New Corporate Governance Norms for India Listed Issuers

Through a circular dated April 17th 2014, SEBI has released the amendments to Clauses 35B and 49 of the Equity Listing Agreement. This follows a consultative paper on review of corporate governance norms released in early January 2013 which sought to revisit the existing clause 49 which was codified in 2004.

The amendments update and align the Listing Agreement with corporate governance changes bought out in the Companies Act, 2013. There are also certain changes which are stricter than that mandated in the new Companies Act, 2013.

Some of the amendments to the Clause 49 that are more stringent than the corresponding provisions in the new Companies Act, 2013 include:

  • Having at least one ‘Woman Director’ on Board
  • Limiting outside directorships of IDs to 7 listed companies and 3 listed companies if the ID is a whole-time director in any listed company
  • Capping the maximum tenure of IDs at 10 years and 5 years if their tenure exceeds 5 years as at October 1st 2014
  • Requiring 2/3rd of members of Audit Committee to be IDs
  • Approval of all material related party transactions by shareholders through special resolutions and barring concerned related parties to cast votes
  • Disclosure of letter along with reason of resignation of IDs in the company website and stock exchanges
  • Disclosure of letter of appointment of IDs in company website and stock exchanges
  • Encouraging separation of roles of Chairman and CEO through a non-mandatory requirement

The InGovern report on the revised new corporate governance norms is Revised Clause 49-New Corporate Governance Norms for India Listed Companies.

InGovern has also analysed the proposed changes in the consultative paper on review of corporate governance norms vis-a-vis the actual changes brought out in the new Listing Agreement. Click on SEBI Listing Agreement Amendments to view the comparison.