st April 2019
Actions to be taken
The listed companies ranking from 101 to 500 as per market capitalisation as on 31st March 2019 shall create a RMC comprising of mostly members of board of directors which shall be chaired by a Non- executive Director.
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