Corporate Governance in listed entities – Amendments to Clauses 35B and 49 of the Equity Listing Agreement.
Securities Exchange Board of India vide Circular No. CIR/CFD/POLICY CELL/2/2014, dated April 17, 2014 has amended clause 35B and 49 of Listing agreement in order to align with the provisions of the Companies Act, 2013, adopt best practices on corporate governance and to make the corporate governance framework more effective.
Clause 35B – Effective from the date of issue of circular.
- Every listed Company shall provide e-voting facility to its shareholders’, in respect of all shareholder’s resolutions, to be passed at General Meetings or through postal ballot.
Clause 49 – Effective from 1st October, 2014. In brief, the major changes are as under:
- Nominee Directors not to be considered as Independent Directors.
- Establishment of Vigil Mechanism for directors and employees.
- Increased the role of Audit Committee.
- Employee Stock Options (ESOP’s) cannot be given to Independent Directors
- The eligibility criteria for appointment of Independent Directors made more stringent.
- A meeting of only Independent Directors to be conducted every year.
- Stakeholders relationship committee to be formed
- Performance evaluation of independent directors to be done by Nomination Committee.
- Related Party transactions to be approved by the Audit Committee
- Material Related Party Transactions to be approved by the Shareholders in the General meeting by special resolution. The interested parties are not allowed to vote in this regard.
- Listed company to have at least one women director.
- Tenure of independent directors is increased to 2 terms of 5 Years each with a cooling off period of 3 years for further appointment.