Enforcement of Corporate Governance - SEBI - SMDRP/POLICY/ CIR- 03/01

Circulars SECURITIES AND EXCHANGE BOARD OF INDIA SECONDARY MARKET DEPARTMENT Mittal Court, B Wing, First Floor, 224, Nariman Point, Mumbai 400 021 SMDRP/POLICY/ CIR- 03/01 January 22, 2001 To: The President/Executive Director/Managing Director Of all the Stock Exchanges Dear Sir/Madam, Enforcement of Corporate Governance SEBI had convened a meeting of the all the stock exchanges on January 17, 2001 to discuss various issues relating to secondary market including the compliance of the provisions of corporate governance. On the basis of discussion in the meeting, the stock exchanges are directed to implement the following: A. Setting up a separate monitoring cell The stock exchanges shall set up a separate monitoring cell with identified personnel to monitor the compliance with the provisions of the corporate governance. This cell shall obtain the quarterly compliance report from the companies who are scheduled in the first phase and shall submit a consolidated compliance report to SEBI within 30 days of the end of the quarter, commencing from the quarter ending March 2001. The companies who scheduled in the first phase of the Clause 49 of the Listing Agreement will be required to submit a quarterly compliance report to the stock exchanges within 15 days from the end of the quarter. The report shall be submitted either by the Compliance Officer or the Chief Executive Officer of the company after obtaining due approvals. The report shall be obtained by the stock exchanges in the following format : B. Listing of Initial Public Offerings As per the schedule of implementation of corporate governance specified by SEBI Circular No. SMDRP/Policy/CIR-10/2000 dated February 21, 2000, all the entities seeking listing for the first time are required to comply with the provisions of corporate governance at the time of listing. The stock exchanges shall ensure that these provisions have been complied with before granting any new listing. For this purpose, it will be satisfactory compliance if these companies have set up the Boards and constituted the Committees such as Audit Committee, Shareholders/Investors Grievance Committee, etc. before seeking listing. A reasonable time to comply with these conditions may be granted only where the stock exchange is satisfied that genuine legal issues exists which will delay such compliance. In such cases while granting listing, the stock exchanges shall obtain an undertaking from the company. In case of the companies failing to comply with this requirement without any genuine reason, the application money shall be kept in an escrow account till the conditions are complied with. Yours faithfully, P K BINDLISH Division Chief Secondary Market, Depository Research Publications Dept. E-mail : [email protected] Ph. 2843631 Fax-2845761 Quarterly Compliance Report on Corporate Governance Name of the Company: Quarter ending on : Particulars Clause of Listing Agreement Compliance status (Yes/No) Remarks 1 2 3 4 Board of Directors 49 I Audit Committee 49 II Shareholders/Investors Grievance Committee 49 VI (C) Remuneration of Directors 49 III Board Procedures 49 IV Management 49 V Shareholders 49 VII Report on Corporate Governance 49 VII Note: 1) The details under each head shall be provided to incorporate all the information required as per the provisions of the clause 49 of the Listing Agreement. 2) In the column No.3, compliance or non-compliance may be indicated by Yes/No. For example, if the Board has been composed in accordance with the clause 49 I of the Listing Agreement, Yes may be indicated. 3) In the remarks column, reasons for non-compliance may be indicated, for example, in case of requirement related to circulation of information to the shareholders, which would be done only in the AGM/EGM, it might be indicated in the Remarks column - will be complied with at the AGM. Similarly, in respect of matters which can be complied with only where the situation arises, for example, Report on Corporate Governance is to be a part of Annual Report only, the words will be complied in the next Annual Report may be indicated.