Applicability (Reg. 15)

> Applicable to a listed entity which has listed its specified securities on any recognised stock exchange(s) either on the main board or on SME Exchange or on Innovators Growth Platform.

> Corporate Governance provisions as specified in Regulations 17-27 and Schedule-V shall not apply in respect of

    • 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.
    • If the aforesaid provisions become applicable to a listed entity at a later date, it shall ensure compliance with the same within six months from such date.
    • Listed entity which has listed its specified securities on the SME Exchange.
  • 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 17-27 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.

Definitions (reg. 16)

> “control” shall have the same meaning as assigned to it under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

> “material subsidiary” shall mean a subsidiary, whose income or net worth exceeds 10% of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

> “senior management” shall mean officer personnel of the listed entity who are members of its core management team excluding board of directors and normally this shall comprise all members of management one level below the CEO/MD/WTD/manager and shall specifically include CS and CFO.

Board of directors (reg. 17)

  • Composition of the Board
    • Optimum combination of executive & Non-executive Directors with at least one woman director and Minimum 50% of the board of directors shall comprise of non-executive directors
    • If chairperson is NED – Min 1/3 of the board shall comprise of Independent Director

If chairperson is not NED – Min 1/2 of the board shall comprise of Independent Director

  • Where the listed company has outstanding SR equity shares, atleast half of the board of directors shall comprise of independent directors
  • Special Resolution with explanatory statement is required for appointment /continuance of the directorship of any person as a non-executive director who has attained the age of seventy five years
  • Conduct of the Board
    • At least 4 meetings in a year, Max gap 120 days
    • To periodically review compliance reports
    • To lay down a code of conduct for all members of BOD
    • Board Evaluation

Board of directors (reg. 17)

  • The top 2000 listed entities (w.e.f. April 1, 2020) shall comprise of not less than 6 directors
  • The Board of directors of the top1000 listed entities shall have at least one independent woman director by April 1, 2020
  • The top 500 listed entities shall ensure that the Chairperson of the board of such listed entity shall w.e.f. April 1, 2022

> be a NED

  • not be related to the MD the CEO as per the definition of the term “relative” defined under the Companies Act, 2013

Maximum number of directorships (reg. 17A)

  • Maximum number of directorships, including any alternate directorships:
  • A person shall not be a director in more than 7 listed entities with effect from April 1, 2020
  •  A person shall not serve as an independent director in more than 7 listed entities
  • Any person who is serving as a WTD / MD in any listed entity shall serve as an independent director in not more than 3 listed entities

Committees required (reg. 18-21)

Committees

Vigil mechanism (reg. 22)

  • The listed entity shall formulate a vigil mechanism/whistle blower policy for directors and employees to report genuine concerns.
  • Vigil Mechanism shall provide-
    • Adequate safeguards against victimization of directors/employees/any other person who avail the mechanism
    • Direct access to the chairperson of the audit committee in appropriate or exceptional cases

Related Party Transactions (reg. 23) (1/2)

  • The listed entity shall formulate a policy on materiality of related party transactions and on dealing with related party transactions approved by the board of directors and reviewed at least once in every 3 years and updated accordingly
  • Material Transaction: Individually/with prev. Transactions during a FY> 10% of consolidated TO
  • All RPT shall require prior approval of Audit Committee (AC)[approved by ID members of AC]
  • AC may grant omnibus approval for proposed RPTs subject to following conditions:

> AC shall lay down the criteria for granting omnibus approval and such approval shall be applicable in respect of transactions which are repetitive in nature

> AC shall satisfy itself regarding the need for such omnibus approval and that such approval is in the interest of the listed entity

  • Where the need for RPT cannot be foreseen and aforesaid details are not available, audit committee may grant omnibus approval for such transactions subject to their value not exceeding rupees 1 crore per transaction.

Related Party Transactions (reg. 23) (2/2)

  • AC shall review, at least on a quarterly basis, the details of RPT entered into by the listed entity pursuant to each of the omnibus approvals given
  • Omnibus Approval shall be valid for Max. 1 year
    • All material RPT shall require approval of the shareholders through resolution (No RP shall vote to approve such resolution)
  • Above provisions shall not be applicable:

> Transactions entered into between two Govt Co.

> Transactions entered into between holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval

  • Listed entity shall submit to the stock exchanges disclosure of RPT within 30 days from the date of publication of its standalone and consolidated financial results for the half year and publish the same on website

Corporate governance requirements with respect to subsidiary of listed entity (reg. 24)

  • At least one ID on the BOD 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: whose income/net worth> 20% of consolidated income/net worth of listed entity and its subsidiary
  • AC of the listed entity shall also review the financial statements, in particular, the investments made by the unlisted subsidiary
  • The minutes of the meetings of the BOD of the unlisted subsidiary shall be placed at the meeting of the BOD of the listed entity
  • A statement of all significant transactions and arrangements entered into by the unlisted subsidiary shall be brought to notice of BOD of listed entity
  • Significant transaction or arrangement – individual transaction/ arrangement that exceeds or is likely to exceed 10% of the total revenues/total expenses/total assets or total liabilities of unlisted subsidiary
  • A listed entity shall not do the following without passing a special resolution in its General Meeting :

> 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 or equal to 50%

> cease the exercise of control over the subsidiary

> sell, dispose and lease of assets amounting to more than 20% of the assets of the material subsidiary on an aggregate basis during a financial year

  • 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

Secretarial audit and secretarial compliance report (reg. 24A)

  • Every listed entity and its material unlisted subsidiaries incorporated in India shall:
    • undertake secretarial audit
    • annex a secretarial audit report given by a company secretary in practice, in such form as specified, with the annual report of the listed entity
  • Every listed entity shall submit a secretarial compliance report in such form as specified, to stock exchanges, within 60 days from end of each financial year

Obligations with respect to independent directors (reg. 25)

  • No person shall be appointed or continue as an alternate director for an independent director of a listed entity
  • ID shall hold Min. 1 Meeting in a financial year without the presence of non-independent directors and members of the management
  • The appointment, re-appointment/removal of an ID of a listed entity, shall be approved by shareholders by way of a special resolution
  • ID shall hold Min 1 meeting in a FY and in the meeting shall:

> review the performance of NED and the BOD as a whole

> review the performance of the chairperson of the listed entity, taking into account the views of ED and NED

> assess the quality, quantity and timeliness of flow of information between the management of the listed entity and the BOD

  • An ID who resigns or is removed from the board of directors of the listed entity shall be replaced by a new ID by listed entity at the earliest but not later than the immediate next board meeting or 3 months from the date of such vacancy, whichever is later
  • No ID who resigns from a listed entity shall be appointed as an ED / WTD on the board of the listed entity, its holding, subsidiary/associate company or on the board of a company belonging to its promoter group, unless a period of 1 year has elapsed from the date of resignation as an ID

Obligations with respect to senior management, kmp, directors & promoters(reg. 26)

  • Director- Member in not more than 10 committees
  • Director- Chairperson in not more than 5 committees across all listed entities in which he/she is a director

(for the purpose of determination of limit, chairpersonship and membership of the AC and the SRC alone shall be considered)

  • All members of the BOD and senior management personnel shall affirm compliance with the code of conduct of BOD and senior management on an annual basis
  • Senior management shall make disclosures to the board of directors relating to all material, financial and commercial transactions, where they have personal interest that may have a potential conflict with the interest of the listed entity at large
  • Prior approval of BOD and shareholder’s approval by way of an OR is required for an employee(including KMP/director/promoter) entering into any agreement for himself/herself or on behalf of any other person, with any shareholder or any other third party with regard to compensation or profit sharing in connection with dealings in the securities of such listed entity

Other corporate governance requirements (reg. 27)

  • 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 within 21 days from the end of each quarter
  • Details of all material transactions with related parties shall be disclosed along with the report
  • The report shall be signed either by the compliance officer or the chief executive officer of the listed entity

In principle approval of recognized stock exchange (Reg. 28)

> Before issuing securities:

  • where the securities are listed only on recognised stock exchange(s) having nationwide trading terminals, from all such stock exchange(s)
  • where the securities are not listed on any recognised stock exchange having nationwide trading terminals, from all the stock exchange(s) in which the securities of the issuer are proposed to be listed
  • where the securities are not listed on any recognised stock exchange having nationwide trading terminals, from all the stock exchange(s) in which the securities of the issuer are proposed to be listed

> The requirement of obtaining in-principle approval from recognised stock exchange(s), shall not be applicable for securities issued pursuant to the scheme of arrangement for which the listed entity has already obtained No-Objection Letter from recognised stock exchange

Prior intimations (reg. 29)

  • Intimation to the stock exchanges:

♦ At least 2 working days in advance-

      • buyback of securities
      • voluntary delisting
      • fund raising by way of further public offer, rights issue, ADR/GDR/FCCB, QIP, debt issue, preferential issue or any other method and for determination of issue price
      • declaration/recommendation of dividend, issue of convertible securities including convertible debentures or of debentures carrying a right to subscribe to equity shares or the passing over of dividend
      • declaration of bonus securities

♦ At least 5 working days in advance-

      • financial results viz. quarterly, half yearly or annual

♦ At least 11 working days in advance-

      • any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof
      • any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable

Disclosure of events or information (reg. 30)

  • Every listed entity shall make disclosure of material events to the stock exchange

♦ Material Events: Events specified in Para A of Part A of Schedule III

  • The listed entity shall frame a policy for determination of materiality, based on criteria specified in this sub-regulation, duly approved by its BOD, which shall be disclosed on its website.
  • Disclosure to stock exchange: Not later than 24 hours from the occurrence of event or information
  • The listed entity shall disclose all events or information with respect to subsidiaries which are material for the listed entity

Holding of specified securities and shareholding pattern (reg. 31)

  • Statement showing holding of securities and shareholding pattern separately for each class of securities submitted to the stock exchange within the following timelines:

> 1 day prior to listing of its securities on the stock exchange(s)

> on a quarterly basis, within 21 days from the end of each quarter

> within 10 days of any capital restructuring of the listed entity resulting in a change exceeding 2% of the total paid-up share capital

  • Exception: listed entities which have listed their specified securities on SME Exchange, the above statements shall be submitted on a half yearly basis within 21 days from the end of each half year
    • The listed entity shall ensure that hundred percent of shareholding of promoter(s) and promoter group is in dematerialized form
    • All  entities falling under promoter and promoter group shall be disclosed separately in the shareholding pattern appearing on the website of all stock exchanges having nationwide trading terminals where the specified securities of the entity are listed

Disclosure of class of shareholders and conditions for reclassification (reg. 31A) (1/2)

Events Time limits
Application by the Promoter to the Company along with requisite undertaking (Holding should not be more than 10% of paid up equity capital of company) Intimation to the Exchange within 24 hours of receipt of application
Resolution must be passed in the meeting of Board of Directors for approving reclassification

(Time gap between BM & EGM- Min 1 month and Max 3 months)

Intimation to the Exchange within 24 hours of conclusion of Board meeting
Ordinary resolution in shareholder’s meeting for approving reclassification Intimation to the Exchange within 24 hours of conclusion of Shareholder meeting

Reg. 31A (2/2)

Events Time limits
Submit reclassification application along with supporting documents to the Exchange 30 days of conclusion of shareholder’s meeting
Deficiencies in application must be rectified by the company 30 days of receipt of intimation
Letter of acceptance to be issued to the Company to effect the reclassification Intimation to the Exchange within 24 hours of receipt of Letter of acceptance by the company

Statement of deviations or variations (reg. 32)

  • Statement to Stock exchange on quarterly basis for public issue, rights issue, preferential issue etc indicating:
    • deviations, if any, in the use of proceeds from the objects stated in the offer document or explanatory statement to the notice for the general meeting, as applicable
    • category wise variation (capital expenditure, sales and marketing, working capital etc.) between projected and actual utilization of funds

> Continue filing of statement till issue proceeds have been fully utilised

> Statement to be placed before Audit Committee before submission

> Explanation for variation in director’s report

> Preparation of an annual statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice

> Submission to the stock exchange(s) any comments or report received from the monitoring agency

> Placing of such report before the audit committee on an annual basis

> Where an entity has raised funds through preferential allotment or qualified institutions placement, the listed entity shall disclose every year, the utilization of such funds during that year in its Annual Report until such funds are fully utilized

Financial results (reg. 33)

  • Approval of BOD before submission of  financial results
  • Signing of financial results by Chairman/ MD/WTD/any other director authorized by board
  • Placing of limited review report before the BOD
  • Submission of quarterly financial results: within 45 days of end of each quarter
  • Submission of annual standalone financial results: within 60 days from the end of the financial year
  • The statutory auditor of a listed entity shall undertake a limited review of the audit of all the entities/ companies whose accounts are to be consolidated with the listed entity

Annual report and annual information memorandum(reg. 34 & 35)

  • Submission of annual report to the stock exchange and publish on its website:

> a copy of the annual report sent to the shareholders along with the notice of AGM not later than the day of commencement of dispatch to its shareholders

> in the event of any changes to the annual report, the revised copy along with the details of and explanation for the changes shall be sent not later than 48 hours after the AGM

  • Annual report shall contain:

> Audited Financial Statements

> Consolidated Financial Statements

> Cash flow Statement

> Director’s Report

> Management Discussion and Analysis Report

  • Submission of Annual Information Memorandum to stock exchange in the manner specified by the boar

Documents and information to shareholders (reg. 36)

  • Sending of Annual Report to the shareholders: Min 21 days before the AGM
  • Soft copies of full annual report to all those shareholder(s) who have registered their email address
  • Hard copies of statement containing the salient features of all the documents to all those shareholder(s) who have not so registered their email address
  • Hard copies of full annual reports to those shareholders, who request for the same
  • In case of the appointment of a new director or re-appointment of a director the shareholders must be provided with Brief resume of director, nature of his expertise, shareholding of NED, disclosure of relationships between directors, shareholding of NED etc

Draft scheme of arrangement & scheme of arrangement (reg. 37)

  • Listed entity is required to file the draft scheme of arrangement with the stock exchange(s) for obtaining Observation Letter or No-objection letter, before filing such scheme with any Court or Tribunal
  • Place the Observation letter or No-objection letter of the stock exchange(s) before the Court or Tribunal at the time of seeking approval of the scheme of arrangement (validity of the ‘Observation Letter’ or No-objection letter of stock exchanges shall be six months from the date of issuance)
  • Submission of documents to the stock exchanges upon sanction of scheme by the Court or Tribunal
  • Exception to this regulation: Merger of wholly owned subsidiary with its holding company (such draft schemes shall be filed with the stock exchanges for the purpose of disclosures)

Minimum public shareholding (reg. 38)

  • Compliance of minimum public shareholding requirements specified in Rule 19(2) and Rule 19A of the Securities Contracts (Regulation) Rules, 1957
  • Exception: not applicable to entities listed on institutional trading platform without making a public issue

Issuance of certificates or receipts/letters/advices for securities (reg. 39)

  • Compliance of Rule 19(3) of Securities Contract (Regulations) Rules, 1957 in respect of Letter/Advices of Allotment, Acceptance or Rights, transfers, subdivision, consolidation, renewal, exchanges, issuance of duplicates thereof or any other purpose
  • Listed entity shall issue certificates or receipts or advices, as applicable in cases of loss or old decrepit or worn out certificates or receipts or advices – within 30 days from the date of such lodgement
  •  Submission of information regarding loss of share certificates and issue of the duplicate certificates to the stock exchange – within 2 days of its getting information

Transfer or transmission or transposition of securities (reg. 40)

  • BOD may delegate the power of transfer of securities to a committee or to a compliance officer or to the registrar to an issue and/or share transfer agents
  • BOD/the delegated authority shall attend to the formalities pertaining to transfer of securities at least once in a fortnight
  • Registration of transfers of its securities in the name of the transferee(s) and issue certificates or receipts or advices within 15 days from the date of such receipt of request for transfer
  • Transmission requests are processed for securities held:

> In demat form- within 7 days after receipt of documents

> In physical form- within 21 days after receipt of documents

  • Submission to the stock exchange Certificate from PCS certifying that all certificates have been issued within 30 days of the date of lodgement for transfer sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies

Other provisions relating to securities (reg. 41)

  • Listed entity shall not exercise a lien on its fully paid shares and that in respect of partly paid shares it shall not exercise any lien except in respect of moneys called or payable at a fixed time in respect of such shares
  • any amount to be paid in advance of calls may carry interest but shall not in respect thereof confer a right to dividend or to participate in profits

Other provisions relating to SR equity shares (reg. 41A)

  • The SR equity shares shall be treated at par with the ordinary equity shares in every respect, including dividends, except in the case of voting on resolutions
  • The total voting rights of SR shareholders (including ordinary shares) in the issuer upon listing pursuant to an IPO, shall not at any point of time exceed 74%
  • The SR equity shares shall be converted into equity shares having voting rights same as that of ordinary shares on the 5th anniversary of listing of ordinary shares of the listed entity
    • Exception: SR equity shares may be valid for up to an additional 5 years after passing a resolution to this effect
  • SR shareholders may convert their SR equity shares into ordinary equity shares at any time prior to the period as specified above

Record date or date of closure of transfer books (reg. 42)

  • Intimation to stock exchanges for following purposes:

> declaration of dividend

> issue of right or bonus shares

> issue of shares for conversion of debentures or any other convertible security

> shares arising out of rights attached to debentures or any other convertible security

> corporate actions like mergers, de-mergers, splits and bonus shares, where stock derivatives are available on the stock of listed entity etc

  • Notice to stock exchange(s) of record date specifying the purpose of the record date- At least 7 working days in advance (excluding the date of intimation and the record date)
  • Recommend/declare all dividend and/or cash bonuses- At least 5 working days before the record date fixed for the purpose
  • Time gap of Min 30 days between two record dates

Dividends and dividend distribution policy (reg. 43 & 43A)

  • Listed entity shall declare and disclose the dividend on per share basis only
  • Listed entity shall not forfeit unclaimed dividends before the claim becomes barred by law
  • The top 1000 listed entities based on market capitalization (calculated as on March 31 of every financial year) shall formulate a dividend distribution policy which shall be disclosed on the website of the listed entity
  • Dividend distribution policy shall include the following parameters:

> Circumstances under which shareholders may/may not expect dividend

> financial parameters

> internal & external factors

> policy as to how the retained earnings shall be utilized

> parameters that shall be adopted with regard to various classes of shares

Meeting of shareholders and voting (reg. 44)

  • Listed entity shall provide the facility of remote e-voting facility to its shareholders, in respect of all shareholders’ resolutions
  • Listed entity shall send proxy forms to holders of securities in all cases mentioning that a holder may vote either for or against each resolution
  • Submission of details regarding voting results – within 48 hours of conclusion of its general meeting
  • The top 100 listed entities by market capitalization, determined as on March 31st of every FY, shall hold their AGM within 5 months from the date of closing of FY
  • The top 100 listed entities shall provide one-way live webcast of the proceedings of the AGM

Change in name of the listed entity (reg. 45)

  • Change in name is allowed subject to compliance with following conditions:

> a time period of at least one year has elapsed from the last name change

> min 50% of the total revenue in the preceding one year period has been accounted for by the new activity suggested by the new name

> the amount invested in the new activity/project is min 50% of the assets of the listed entity

  • An application for name availability to be filed with ROC on satisfaction of above conditions
  • If any listed entity has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of 6 months from the change of activities
  • Approval from Stock Exchange by submitting a certificate from chartered accountant stating compliance with conditions after the receipt of confirmation regarding name availability from Registrar of Companies

Website (reg. 46)

  • Listed entity shall maintain a functional website containing the basic information about the listed entity
  • Disseminate the following information on its website:

> details of its business

> terms and conditions of appointment of independent directors

> composition of various committees of board of directors

> code of conduct of board of directors and senior management personnel

> details of establishment of vigil mechanism/ Whistle Blower policy

> policy on dealing with related party transactions

> email address for grievance redressal and other relevant details

> contact information of the designated officials of listed entity etc

  • Listed entity shall ensure that the contents of the website are correct
  • Update any change in contents within 2 working days of change

Advertisements in newspapers and accounting standards (reg. 47 & 48)

  • Following information to be published in the newspaper:

> financial results, as specified in regulation 33, along-with the modified opinion(s) or reservation if any, expressed by the auditor

> notices given to shareholders by advertisement

  • Reference of link of website of company and stock exchange to be given in newspaper publication
  • Financial results shall be published within 48 hours of conclusion of the meeting of board of directors at which the financial results were approved
  • Information shall be published in at least one English daily newspaper and one regional newspaper
  • These requirements are not applicable to listed entities which have listed their specified securities on SME Exchange
  • Listed entity shall comply with all the applicable and notified Accounting Standards from time to time

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