SEBI has recently amended the listing Agreement, to be in line with some of the provisions of the new Act.
In this article, we have compiled the important changes applicable from the
attached circular and the Action points for most of the listed Companies. The current circular also talks about many points which are already there in the current Clause 49 and hence not touched upon in this article.
Please note that most
of these changes shall be given effect before 1st October, 2014.
1. E Voting facility to Shareholders in General Meeting
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Company shall provide e-voting facility to its shareholders
for all shareholders' resolutions, to be passed at General Meetings or through
postal ballot. Such e-voting facility shall be kept open for such number of
days as the relevant Rules prescribe.
Action point : Listed Companies need to include E Voting
from the current AGM.
2. Whistle Blower Mechanism to be implemented
The company should devise a Whistle Blower Mechanism enabling
stakeholders, including individual employees to freely communicate their
concerns about illegal or unethical practices.
Action point : Listed Companies need to devise &
introduce a Whistle Blower policy before 1st October, 2014
3. Mandatory appointment of Women Director
Company shall have one women Director. (She may or may not be
Independent Director).
Action point : Listed Companies need to have a Women Director
in the Board before 1st October, 2014
4. An independent Director can hold office for a maximum
of 10 years
An independent director shall hold office for a term up to
five consecutive years on the Board of a company and shall be eligible for
reappointment for another term of up to five consecutive years. A person who
has already served as an independent director for five years or more in a
company as on October 1, 2014 shall be eligible for appointment, on completion
of his present term, for one more term of up to five years only.
A person shall not serve as an independent director in more
than seven listed companies.
Action point : The ensuing AGM Notice shall specify that the Independent
Directors are appointed for 5 years term.
5. Formal issue of appointment letter to Independent
Directors & Performance evaluation
The company shall issue a formal letter of appointment to the
independent directors in the manner as provided in the Companies Act,
2013. The letter of appointment along with the detailed profile of independent
director shall be disclosed on the websites of the company and the Stock
Exchanges not later than one working day from the date of such appointment.
The Nomination Committee shall lay down the evaluation
criteria for performance evaluation of independent directors. The company shall
disclose the criteria for performance evaluation, as laid down by the
Nomination Committee, in its Annual Report. The performance evaluation of
independent directors shall be done by the entire Board of Directors (excluding
the director being evaluated).
Action point : Company need to issue formal letter
of appointment to Independent Directors. It shall be placed in website.
6. Separate meeting of Independent Directors made
Compulsory
The independent directors of the company shall hold at least
one meeting in a year, without the attendance of non-independent directors and
members of management. All the independent directors of the company shall
strive to be present at such meeting.
Action point : Company shall conduct one separate
meeting of Independent Directors in a year.
7. Vacancy in office of Independent Directors - to be
filled in 3 months or next Board meeting
An independent director who resigns or is removed from the
Board of the Company shall be replaced by a new independent director at the
earliest but not later than the immediate next Board meeting or three months
from the date of such vacancy, whichever is later.
Action point : No immediate action is
required. But going forward, any vacancy in the office of Independent Director
shall be filled within 3 months or next Board meeting whichever is later.
8. Remuneration Committee to have 3 Non executive Directors
The company shall set up a nomination and remuneration committee which shall comprise at least three directors, all of whom shall be non-executive directors and at least half shall be independent. Chairman of the committee shall be an independent director.
9. Related party transactions – Shareholders approval
required…
The company shall formulate a policy on materiality of related
party transactions and also on dealing with Related Party Transactions.
Provided that a transaction with a related party shall be
considered material if the transaction / transactions to be entered into
individually or taken together with previous transactions during a financial
year, exceeds five percent of the annual turnover or twenty percent of the net
worth of the company as per the last audited financial statements of the
company, whichever is higher.
All Related Party Transactions shall require prior approval of
the Audit Committee.
All material Related Party Transactions shall require approval
of the shareholders through special resolution and the related parties shall
abstain from voting on such resolutions.
Existing Related party transactions which are likely to
continue beyond 31 March 2015 shall be placed for approval in the first General
Meeting subsequent to October 01, 2014. However, a company may choose to get
such contracts approved by the shareholders even before October 01, 2014.
Action point : CS need to check if the current
Related party transactions with subsidiaries will fall under this criteria; if
so, need to place before Shareholders.
10. Constitution of Risk management committee for Top 100
Companies
The company shall constitute a Risk Management Committee. The
Board shall define the roles and responsibilities of the Risk Management
Committee and may delegate monitoring and reviewing of the risk management plan
to the committee
Action point: This is currently applicable for Top 100 Companies only.
Very good and timely write up!!
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