Clause 49 of listing agreement Corporate Governance
It is the system by which companies are directed and controlled by the management in the best interest of the stakeholders and other ensuring greater transparency and better and timely reporting (financial).
Entity required to obtain a certificate from auditors for compliance of conditions of corporate governance. This certificate to be annexed to directors report and also sent to S.E. along with annual return.
1. Board of Directors: optimum combination of ED & non ED with at least 50% of BOD comprising non ED. If non ED chairman At least 1/3 of Board comprise of independent directors else at least ½ of Board comprise of independent directors. Independent director is a non-ED, who fulfills all the following conditions -
(i) He shouldn’t have (apart from receiving managerial remuneration any other material pecuniary relationship / transaction with the co., its promoters. Management / Subsidiary which (in judgment of Board) may affect independence of judgment of Board.
(ii) Not related to promoters or persons occupying management positions at Board level or at one level below the Board.
(iii) Not been executive of co. in proceeding 3 F.Y.
(iv) Not partner / executive (this year or Pr. 3 F.Y) of (i) Statutory /internal audit firm and (ii) legal / consulting firm having material association with co.
(v) Not a material supplier, service provider or customer or lesser / lessee of co.
(vi) He is not a substantial shareholder of the company owning 2% or more of block of voting shares.
Company agrees that all pecuniary relationship / Transaction of non ED vis-à-vis co. shall be disclosed in Annual Report.
2. Audit Committee
Minimum 3 members (any director) with 2/3 independent.
All members financially literate.
Chairman independent director.
Minimum no. of meetings in a year 4. one meeting before finalisation of A/c Maximum gap between 2 meetings is 4 months.
Quorum 2 members or 1/3 of members (higher) & out of which minimum of 2 independent director.
Co. secretary shall act as secretary of A.C.
A.C. to invite financial executive of co. in its meeting. However, they can meet without his presence too.
A.C
(i) Will maintain laison with Co. & auditor. Consider:
(a) Matter to be included in directors responsibility statement.
(b) Review functioning of whistle blower mechanism (if any).
(c) Review performance of statutory / internal auditors.
AC Mandatorily review
(i) Management discussion & analysis of financial statements.
(ii) Statement of significant related party transaction.
(iii) Management letter / letters of IC weaknesses issued by statutory auditors.
(iv) Internal audit reports relating to internal control weaknesses.
Appointment / Removal / Terms of remuneration of chief internal auditor.
3. Remuneration of Directors: Remuneration of non-ED decided by BOD, after obtaining prior approval of shareholders. If stock option to non-ED. Limit for maximum no. to be granted to non-ED in one F.Y. & in aggregate to be disclosed alongwith disclosure of elements of remuneration package. Details of incentives, service contract in annual report.
4. Board procedures: Meeting 4 times a year with maximum gap 3 months between two meetings. Code of conduct for Board / Senior management laid by BOD. A director not to be a member in more than 10 committees or chairman in more than 5 committees across all companies in which he’s is a director.
5. Management:
(a) Management discussion & analysis report should form part of annual report.
(b) Disclosure of all material transaction having personal interest, having potential conflict with interest of the company a large.
6. Shareholder: In case of Appointment / RE-appointment of a directors, shareholders must be provided with its brief resume, nature of this expertise & names of companies in which he holds directorship.
(a) Shareholders: Information like quarterly results to be put on companies web-site or on S.E’s site.
(b) Shareholders: Board committee under chairmanship of non-E.D to look into redressing of shareholders & investors complaints.
(c) Shareholders: To expedite the process of share transfer this work to be delegated to an officer or share transfer agent.
7. Subsidiary Company:
(i) At least one independent director of holding company shall be a director in material non-listed Indian subsidiary company.
(ii) AC of holding shall review the financial statement (particularly investment) by unlisted subsidiary company.
(iii) Minutes of Board meeting of unlisted subsidiary company to be placed at board meeting of holding co.
8. Disclosures:
(i) Statement on transaction with related parties in ordinary course of bussiness/not in ordinary course of business to be placed before A.C.
(ii) Details of transaction with related parties or other not on arms length to be placed before A.C. with management justification.
(iii) Financial Statement to disclose (with management explanation) A/C treatment difference from A/C standard.
(iv) Procedure to inform Board risk assessment & its minimization procedures.
(v) Company to disclose Audit Committee (quarterly) use of funds raised through issue.
(vi) Criteria for making payment to non-ED.
9. CEO / CFO Certification : The CEO and the CFO or any other person heading the finance function discharging that function shall certify to the Board that :
(a) They have reviewed financial statements and the cash flow statement for the year and that to the best of their knowledge and belief :
i) these statements do not contain any materially untrue statement or omit any material fact.
ii) These statements together present a true and fair view of the company’s affairs.
(b) There are no transactions entered that are fraudulent, illegal and violative of the company’s code of conduct.
(c) They accept responsibility for establishing and maintaining internal controls.
(d) They have indicated to the auditors and the Audit committee
i. Significant changes in internal control during the year;
ii. Significant changes in accounting policies during the year.
iii. Instances of significant fraud.
10. Report on Corporate Governance :
There shall be separate section on Corporate Governance in the Annual Reports of company with a detailed compliance report on Corporate Governance.
11. Compliance : The company shall obtain a certificate either from the auditors or practicing company secretaries regarding compliance of conditions of corporate governance
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