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1. Need of Corporate Governance

Today time corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power or alleged criminal activity by corporate officers. Therefore, laws and regulations have been passed to address the components of corporate governance. Organizations have Duties and responsibilities towards their shareholders and stakeholders and hence they need to be governed in accordance with the law and keeping in mind the interests of the stakeholders and shareholders. The board of directors is responsible for creating the framework for corporate governance that best aligns business conduct with objectives. This term encompasses the internal and external factors that affect the interests of a company’s stakeholders, including shareholders, customers, suppliers, government regulators and management.

Corporate Governance

2. Some features of Corporate Governance

– Corporate governance is the combination of rules, processes or laws by which businesses are operated, regulated or controlled

– Processes of proper and adequate disclosure

– Provide precise and accurate information about the financial, operational and other aspects of the company

– Art of directing and controlling the organization

Balancing the needs of the various stakeholders

– Ensuring that the organization is managed well

– Follow principles of transparency and accountability

Equally and fairly treatment with all shareholders

– Objective to aware shareholder’s rights and how to exercise them

3. Every company should follow the below points to adopt good corporate governance, (Schedule II of SEBI (LODR) Regulation, 2015)

 PART A: Minimum information to be placed before Board of Directors for good corporate governance and adequate decision, like

i. Annual operating plans and budgets and any updates.

ii. Capital budgets and any updates.

iii. Quarterly results for the listed entity and its operating divisions or business segments.

iv. Minutes of meetings of audit committee and other committees.

v. The information on recruitment and remuneration of senior officers just below the level of board of directors, including appointment or removal of Chief Financial Officer and the Company Secretary.

vi. Show cause, demand, prosecution notices and penalty notices, which are materially important.

vii. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.

viii. Any material default in financial obligations to and by the listed entity, or substantial non-payment for goods sold by the listed entity.

ix. Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the listed entity or taken an adverse view regarding another enterprise that may have negative implications on the listed entity.

x. Details of any JV or collaboration agreement.

xi. Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property.

xii. Significant labour problems and their proposed solutions. Any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc.

xiii. Sale of investments, subsidiaries, assets which are material in nature and not in normal course of business.

xiv. Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material.

xv. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer etc.

Part B: Compliance Certificate by CEO and CFO

The CEO& CFO shall provide Compliance Certificate to the Board of Directors as specified in Part B of Schedule II of SEBI (LODR) Regulation, 2015.

Part C: Role of Audit Committee and review of information by Audit Committee

(Refer Regulation 18 of SEBI (LODR) regulation, 2015)

Detailed discussion on Audit Committee has been made in my article on 01 May 2020. The link is being produced below for user’s ready reference.


Part D: Role of Committees (Other than Role of Audit Committee) 

(a) Nomination and Remuneration Committee

(Refer Regulation 19 of SEBI (LODR) regulation, 2015) 

(i) To guide the Board in relation to appointment and removal of Directors

(ii) Formulate the criteria for determining qualifications, positive attributes and independence of a director

(iii) Formulate criteria for evaluation of performance of independent directors and the board of directors

(iv) Recommend the board on remuneration payable to the directors, key managerial personnel and other employees

 (v) Making a policy on diversity of board of directors

(vi) Identifying persons who are qualified to become directors and who may be appointed in senior management and recommend to the board of directors their appointment and removal.

(vii) Extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors.

(b) Stakeholders Relationship Committee

(Refer Regulation 20 of SEBI (LODR) regulation, 2015)

(i) Resolving the issues of transfer / transmission of shares, non-receipt of annual report, non-receipt of declared dividends, issue of new/duplicate certificates, general meetings etc.

(ii) Review of measures taken for effective exercise of voting rights by shareholders.

(iii) To monitor and review the performance and service standards of the Registrar and Share Transfer Agents of the Company and provides continuous guidance to improve the service levels for investors.

(iv) Review of the various measures and initiatives taken by the listed entity for reducing the quantum of unclaimed dividends and ensuring timely receipt of dividend warrants/annual reports/statutory notices by the shareholders of the company.


In terms of Regulation 27(1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,2015 read with Schedule II to the said Regulations, the disclosure on account of the extent to which the discretionary requirements are given as under:

(i) The Board

 A non-executive chairperson may be entitled to maintain a chairperson’s office at the listed entity’s expense and also allowed reimbursement of expenses incurred in performance of his duties.

(ii) Shareholder’s Right

A half-yearly declaration of financial performance including summary of the significant events in last six-months, may be sent to each household of shareholders.

(iii) Audit Qualifications

The listed entity may move towards a regime of financial statements with unmodified audit opinion.

(iv) Reporting of internal Auditors

The internal auditor may report directly to the audit committee.

4. Corporate Governance Report in Annual Report (Refer Schedule V of SEBI (LODR) Regulation, 2015)

The disclosures of the compliance with corporate governance requirements specified in regulation 17 to 27 and clauses (b) to (i) of sub-regulation (2) of regulation 46 shall be made in the section on corporate governance of the annual report. The Following contents need to be disclosed under corporate governance report:

(i) Companies philosophy on code of governance.

(ii) Board of directors:

(a) Composition and category of directors

(b) Number of other board of directors in public companies or committees (Audit Committee and Stakeholder’s relationship committee) in which a directors is a member or chairperson, and with effect from the Annual Report for the year ended 31st March 2019, disclose the names of the listed entities where the person is a director and the category of directorship

(c) Number of meetings of the BOD held and dates on which held

(d) Attendance of each director at the meeting of the board of directors and the last annual general meeting

(e) Disclosure of relationships between directors inter-se

(f) Number of shares and convertible instruments held by non- executive directors

(g) Web link where details of familiarisation programmes imparted to independent directors is disclosed

(iii) Skills/expertise/competence of the board of directors

(i) List of core skills/expertise/competencies identified in the context of its business(es)

(ii) The names of directors who have such skills / expertise / competence

(iv) Independent Director

(i) Confirmation from the independent directors about independence

(ii) Detailed reasons for the resignation of an independent director who resigns before the expiry of his tenure

(iii) Meeting of Independent directors and attendance record

(v) Audit committee:

(a) Brief description

(b) Composition, name of members and chairperson

(c) Meetings and attendance

(vi) Nomination and Remuneration Committee:

(a) Brief description

(b) Composition, name of members and chairperson

(c) Meeting and attendance

(d) Performance evaluation criteria

(vii) Stakeholders’ grievance committee:

(a) Name of non-executive director heading the committee

(b) Name and designation of compliance officer

(c) Number of shareholders’ complaints received

(d) Number not solved to the satisfaction of shareholders

(e) Number of pending complaints

(viii) Nomination and Remuneration Committee:

(a) Brief description

(b) Composition, name of members and chairperson

(c) Meeting and attendance

(ix) Remuneration of Directors

(a) All pecuniary relationship or transactions of the non-executive directors and criteria of making payments to non-executive directors

(b) Elements of remuneration package of individual directors

(c) Details of fixed component and performance linked incentives, along with the performance criteria

(d) Service contracts, notice period, severance fees

(e) ESOP details

(x) General body meetings:

(a) Location and time, where last 3 AGM held

(b) Whether any SR passed in the last 3 AGM

(c) Whether any SR passed last year through postal ballot – details of voting pattern

(d) Person who conducted the postal ballot exercise

(e) Whether any SR is proposed to be conducted through postal ballot

(f) Procedure for postal ballot

(xi) Means of communication:

(a) Quarterly results

(b) Newspapers wherein results published

(c) Website, where displayed

(d) Displays of official news releases

(e) Presentations made to institutional investors or to the analysts

(xii) General shareholder information:

(a) Annual general meeting – date, time and venue

(b) Financial year/ Calendar

(c) Book Closure date

(d) Dividend

(e) Company Website

(f) CIN of Company

(g) Compliance Officer

(h) Name and address of stock exchange(s) and a confirmation about payment of annual listing fee

(i) Stock code and ISIN allotted to equity shares

(j) Market price data- high, low during each month in last financial year

(k) Share Performance in comparison to broad-based indices

(l) In case the securities are suspended from trading, the reason thereof

(m) Registrar and share transfer agents and share transfer system

(n) Distribution of shareholding

(o) Dematerialization of shares and liquidity

(p) Outstanding GDR or ADR or warrants or any convertible instruments, conversion date and likely impact on equity

(q) Commodity price risk or foreign exchange risk and hedging activities

(r) Plant locations

(s) Address for correspondence

(t) List of all credit ratings obtained by the entity along with any revisions thereto

(xiii) Other Disclosures:

(a) Disclosures on materially significant related party transactions that may have potential conflict with the interests of listed entity at large

(b) Details of non-compliance, penalties, strictures imposed on the listed entity by stock exchange(s) or the board or any statutory authority, on any matter related to capital markets, during the last 3 years

(c) Details of establishment of vigil mechanism, whistle blower policy, and affirmation that no personnel has been denied access to the audit committee

(d) Details of compliance with mandatory requirements and adoption of the non-mandatory requirements

(e) Web link of policy for determining ‘material’ subsidiaries

(f) Web link of policy on dealing with related party transactions

(g) Commodity price risks, foreign risk and commodity hedging activities

(h) Utilization of funds raised through preferential allotment or QIP as specified under Regulation 32 (7A).

(i) A certificate from a PCS that none of the directors on the board of the company have been debarred or disqualified from being appointed or continuing as directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority

(j) Where the board had not accepted any recommendation of any committee of the board which is mandatorily required, in the relevant financial year, the same to be disclosed along with reasons thereof:

Provided that the clause shall only apply where recommendation of / submission by the committee is required for the approval of the Board of Directors and shall not apply where prior approval of the relevant committee is required for undertaking any transaction under these Regulations.

(k) Total fees for all services paid by the listed entity and its subsidiaries, on a consolidated basis, to the statutory auditor and all entities in the network firm/network entity of which the statutory auditor is a part.

(l) Disclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

1. number of complaints filed during the financial year

2. number of complaints disposed of during the financial year

3. number of complaints pending as on end of the financial year.

(xiv) Non-compliance of any above requirement mentioned in point no (ii) to (xiii) with reason thereof

(xv) Discretionary corporate governance requirement (Regulation 27(1) of SEBI LODR, 2015)

(xvi) The Board of director shall lay down a code of conduct for all members of board directors and senior management of the listed company (Regulation 17(5) of of SEBI, LODR, 2015). Declaration signed by the CEO stating that the members of board of directors and senior management personnel have affirmed compliance with the code of conduct of board of directors and senior management.

(xvii) Compliance certificate from either the auditors or PCS regarding compliance of conditions of corporate governance shall be annexed with the directors’ report.

(xviii)Disclosures with respect to Demat suspense account/ unclaimed suspense account.

5. Regulations 27 of SEBI (LODR) Regulation, 2015

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 15 days from close of the quarter. Details of all material transactions with related parties shall also be disclosed

6. Regulations 24A of SEBI (LODR) Regulation, 2015

Every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex with its annual report, a secretarial audit report, given by a PCS in such form as may be specified.

7. Corporate governance requirements with respect to subsidiary of listed entity. (Regulation 24 of SEBI (LODR) regulation, 2015)

(i) At least one independent director on the board of directors of the listed entity shall be a director on the board of directors of an unlisted material subsidiary, whether incorporated in India or not.

 “Material subsidiary” shall mean a subsidiary, whose income or net worth exceeds 20 % of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

(ii) The audit committee of the listed entity shall also review the financial statements, in particular, the investments made by the unlisted subsidiary.

(iii) The minutes of the meetings of the board of directors of the unlisted subsidiary shall be placed at the meeting of the board of directors of the listed entity.

(iv) The management of the unlisted subsidiary shall periodically bring to the notice of the board of directors of the listed entity, a statement of all significant transactions and arrangements entered into by the unlisted subsidiary.

 “Significant transaction or arrangement” shall mean any individual transaction or arrangement that exceeds or is likely to exceed 10 % of the total revenues or total expenses or total assets or total liabilities, as the case may be, of the unlisted subsidiary for the immediately preceding accounting year.

(v) A listed entity shall not dispose of shares in its material subsidiary resulting in reduction of its shareholding (either on its own or together with other subsidiaries) to less than fifty percent or cease the exercise of control over the subsidiary without passing a SR in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court/Tribunal, or under a resolution plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved.

(vi) Selling, disposing and leasing of assets amounting to more than 20 % of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of SR, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court/Tribunal, or under a resolution plan duly approved under section 31 of the Insolvency Code and such an event is disclosed to the recognized stock exchanges within one day of the resolution plan being approved.

(vii) Where a listed entity has a listed subsidiary, which is itself a holding company, the provisions of this regulation shall apply to the listed subsidiary in so far as its subsidiaries are concerned.

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May 2021