Corporate Governance in listed Companies – Clause 49 of the Listing Agreement

SEBI/CFD/DIL/CG/1/2004/12/10 · 2004-10-29 · SEBI Corporation Finance Department

Summary

This section mandates Stock Exchanges to replace existing Clause 49 with revised provisions and establishes a phased implementation schedule for listed entities. It requires companies meeting specific capital thresholds to submit quarterly compliance reports within fifteen days of the quarter's end. Additionally, it defines the applicability of these rules to various corporate entities while explicitly excluding Mutual Funds. This section mandates a code of conduct for board members and senior management, requiring annual affirmation and website publication. It establishes strict composition, meeting, and power requirements for the Audit Committee, including oversight of financial reporting and internal controls. Additionally, it outlines governance rules for subsidiary companies and specific disclosure obligations regarding related party transactions and risk management. This section mandates detailed disclosures regarding director remuneration, management discussion and analysis, and shareholder grievance redressal mechanisms. It requires CEO and CFO certification of financial statements, internal controls, and absence of fraud or illegal transactions. Finally, it establishes a s

Text

All Stock Exchanges are hereby directed to amend the Listing Agreement by replacing the existing Clause 49... with the revised Clause 49 given in Annexure I through I D to this circular.

Please note that this is a master circular which supersedes all other earlier circulars issued by SEBI on Clause 49 of the Listing Agreement.

For entities seeking listing for the first time, at the time of seeking in-principle approval for such listing.

For existing listed entities which were required to comply with Clause 49 which is being revised i.e. those having a paid up share capital of Rs. 3 crores and above or net worth of Rs. 25 crores or more at any time in the history of the company, by April 1, 2005.

Companies complying with the provisions of the existing Clause 49 at present... shall continue to do so till the revised Clause 49 of the Listing Agreement is complied with or till March 31, 2005, whichever is earlier.

The companies which are required to comply with the requirements of the revised Clause 49 shall submit a quarterly compliance report to the stock exchanges as per sub Clause VI (ii), of the revised Clause 49, within 15 days from the end of every quarter.

However, for other listed entities which are not companies, but body corporate... incorporated under other statutes, the revised Clause 49 will apply to the extent that it does not violate their respective statutes and guidelines...

The Stock Exchanges shall ensure that all provisions of the revised Clause 49 have been complied with by a company seeking listing for the first time, before granting the in-principle approval for such listing.

The Stock Exchanges shall set up a separate monitoring cell with identified personnel to monitor the compliance with the provisions of the revised Clause 49 on corporate governance.

The Board shall lay down a code of conduct for all Board members and senior management of the company. The code of conduct shall be posted on the website of the company.

All Board members and senior management personnel shall affirm compliance with the code on an annual basis. The Annual Report of the company shall contain a declaration to this effect signed by the CEO.

For this purpose, the term “senior management” shall mean personnel of the company who are members of its core management team excluding Board of Directors.. Normally, this would comprise all members of management one level below the executive directors, including all functional heads.

Source: SecMarx — Corporate Governance in listed Companies – Clause 49 of the Listing Agreement. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.