The capital market regulator Securities and Exchange Board of India (SEBI) has relaxed the corporate governance norms for listed companies by making amendments in various provisions, including extending the deadline for appointment of at least one woman director to April 1, 2015 and also exempting smaller companies from the mandatory compliance to the new code for the time being.
The securities watchdog decided to make amendments in the norms, which would come into effect from October 1, 2014, after receiving representations from companies and industry associations, among others, which pointed out certain practical difficulties in complying with the norms and sought clarifications on interpretation of certain provisions while suggesting various options to ease the process of implementation.
The norms, which have been modified to align with the relevant sections of the new Companies Act, are expected to change the way listed companies function and are regulated in the country, once implemented.
Following the amendments, the listed companies have until April 2015 to appoint at least one woman director on the board, as against October 1, 2014. Despite changes in various other provisions, the deadline of October 1, 2014 to comply with the norms will remain unchanged.
SEBI has exempted listed companies with equity share capital of up to Rs 10 crore and net worth not exceeding of Rs 25 crore and those also listed on SME platforms of the stock exchanges from the mandatory compliance of corporate governance code “for the time being”.
Previously, SEBI had restricted the total tenure of an independent director to two terms of five years and also said that if a person who has already served as an independent director for five years or more in a listed company as on the date on which the amendment to the agreement becomes effective, he/she shall be eligible for appointment for one more term of five years only.
However, it has now amended the norm, saying that the “maximum tenure of Independent Directors shall be in accordance with the Companies Act, 2013”. The companies are also required to disclose the terms and conditions related to the appointments on the their websites.
SEBI had tightened procedures for intra-group transactions or RPTs by making mandatory prior approval of audit committee for all material RPTs, in order to strengthen minority shareholders rights for RPTs. The regulator has now changed the definition for Related Party Transactions (RPTs) and exempted from mandatory prior approval for certain RPTs.
“All Related Party Transactions shall require prior approval of the Audit Committee. However, the Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the company subject to the following conditions,” it said.
Since implementation of new Companies Act from April 1,2014, the Ministry of Corporate Affairs has issued various circulars on matters related to corporate governance clarifying certain provisions of the Corporate Governance Code, including rules relating to appointment and qualification of directors and independent directors, matters relating to RPTs, among others.
(Edited by Joby Puthuparampil Johnson)