Applicability of Corporate Governance provisions for listed companies with examples and timelines for submission
Governing Regulation for applicability of Corporate Governance Provisions:
Regulation 15 (2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) is the governing regulation which decides whether corporate governance provisions are applicable to the listed company or not.
What Regulation 15 (2) states:
Regulation 15 (2) of the Listing Regulations states as under:
“The compliance with the corporate governance provisions as specified in regulations 17, 17A, 18, 19, 20, 21,22, 23, 24, 24A, 25, 26, 27 and clauses (b) to (i) of sub-regulation (2) of regulation 46 and para C , D and E of Schedule V shall not apply, in respect of –
(a) the listed entity having paid up equity share capital not exceeding rupees ten crore and net worth not exceeding rupees twenty five crore, as on the last day of the previous financial year:
Provided that where the provisions of the regulations specified in this regulation becomes applicable to a listed entity at a later date, such listed entity shall comply with the requirements those regulations within six months from the date on which the provisions became applicable to the listed entity.
(b) the listed entity which has listed its specified securities on the SME Exchange:
Provided that for other listed entities which are not companies, but body corporate or are subject to regulations under other statues, the provisions of corporate governance provisions as specified in regulation 17, 17A, 18, 19, 20, 21, 22, 23, 24, 24A, 25, 26, 27 and clauses (b) to (i) of sub-regulation (2) of regulation 46 and para C , D and E of Schedule V shall apply to the extent that it does not violate their respective statutes and guidelines or directives issued by the relevant authorities.”
Understanding applicability of corporate governance provisions with examples:
After going through the above provisions of Regulation 15 (2) of the Listing regulations, let us try to understand, whether provisions of corporate governance will be applicable or not to the listed companies in the below scenarios:
| Figures are as on the last day of the previous financial year | ||||
| Case No. | Paid up Equity share capital (INR) | Paid up Preference share capital (INR) | Net Worth
(INR) |
Listed on
|
| 1 | 10 Crore | 0 | 25 Crore | Main Board |
| 2 | 10 Crore | 10 Crore | 25 Crore | Main Board |
| 3 | 19 Crore | 0 | 20 Crore | Main Board |
| 4 | 10 Crore | 0 | 30 Crore | Main Board |
| 5 | 10 Crore | 0 | 150 Crore | SME Platform |
Case 1: In this case, paid up equity capital is Rs. 10 Crore and net worth is Rs. 25 crore, the provisions of corporate governance would not be applicable because both paid up capital and net worth does not exceed the specified limit of Rs. 10 Crores and Rs. 25 Crores respectively.
Case 2: In this case, paid up share capital is Rs. 20 Crores (Rs. 10 Crores Equity Share Capital and Rs. 10 Crores Preference Share Capital) and net worth is Rs. 25 crores, the provisions of corporate governance would not be applicable because regulation clearly states paid up equity share capital should not exceed Rs. 10 Crores and net worth should not exceed Rs. 25 Crores.
Case 3: In this case, paid up equity capital is Rs. 19 Crores and net worth is Rs. 20 crores, the provisions of corporate governance would be applicable because paid up equity share capital is exceeding the specified limit of Rs. 10 Crores.
Case 4: In this case, paid up equity capital is Rs. 10 Crores and net worth is Rs. 30 crores, the provisions of corporate governance would be applicable because net worth is exceeding the specified limit of Rs. 25 Crores.
Case 5: In this case, paid up equity capital is Rs. 10 Crores and net worth is Rs. 150 crores, the provisions of corporate governance would not be applicable because company is listed on SME Platform.
When to submit Corporate Governance Report:
The timelines to submit the corporate governance report is specified in Reg. 27 (2) of the Listing Regulations.
Regulation 27 (2) of the Listing Regulations states as under:
“(a) 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 recognised stock exchange(s) within fifteen days from close of the quarter.
(b) Details of all material transactions with related parties shall be disclosed along with the report mentioned in clause (a) of sub-regulation (2).
(c) 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”
For quarter ended June, September, December and March, due date of submission of corporate governance report will be July 15, October 15, January 15 and April 15 respectively.
– This article on Corporate Governance applicability is written by Author Vaibhhav Shah, who has over six years of experience in the field of Listing and Compliances.
Author Bio
Thanks for the brief analysis, suggest you to write more articles on Corporate Governance and enlighten us.
If any Company having net worth Rs 23 Crore as on 31-3-2020 and Rs 26 Crore as on 31-12-2020, Corporate Governance applicable for Fy 2020-21 ending 31-3-2021 or applicable for FY 2021-22 after 6 month say 30th June 2021 onwards please clarify
Hi, firstly the net-worth needs to be checked as on the last day of the previous financial year as per the regulations i.e you will have to check the net-worth as on March 31, 2021 (net-worth as on December 31, 2020 need not be verified for CG applicability. In case if the net-worth as on last day of the previous financial year i.e March 31, 2021 exceeds the specified limits then Company will have to comply with the relevant regulations within six months i.e on or before September 30, 2021.
Trust the same clarifies.
Dear Sir,
Kindly guide on the same. If my equity paid up capital is below 10 cr and net worth is exceeding 25cr then is it applicable in this situation.
Thanks for the clarity. Our Company was penalized due to wrong interpretation. This article has made it very clear and the examples set are easy to understand and interpret. This is the only article at Google where I could get proper clarity for interpretation of CG applicability.
Thanks Rajneesh
Hello Mr. Rajnesh,
Can you give me your contact details need to discuss on the same issue.
Is it mandatory for the Company to file Non-applicability certificate quarterly where the Corporate Governance is not applicable. Please state the rule/regulation where it is mentioned..
Please guide.
Hi Roshni, its not specified in Regulations to submit CG Non-applicability certificate.
There is some ambiguity on the subject – Regulation 15 (2) stipulates that it shall not apply, in respect of –
(a) the listed entity having paid up equity share capital not exceeding rupees ten crore
and net worth not exceeding rupees twenty five crore, as on the last day of the
previous financial year:
Here the word “and “ in between Equity capital & net worth is crucial . It means, according to me, that both criteria are to be considered
for applicability not any one of them.
Yes, you are right, both criterias are to be considered, but for non-applicability
There is some ambiguity on the issue -Regulation 15 (2) stipulate that it shall not apply in respect of-
a) the listed entity having paid up Equity share capital not exceeding rupees ten crore and net worth not exceeding rupees twenty five crore, as on the last day of the previous financial year:
Here the word and between Equity capital and net worth is crucial. According to me both criteria should be considered not any one of them
Point wise framed Examples making the complex provision simple to understand. Well drafted article and gives clear interpretation of law, i wasn’t able to get clarity and had mixed interpretation given by Professionals. You need to write more articles for benefit of Compliance Professionals like us.
Thanks Gauri
Simplified article.
Had a lot of confusion on the interpretation, this one had clarified to a lot of extent.
Thanks Dixit
Outstanding. Very easy to understand
Thank you Sir
Illustrations making understanding of Reg. 15 (2) simple
Thanks, Illustrations were intentionally included for better clarity.
Explained nicely with cases which makes understanding of corporate governance applicability with ease.
Thanks Ram
nice
Thanks Bissy !!!
Helpful
Thanks Aayush