Category Archives: CorpGov

BOARD COMMITTEES – ENTITY LISTED SPECIFIED SECURITIES


In this post we will discuss, board committees other than audit committee under the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 for the listed entities which got listed its specified securities on Stock Exchanges. These Regulations talk about Audit Committee (Regulation 18) which we have already discussed here in a recent, Nomination and Remuneration Committee (Regulation 19) Shareholders Relationship Committee (Regulation 20) and Risk Management Committee (Regulation 21).

Nomination and Remuneration Committee

The board of directors shall constitute the nomination and remuneration committee as follows:

  • the committee shall comprise of at least three directors;
  • all directors of the committee shall be non-executive directors; and
  • at least fifty percent of the directors shall be independent directors. [Regulation 19(1)]

As per Section 178 of the Companies Act, 2013, the Nomination and Remuneration Committee shall have with three or more non – executive directors but there is no requirement of all non – executive directors with majority of independent directors as introduced here by Regulation 19(1). However, there is one exception of all non – executive directors rule.

The Chairperson of the nomination and remuneration committee shall be an independent director. However, the chairperson of the listed entity, whether executive or non-executive, may be appointed as a member of the Nomination and Remuneration Committee and shall not chair such Committee. [Regulation 19(2)]

The exception of all non – executive directors rule came here from proviso to Section 178(1) of the Companies act, 2013.

(3) The Chairperson of the nomination and remuneration committee may be present at the annual general meeting, to answer the shareholders’ queries; however, it shall be up to the chairperson to decide who shall answer the queries. [Regulation 19(3)]

This is only an advice in line of Section 178(7) where either chairperson of Nomination or remuneration committee or its nominee member shall present. The combined reading of both provisions is same as of Section 178(7). Significantly, this clarify that chairman of the General meeting may give chance to the chairperson of the committee to answer the queries of shareholders.

(4) The role of the nomination and remuneration committee shall be as specified as in Part D of the Schedule II. [Regulation 19(4)]

Sub – part A of Part D of the Schedule II list out the role of the Committee which shall inter-alia, include the following:

  • formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the board of directors a policy relating to, the remuneration of the directors, key managerial personnel and other employees;
  • formulation of criteria for evaluation of performance of independent directors and the board of directors;
  • devising a policy on diversity of board of directors;
  • identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the board of directors their appointment and removal.
  • whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors.

This Regulation 19(4) require and deals with provision for a policy and run parallel to provisions of sub – section (3) and (4) of Section 178 of the Companies Act, 2013.

Stakeholders Relationship Committee

The listed entity shall constitute a Stakeholders Relationship Committee to specifically look into the mechanism of redressal of grievances of shareholders, debentures holders and other security holders. [Regulation 20(1)]

The chairperson of this committee shall be a non-executive director. [Regulation 20(2)]

The board of directors shall decide other members of this committee. [Regulation 20(3)]

The role of the Stakeholders Relationship Committee shall be as specified as in Part D of the Schedule II. [Regulation 20(4)]

Apparently, a non – director may be member of this committee under these Regulation and also in line with provision of Section 178(5).

Sub – part B of Part D of Schedule II state that the Committee shall consider and resolve the grievances of the security holders of the listed entity including complaints related to transfer of shares, non-receipt of annual report and non-receipt of declared dividends.

Risk Management Committee

The board of directors shall constitute a Risk Management Committee. [Regulation 21 (1)]

The majority of members of Risk Management Committee shall consist of members of the board of directors. [Regulation 21(2)]

The Chairperson of the Risk management committee shall be a member of the board of directors and senior executives of the listed entity may be members of the committee. [Regulation 21(3)]

The board of directors shall define the role and responsibility of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to the committee and such other functions as it may deem fit. [Regulation 21(4)]

The provisions of this regulation shall be applicable to top 100 listed entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year. [Regulation 21(5)]

The Companies Act, 2013 has mandate audit committee and independent directors a role in risk management besides inherent role of Board of Directors. However, Regulation 21(5) mandates risk management committee for top 100 listed entities determined on the basis of market capitalization.

Vigil Mechanism

The listed entity shall formulate a vigil mechanism for directors and employees to report genuine concerns. [Regulation 22(1)]

The vigil mechanism shall provide for adequate safeguards against victimization of director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases. [Regulation 22(2)]

Sub – regulation of Regulation 22 is similar to the sub – Section (9) and (10) of Section 177 which deals with audit committee.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY


Investor Education and Protection Fund Authority established under Section 125(5) of the Companies Act, 2013 is an authority to administer for administration of Investor Education and Protection Fund established under Section 125(1) of the Act. Operating provisions of Section 125 are not force, but recently a Notification S.O. 125(E) dated 13th January 2016 notified part of this Section to be effective with effect from 13th January 2016. Consequently, Ministry of Corporate Affairs also put a draft notification for the Investor Education and Protection Fund Authority (Appointment of Chairperson and Members, holding of meetings and provision for offices and officers) Rules, 2016. In this post, we discuss the Notification and these Rules.

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AUDIT COMMITTEE – ENTITY LISTED SPECIFIED SECURITIES


In this post we will discuss, audit committees under the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 for the listed entities which got listed its specified securities on Stock Exchanges.

Section 177 of the Companies Act, 2013 as discussed earlier here prescribes audit committee for every listed and certain other companies. Regulation 18 of the SEBI (LODR) Regulations, 2015 supplement this requirement for listed companies.

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Definitions: Chapter IV of LODR


Regulation 2 of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 define terms used in these regulations. We have discussed some of these definitions earlier here, here, here and here. Some terms may not have same legal meaning always and require defining as per context and purpose. Regulation 16 of these Regulations defines four terms for the purpose of Chapter IV. As me mentioned in last post, Chapter VI deals with obligation of listed entity which has listed its specified securities on any recognised stock exchange either on main board or on SME Exchange or on institutional platform.

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OMNIBUS APPROVAL FOR RELATED PARTY TRANSACTIONS


Ministry of corporate Affairs issued a notification dated 14th December 2015 and published here in the Gazette of India dated 15th December 2015 regarding amendment in the Companies (Meetings of Board and its Power) Rules 2014.

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Meetings of Board and its Power: Second Amendment Rules


Ministry of corporate Affairs issued a notification dated 14th December 2015 and published here in the Gazette of India dated 15th December 2015 regarding amendment in the Companies (Meetings of Board and its Power) Rules 2014.

The Companies (Meetings of Board and its Power) Second Amendment Rules, 2015 (i) inserts a new Rule 6A, (ii) omit present Rule 10 and (iii) amend present Rule 15(3).

We will discuss newly inserted Rule 6A in a future post. In this post we bill discuss other two amendments in very brief way.

Loan to Directors

We have discussed now omitted Rule 10 earlier here. These rules became redundant after the Company (Amendment) Act, 2015 as discussed earlier here. Hence, it is deleted.

Amendment in Rule 15

We have discussed Rule 15 earlier here. There is a minor but very important amendment in Rule 15(3). In rule 15, in sub-rule (3), for the words “special resolution”, wherever they occur, the word “resolution” shall be substituted.

This amendment is in line with the amendment in Section 188 by the Companies (Amendment) Act, 2015 discussed earlier here.

This has a very significant effect and dilutes corporate governance to certain level. This cut power of non – promoter investors whether they are indigenous investors or foreign investors.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

REPORTING OF FRAUD


Ministry of corporate Affairs issued a notification dated 14th December 2015 and published here in the Gazette of India dated 15th December 2015 regarding amendment in the Companies (Audit and Auditors) Rules, 2014.

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Remaining Part of Companies Amendment Act became Effective


A gazette notification posted here on official website of the Gazette of India and posted on website of Ministry of Corporate Affairs says that Section 13 and Section 14 of the Companies (Amendment) Act, 2015 came into force with effect from 14th December 2015. The official language of notification read, “The Central Government hereby appoints the 14th day of December, 2015 as the date on which the provisions of section 13 and 14 of the said Act shall come into force.”

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COMMON OBLIGATIONS OF LISTED ENTITIES -2


Chapter III of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 enumerates common obligations of listed entities. In this post, we will discuss some of these obligations related to Intermediaries, filings, grievance redressal mechanism Continue reading

National Herald and the Companies Act, 2013


National Herald was a newspaper and is a building and, for most political activist on social media, a case by a politician against its rivals.

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COMMON OBLIGATIONS OF LISTED ENTITIES -1


Chapter III of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 enumerates common obligations of listed entities. In this post, we will discuss some of these obligations related to Key Managerial Personnel, Compliance officer and Share Transfer Agent.

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GOVERNANCE PRINCIPLES GOVERNING DISCLOSURES AND OBLIGATIONS


Regulation 4 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 enumerates principles governing disclosure and obligations of listed entities. There are two different set of principles one is general and second governance principles. In this post, we will discuss, governance principles.

Corporate Governance Principle

The listed entity which has listed its specified securities shall comply with the corporate governance provisions as specified in chapter IV which shall be implemented in a manner so as to achieve the objectives of the principles mentioned in Regulation 4(2) of SEBI (LODR) Regulations 2015.

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MGT – 7 (v. 17Nov2015)


We live in a changing world; corporate world changing fast and Indian Corporate Law fastest. A draft of the Companies (Management and Administration) third Amendment Rules, 2015 dated 16th November 2015, which is pending for publication in Official Gazette of India amend the version of form MGT -7 once again. Though these amendment rules are not available in official gazette, new version of form MGT – 7 is made available on the MCA21 portal for filing.

Note: MGT – 7 Version 17th November 2015 is being used for writing this post. Earlier posts here and here are only historic relevance now.

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GENERAL PRINCIPLES GOVERNING DISCLOSURES AND OBLIGATIONS


Regulation 4 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 enumerates principles governing disclosure and obligations of listed entities. There are two different set of principles one is general and second governance principle. In this post we will discuss general principles which deal with accounting standards, misrepresentation, adequate and timely disclosure, applicable laws and specified disclosures.

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RELATED PARTY TRANSACTIONS


The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2nd September 2015 and will come into force from 1st December 2015. However, Regulation 31A of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 came into force on 2nd September 2015 on publication of these regulations along with sub – regulation (4) of Regulation 23. In last post here, we discussed Regulation 31A and in this post we will discuss Regulation 23.

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Class of shareholders


The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2nd September 2015 and will come into force from 1st December 2015. However, Regulation 31A of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 came into force on 2nd September 2015 on publication of these regulations along with sub – regulation (4) of Regulation 23. Regulation 31A deals with Disclosure of Class of shareholders and Conditions for Reclassification.

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RELATED PARTY


The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2nd September 2015 and will come into force from 1st December 2015. In this post we will discussion definition of Holding, Subsidiary, Associates, Relative, Related Party, and Related Party Transactions.

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Stock Exchanges and Listed Entities


The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2nd September 2015 and will come into force from 1st December 2015. In this post we will discussion definition of Stock Exchanges, Listed Entities and other related terms.

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City in Companies Act, 2013


Companies Act, 2013 uses city 3 times (without taking subordinate legislations into account):

  • In section 12(5)(a) with reference to registered office;
  • In Section 27(1) for advertisement in news paper in the city of registered office;
  • In Section 96(2) for place of Annual General Meeting in city of registered office.

The Companies Act, 1956 also used this term in similar reference.

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Designated Securities


The Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations 2015 was notified on 2nd September 2015 and will come into force from 1st December 2015. In this post we will discussion definition of Designated Securities.

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