From Oct 1, listed cos to follow new norms
Aug 04 2014 , Mumbai
The new rules would include provisions such as requirement by companies to get shareholders’ approval for related party transactions, setting up a whistleblower mechanism, disclosures on pay packages and requirement of at least one woman director on company boards.
“Listing agreement regulations will kickstart from October 1 onwards,” the Sebi chairman told reporters on the sidelines of a conference here.
Through this regulation, the market regulator is trying to align the listing norms with the new Companies Act and is aimed at better investor protection by ensuring equitable treatment for minority and foreign shareholders. It also aims to encourage companies to adopt best practices on corporate governance.
In February, the Sebi board had cleared the new set of norms to be incorporated in listing agreement.
This includes expanding the role of the audit committee, putting restrictions on related party transactions involving promoters and directors and ban on stock options to independent directors.
Under the new rule, 'nominee directors' will not come under the definition of independent directors and it also put curbs on remuneration of board members and greater disclosure of remuneration policies.
The Companies Act, 2013 was enacted on August 30, 2013 which provides for a major overhaul in the corporate governance norms for all companies. The rules pertaining to corporate governance was notified on March 27, 2014.
Since these rules are applicable for every company, Sebi had “decided to review the provisions of the Listing Agreement with the objectives 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,” Sebi had said in a circular earlier.
The capital market regulator has amended clauses 35B and 49 of the listing agreement. Now, under changed 35B norms, listed companies are required to provide the option of facility of e-voting to shareholders on all resolutions proposed to be passed at general meetings.
The market regulator is also in the process of finalising the new regulation called Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2014 that would replace current listing agreement through which listed companies are being governed by the stock exchange.
This regulation will have all the rules relating to listing and corporate governance and it will be uniformly followed across exchanges.
The regulation updates and consolidates provisions relating to listing and disclosure requirements in respect of all kinds of securities. It makes detailed provisions for enforcement of violations. Most importantly, it lays down the principles governing disclosures and listing obligations, while making specific illustrative rules. It assigns specific responsibilities to each constituent such as listed company, board, compliance officer, stock exchange, etc. under the regulations. It promotes electronic filing through technologically updated platform.
Sebi's chairman also said that the market regulator is working with the Reserve Bank of India on framing rules targeting willful loan defaulters.
The new rules will provide for tough measures like banning willful defaulters from capital raising activities. There will also be a mechanism to have real-time information sharing between the two regulators.
Meanwhile, Sinha also said that the Sebi board which meets later this week will discuss the way forward on real estate investment trusts (REITs) and infrastructure investment trusts. It will, however, not discuss insider trading norms, he said.