DISCLOSURES

[Mr. M. GOVINDARAJAN]

INTRODUCTION:

         SEBI requires the listed companies to include a separate report on Corporate Governance in their Annual Report by including Clause 49 in the listing agreement.  The disclosures to be made according to Clause 49 are of two types - one is disclosures on mandatory requirements and the other is on disclosures on non mandatory requirements.  Some disclosures are to be made to the Audit Committee which will make appropriate recommendations to the Board.   Some disclosures will be form part of the Annual Report that should be submitted to the shareholders.

TYPES OF DISCLOSURES:

         Clause 49 of the listing agreements requires the following disclosures:

Basis of related party transactions;

Disclosure on Accounting Treatment;

Board disclosures on Risk Management;

Proceeds from public issues, rights issues, preferential issues etc.,;

Remuneration of Directors;

Management;

Shareholders.

BASIS OF RELATED PARTY TRANSACTIONS:

         The related party transactions are required to be submitted to the audit committee.  A statement in summary form of transactions with related parties in the ordinary course of business shall be placed periodically before the audit committee.  The details of material individual transactions with related parties which are not in the normal course of business shall also be placed before the Audit Committee.  Further the details of material individual transactions with related parties or others, which are not on an arm's length basis, should be placed before the Audit Committee should be placed before the Audit Committee together with Management's justification for the same.

DISCLOSURE ON ACCOUNTING TREATMENT:

         The listing agreement requires where in the preparation of financial statements a treatment different from that prescribed in an Accounting Standard has been followed, the fact shall be disclosed in the financial statements, together with the management's explanation as to why it believes such alternative treatment is more representative of the true and fair view of the underlying business transaction in the Corporate Governance report.

BOARD DISCLOSURES ON RISK MANAGEMENT:

         The company shall lay down procedures to inform Board members about the risk assessment and minimization procedures.   These procedures shall be periodically reviewed to ensure that executive management controls risk through means of a properly defined framework.

PROCEEDS FROM PUBLIC ISSUES, RIGHTS ISSUES, PREFERENTIAL ISSUES ETC:

         Companies are used to raise public issues, rights issues, preferential issues etc.,   When money is raised through an issue it shall disclose to the Audit Committee, the uses/applications of funds by major category on a quarterly basis as a part of their quarterly declaration of financial results.   Further, on annual basis, the company shall prepare a statement of funds utilized for the purposes other than those stated in the offer document or prospectus or notice and place it before the Audit Committee.  Such disclosure shall be made only till such time that the full money raised through the issue has been fully spent.   This statement shall be certified by the statutory auditors of the company.   If the company appoints a monitoring agency to monitor the utilization of proceeds of a public or rights issues it shall place before the Audit Committee the monitoring report of such agency, upon receipt without any delay.   The Audit Committee shall make appropriate recommendations to the Board to take up steps in this matter.

REMUNERATION OF DIRECTORS:

         In annual reports the following are to be disclosed in respect of remuneration of directors:

All pecuniary relationship or transactions of the non executive directors vis-à-vis the company shall be disclosed the Annual Report;

All elements of remuneration package of individual directors summarized under major groups, such as salary, benefits, bonuses, stock options, pension etc.,;

Details of fixed component and performance linked incentives, along with the performance criteria;

Service contracts, notice period, severance fees;

Stock option details, if any and whether issued at a discount as well as the period over which accrued and over which exercisable;

Criteria of making payments to non executive directors or the same may be put up in the company's website and reference drawn thereto in the annual report;

The number of shares and convertible instruments held by non executive directors;

Non executive directors shall be required to disclose their shareholding both own or held by/for other persons on a beneficial basis in the listed company in which they are proposed to be appointed as directors, prior to their appointment.  These details should be disclosed in the notice to the general meeting called for appointment of such director.

MANAGEMENT:

         A Management Discussion and Analysis Report should form part of the annual report to the shareholders.  It should include discussion on the following matters within the limits set by the company's competitive position:

Industry structure and developments;

Opportunities and threats;

Segment-wise or product-wise performance;

Outlook;

Risks and concerns;

Internal control systems and their adequacy;

Discussion on financial performance with respect to operational performance;

Material developments in Human Resources/Industrial Relations front, including number of people employed.

The senior management shall make disclosures to the board relating to all material financial and commercial transactions where they have personal interest that may have a potential conflict with interest of the company at large.

SHAREHOLDERS:

         The following disclosures are required to be made to the shareholders:

In case of the appointment of a new director or re-appointment of a director the following information shall be furnished:

A brief resume of the director;

Nature of his expertise in specific functional areas;

Names of companies in which the person also holds the directorship and the membership of Committees of the Board; and

Shareholding of non executive directors;

Disclosure of relationships between directors inter-se shall be made in the Annual report, notice of appointment of a Director, prospectus and letter of offer for issuances and any related filings made to the stock exchange where the company is listed;

Quarterly results and presentations made by the company to analysts shall be put  on company's web-site, or shall be sent in such a form as to enable the stock exchange on which the company is listed to put it on its own web site;

INVESTOR GRIEVANCE:

A board committee under the chairmanship of a non executive director shall be formed to specifically look into the redressal of shareholders and investors' complaints like transfer of shares, non receipt of balance sheet, non receipt of declared dividends etc.,   the Committee shall be designated as 'Shareholders/Investors Grievance Committee'.

To expedite the process of share transfers the Board of the company shall delegate the power of share transfer to an officer or a committee or to the registrar and share transfer agents.   The delegated authority shall attend to share transfer formalities at least once in a fortnight.

Non compliance of such mandatory requirements of this clauses with reasons thereof and the extent to which the non mandatory requirements have been adopted should be specifically highlighted.