Winding up Provisions

Winding up Provisions

Read More

Companies (Transfer of Pending Proceedings) Rules, 2016.

1. Short title  and  Commencement.   –  (1)  These  rules  may  be  called  the  Companies  (Transfer  of  Pending Proceedings) Rules, 2016.

(2) They shall come into force with effect from the 15th December, 2016, except rule 4, which shall come into force from 1st April, 2017.

2. Definitions.- (1) In these rules, unless the context otherwise requires-

(a)   “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);`

(b)  “Tribunal”  means the National  Company Law Tribunal  constituted  under section 408 of the Companies  Act, 2013.

(2) Words and expressions  used in these rules and not defined,  but defined  in the Companies  Act, 1956 (1 of 1956) (herein referred to as the Act), the Companies Act, 2013 (18 of 2013) or the Companies (Court) Rules, 1959 or the Code shall have the meanings respectively assigned to them in the respective Act or rules or the Code, as the case may be.

3. Transfer of pending proceedings relating to cases other than Winding up.—All proceedings under the Act, including proceedings  relating  to  arbitration,  compromise,  arrangements  and  reconstruction,  other  than  proceedings relating  to winding  up on the date  of coming  into force  of these  rules shall stand  transferred  to the Benches  of the Tribunal exercising respective territorial jurisdiction:

Provided that all those proceedings which are reserved for orders for allowing or otherwise of such proceedings shall not be transferred.

4. Pending proceeding relating to Voluntary  Winding up: All applications  and petitions relating to voluntary winding up of companies pending before a High Court on the date of commencement of this rule, shall continue with and dealt with by the High Court in accordance with provisions of the Act.
5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.—(1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code:

Provided  that the petitioner  shall submit  all information,  other than information  forming  part of the records

transferred in accordance with Rule 7, required for admission of the petition under sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate.

(2)          All cases where opinion has been forwarded by Board for Industrial and Financial Reconstruction,  for winding up of a company to a High Court and where no appeal is pending, the proceedings for winding up initiated under the Act, pursuant to section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall continue to be dealt with by such High Court in accordance with the provisions of the Act.

6. Transfer of  pending  proceedings  of  Winding  up  matters  on  the  grounds  other  than  inability  to  pay debts.—All  petitions filed under clauses (a) and (f) of section 433 of the Companies Act, 1956 pending before a High Court and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal exercising territorial jurisdiction and such petitions shall be treated as petitions under the provisions of the Companies Act, 2013 (18 of 2013).

7. Transfer  of Records.—Pursuant  to the transfer  of cases as per these rules the relevant  records shall also be transferred by the respective High Courts to the National Company Law Tribunal Benches having jurisdiction forthwith over the cases so transferred.
8. Fees not  to be  paid.—Notwithstanding anything  contained  in the  National  Company  Law  Tribunal  Rules, 2016, no fee shall be payable in respect of any proceedings transferred to the Tribunal in accordance with these rules.

Read More

DIN and DPIN with Practical Examples

Director Identification Number

Legal Framework

The Companies Act, 2013 – Section 153 to 159

Companies (Appointment and Qualification of Directors) Rules, 2014.

Rule 2(d)

“Director Identification Number” (DIN) means an identification number allotted by the Central Government to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as a director of a company:

Provided that the Director Identification Number (DIN) obtained by the individuals prior to the notification of these rules shall be the DIN for the purpose of the Companies Act, 2013:

Provided further that “Director Identification Number” (DIN) includes the Designated Partnership Identification Number (DPIN) issued under section 7 of the Limited Liability Partnership Act, 2008 (6 of 2009) and rules made thereunder;

Application for allotment of Director Identification Number (Section 153 + Rule 9)

(1) Every individual, who is to be appointed as director of a company shall make an application electronically in Form DIR-3, to the Central Government for the allotment of a Director Identification Number (DIN) along with such fees as provided in the Companies (Registration Offices and Fees) Rules, 2014.

(2) The Central Government shall provide an electronic system to facilitate submission of application for the allotment of DIN through the portal on the website of the Ministry of Corporate Affairs.

(3) (a) The applicant shall download Form DIR-3 from the portal, fill in the required particulars sought therein and sign the form and after attaching copies of the following documents, scan and file the entire set of documents electronically-

photograph;proof of identity;proof of residence;verification by the applicant for applying for allotment of DIN in Form DIR-4;specimen signature duly verified.(b) Form DIR-3 shall be signed and submitted electronically by the applicant using his or her own Digital Signature Certificate and shall be verified digitally by –a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; ora company secretary in full time employment of the company or by the managing director or director of the company in which the applicant is to be appointed as director.

Procedure for allotment of DIN (Section 154 read with Rule 10)

(1) On the submission of the Form DIR-3 on the portal and payment of the requisite amount of fees through online mode the provisional DIN shall be generated by the system automatically which shall not be utilized till the DIN is confirmed by the Central Government.

(2) After generation of the provisional DIN, the Central Government shall process the applications received for allotment of DIN under sub-rule (2) of rule 9, decide on the approval or rejection thereof and communicate the same to the applicant along with the DIN allotted in case of approval by way of a letter by post or electronically or in any other mode, within a period of one month from the receipt of such application.

(3) If the Central Government, on examination, finds such application to be defective or incomplete in any respect, it shall give intimation of such defect or incompleteness, by placing it on the website and by email to the applicant who has filed such application, directing the applicant to rectify such defects or incompleteness by resubmitting the application within a period of fifteen days of such placing on the website and email:

 Provided that the Central Government shall –

reject the application and direct the applicant to file fresh application with complete and correct information, where the defect has been rectified partially or the information given is still found to be defective;treat and label such application as invalid in the electronic record in case the defects are not removed within the given time; andinform the applicant either by way of letter by post or electronically or in any other mode.

(4) In case of rejection or invalidation of application, the provisional DIN so allotted by the system shall get lapsed automatically and the fee so paid with the application shall neither be refunded nor adjusted with any other application.

(5) All Director Identification Numbers allotted to individual(s) by the Central Government before the commencement of these rules shall be deemed to have been allotted to them under these rules.

(6) The Director Identification Number so allotted under these rules is valid for the life-time of the applicant and shall not be allotted to any other person.

Cancellation or surrender or Deactivation of DIN – Rule – 11

The Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received from any person, cancel or deactivate the DIN in case –

the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number;the DIN was obtained in a wrongful manner or by fraudulent means;of the death of the concerned individual;the concerned individual has been declared as a person of unsound mind by a competent Court;if the concerned individual has been adjudicated an insolvent:Provided that before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned individual;on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such DIN.   Provided that before deactivation of any DIN in such case, the Central Government shall verify e-records.

Explanation.- For the purposes of clause (b) –

(i) the term “wrongful manner” means if the DIN is obtained on the strength of documents which are            not legally valid or incomplete documents are furnished or on suppression of material information            or on the basis of wrong certification or by making misleading or false information or by                                misrepresentation;

(ii) the term “fraudulent means” means if the DIN is obtained with an intent to deceive any other                      person or any authority including the Central Government.

Intimation of changes in particulars specified in DIN application – (Rule 12)

Every individual who has been allotted a Director Identification Number under these rules shall, in the event of any change in his particulars as stated in Form DIR-3, intimate such change(s) to the Central Government within a period of thirty days of such change(s) in Form DIR-6 in the following manner, namely;-(i). the applicant shall download Form DIR-6 from the portal and fill in the relevant changes, attach copy of the proof of the changed particulars and verification in the Form DIR-7 all of which shall be scanned and submitted electronically;(ii). the form shall be digitally signed by a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; 16(iii). the applicant shall submit the Form DIR-6;The Central Government, upon being satisfied, after verification of such changed particulars from the enclosed proofs, shall incorporate the said changes and inform the applicant by way of a letter by post or electronically or in any other mode confirming the effect of such change in the electronic database maintained by the Ministry.The DIN cell of the Ministry shall also intimate the change(s) in the particulars of the director submitted to it in Form DIR-6 to the concerned Registrar(s) under whose jurisdiction the registered office of the company(s) in which such individual is a director is situated.The concerned individual shall also intimate the change(s) in his particulars to the company or companies in which he is a director within fifteen days of such change.

Prohibition to obtain more than one DIN (Section – 155)

No individual shall apply for/obtain/ possess another Director Identification Number who has already been allotted a Director Identification Number under section 154.

Director to intimate DIN (Section – 156)

Every existing director shall, within 1 month of the receipt of DIN from the Central Government, intimate his DIN to the company or all companies wherein he is a director.

Company to intimate DIN to ROC – (Section – 157)

Every company shall, within fifteen days of the receipt of intimation under section 156, furnish the DIN of all its directors to the Registrar/authorised office by the Central Government. Every such intimation shall be furnished in such form and manner as may be prescribed.If a company fails to furnish Director Identification Number under section 157 (1), before the expiry of the 270 days period from the date by which it should have been furnished with additional fee, the company shall be punishable with fine which shall not be less than Rs. 25,000 but which may extend to Rs. 1,00,000 and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs. 25,000 but which may extend to Rs. 1,00,000.

Obligation to indicate DIN – (Section – 158)

Every person or company shall mention the DIN in return, information or particulars as required to be furnished under this act, in case such return etc. relate to the director or contain any reference of any director.

Punishment for contravention – (Section – 159)

If any individual or director of a company, contravenes any of the provisions of section 152, section 155 and section 156, such individual or director of the company shall be punishable with imprisonment for a term which may extend to 6 months or with fine which may extend to Rs. 50,000 and where the contravention is a continuing one, with a further fine which may extend to Rs. 500 for every day after the first during which the contravention continues.

Integration of DPIN and DIN

Any person, who desires to become a designated partner in a Limited Liability Partnership, now has to obtain DIN by filing e-form DIR-3. If a person has been allotted DIN, the said DIN shall also be used as DPIN for all purposes under Limited Liability Partnership Act, 2008.  If a person has been allotted DPIN, the said DPIN will also be used as DIN for all the purposes under Companies Act, 2013 and the previous Act. If a person has been allotted both DIN and DPIN, his DPIN will stand cancelled and his DIN will be used as DIN as well as DPIN for all purposes under Limited Liability Partnership Act, 2008 and Companies Act, 2013. Every designated partner, shall intimate his consent to become a designated partner to the limited liability partnership and DPIN, in Form 9 and the LLP shall intimate such DPIN to Registrar in Form 4.

Q. Mohan, a director in Agile Ltd. holding director’s identification number (DIN) allotted by the Central Government has now accepted directorship in two other public companies and three private companies. Referring to the provisions of the Companies Act, 2013, answer the following :

(i) Whether he is required to obtain DIN for each of the companies in which he has been appointed as director ?

(ii) After obtaining DIN, there are some changes in the particulars of Mohan.  What procedure would you follow to get the changes incorporated in the DIN already allotted to Mohan? (Dec, 15(F) – 4 marks)

Ans. (i) As per section 155 of Companies Act, 2013, no individual shall apply for/obtain/ possess another Director Identification Number who has already been allotted a Director Identification Number under section 154. So Mohan is not required to obtain any new DIN for becoming director in any other company.

(ii) Procedure to be followed for changes in DIN (Rule 12 of Companies (Appointment and Qualification of Directors) Rules, 2014

Every individual who has been allotted a Director Identification Number under these rules shall, in the event of any change in his particulars as stated in Form DIR-3, intimate such change(s) to the Central Government within a period of thirty days of such change(s) in Form DIR-6 in the following manner, namely;-the applicant shall download Form DIR-6 from the portal and fill in the relevant changes, attach copy of the proof of the changed particulars and verification in the Form DIR-7 all of which shall be scanned and submitted electronically;the form shall be digitally signed by a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; 16the applicant shall submit the Form DIR-6;

Q. ABC Ltd. appointed Anil as director on 1st November, 2014. Subsequently, Anil obtained his DIN on 10th  November, 2014. ABC Ltd. filed DIR-12 on 15th November, 2014.

Examine the legal validity of the appointment of Anil. (June, 15(F) – 4 marks)

Ans. As per section 152(3), no person shall be appointed as a director of a company unless he has been allotted the DIN. Further as per section 152(4) every person proposed to be appointed as a director by the company shall furnish his DIN and a declaration that he is not disqualified to become a director.

Any individual who intends to be a director of a company will have to mandatorily apply for DIN first. In the given case , Anil is appointed as a director on 1^st November, 2014 when he was not having DIN. So his appointment is void.

Q. Your company is contemplating appointment of Biswas as a director and he is not a director in any other company. As the Company Secretary, advise Biswas as to the need for obtaining a Director Identification Number (DIN). (Dec, 07 (F) – 4 marks)

Ans. As per section 152(3), no person shall be appointed as a director of a company unless he has been allotted the DIN. Further as per section 152(4) every person proposed to be appointed as a director by the company shall furnish his DIN and a declaration that he is not disqualified to become a director.

So to become director in a company, Biswas must have a DIN first.

To apply for DIN, he has to comply with Section 153 and Rule 9 of Companies (Appointment and Qualification of Directors) Rules, 2014.

So he has to follow the following procedure to apply for DIN.

a) Make an application electronically in Form DIR-3, to the Central Government for the allotment of a Director Identification Number (DIN) along with such fees as provided in the Companies (Registration Offices and Fees) Rules, 2014

b) Download Form DIR-3 from the portal, fill in the required particulars sought therein and sign the form and after attaching copies of the following documents, scan and file the entire set of documents electronically-

photograph;proof of identity;proof of residence;verification by the applicant for applying for allotment of DIN in Form DIR-4;specimen signature duly verified.Form DIR-3 shall be signed and submitted electronically by the applicant using his or her own

c) Digital Signature Certificate and shall be verified digitally by –

a chartered accountant in practice or a company secretary in practice or a cost accountant in practice; ora company secretary in full time employment of the company or by the managing director or director of the company in which the applicant is to be appointed as director.

Q. A director of 10 companies will require _1____ number(s) of DIN.

Q. Answer the following citing the relevant provisions of law/case law, if any;

A foreign national was intended to be appointed to the board of an MNC in India. He contends that, DIN is not required for him as he is a foreign national. Whether his contention is valid?

Ans. As per Section 153 of Companies Act, 2013, every individual, who is to be appointed as director of a company shall make an application electronically in Form DIR-3, to the Central Government for the allotment of a Director Identification Number (DIN) along with such fees as provided in the Companies (Registration Offices and Fees) Rules, 2014.

It is also mandatory for the directors of Indian companies who are not citizens of India. But, DIN is not mandatory for directors of foreign company having a branch office in India.

So in conclusion, to become a director in an Indian Company , an Individual is required to have DIN whether he is Indian Citizen or foreign National. But there is no requirement of DIN for becoming director in Foreign Company.

                                                                                                                  Author

                                   Jagdeep Arora

                                                                                                                 B.Com,CA,CS & CMA

Read More

Capital Markets and Securities Laws - Practical Q & A

Practical Questions and Answers - Security Law(CS Executive)

Read More

SEBI (LODR) Regulations, 2015 - Most Important Provisions relevant for CS Executive & Professional Students

(2) The listed entity which has listed its specified securities shall comply with the corporate governance provisions as specified in chapter IV which shall be implemented in a manner so as to achieve the objectives of the principles as mentioned below.

(a) The rights of shareholders: The listed entity shall seek to protect and facilitate the exercise of the following rights of shareholders:

(i) right to participate in, and to be sufficiently informed of, decisions concerning fundamental corporate changes.

(ii) opportunity to participate effectively and vote in general shareholder meetings. (iii)being informed of the rules, including voting procedures that govern general

shareholder meetings.

(iv)opportunity to ask questions to the board of directors, to place items on the agenda of general meetings, and to propose resolutions, subject to reasonable limitations.

(v) Effective  shareholder  participation  in  key  corporate  governance  decisions, such as the nomination and election of members of board of directors.

(vi)exercise of ownership rights by all shareholders, including institutional investors.

(vii) adequate mechanism to address the grievances of the shareholders.

(viii) protection  of  minority  shareholders  from  abusive  actions  by,  or  in  the interest of, controlling shareholders acting either directly or indirectly, and effective means of redress.

(b) Timely information: The listed entity shall provide adequate and timely information to shareholders, including but not limited to the following:

(i)  sufficient and timely information concerning the date, location and agenda of general meetings, as well as full and timely information regarding the issues to be discussed at the meeting.

(ii) Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership.

(iii) rights attached to all series and classes of shares, which shall be disclosed to investors before they acquire shares.

(c) Equitable  treatment:  The  listed  entity  shall  ensure  equitable  treatment  of  all shareholders, including minority and foreign shareholders, in the following manner:

(i)  All shareholders of the same series of a class shall be treated equally.

(ii) Effective  shareholder  participation  in  key  corporate  governance  decisions, such as the nomination and election of members of board of directors, shall be facilitated.

(iii)Exercise of voting rights by foreign shareholders shall be facilitated.

(iv)The listed entity shall devise a framework to avoid insider trading and abusive self-dealing.

(v) Processes and procedures for general shareholder meetings shall allow for equitable treatment of all shareholders.

(vi)Procedures of listed entity shall not make it unduly difficult or expensive to cast votes.

(d) Role of stakeholders in corporate governance: The listed entity shall recognise the rights of its stakeholders and encourage co-operation between listed entity and the stakeholders, in the following manner:

(i)  The listed entity shall respect the rights of stakeholders that are established by law or through mutual agreements.

(ii) Stakeholders  shall  have  the  opportunity  to  obtain  effective  redress  for violation of their rights.

(iii)Stakeholders shall have access to relevant, sufficient and reliable information on  a  timely and  regular  basis  to  enable  them  to  participate  in  corporate governance process.

(iv)The listed entity shall devise an effective whistle blower mechanism enabling stakeholders, including individual employees and their representative bodies, to freely communicate their concerns about illegal or unethical practices.

Compliance Officer and his Obligations.

6.   (1) A listed entity shall appoint a qualified company secretary as the compliance officer.

(2) The compliance officer of the listed entity shall be responsible for-

(a) ensuring conformity with the regulatory provisions applicable to the listed entity in letter and spirit.

(b) co-ordination with and reporting to the Board, recognised stock exchange(s) and depositories with respect to compliance with rules, regulations and other directives of these authorities in manner as specified from time to time.

(c) ensuringthat the correct procedures have been followed that would result in the correctness, authenticity and comprehensiveness of the information, statements and reports filed by the listed entity under these regulations.

(d) monitoring email address of grievance redressal division as designated by the listed entity for the purpose of registering complaints by investors:

Provided that the requirements of this regulation shall not be applicable in the case of units issued by mutual funds which are listed on recognised stock exchange(s) but shall be governed by the provisions of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

Preservation of documents.

9. The listed entity shall have a policy for preservation of  documents, approved by its board

of directors, classifying them in at least two categories as follows- (a)   documents whose preservation shall be permanent in nature ;

(b)  documents with preservation period of not less than eight years after completion of the relevant  transactions:

Provided  that  the  listed  entity may keep  documents  specified  in  clauses  (a)  and  (b)  in electronic mode.

Payment of dividend or interest or redemption or repayment.

12.     The listed entity shall use any of the electronic mode of payment facility approved by

the Reserve Bank of India, in the manner specified in Schedule I, for the payment of the following:

(a)   dividends; (b)  interest;

(c)   redemption or repayment amounts:

Provided that where it is not possible to use electronic mode of payment, ‗payable-at-par‘

warrants or cheques may be issued:

Provided further that where the amount payable as dividend exceeds one thousand and five hundred rupees, the ‗payable-at-par‘ warrants or cheques shall be sent by speed post.

Grievance Redressal Mechanism.

13.     (1)The listed entity shall ensure that adequate steps are taken for expeditious redressal

of investor complaints.

(2)The listed entity shall ensure that it is registered on the SCORES platform or such other electronic platform or system of the Board as shall be mandated from time to time, in order to handle investor complaints electronically in the manner specified by the Board.

(3)The listed entity shall file with the recognised stock exchange(s) on a quarterly basis, within twenty one days from the end of each quarter, a statement giving the number of investor complaints pending at the beginning of the quarter, those received during the quarter, disposed of during the quarter and those remaining unresolved at the end of the quarter.

(4)The statement as specified in sub-regulation (3) shall beplaced, on quarterly basis, before the board of directors of the listed entity.

(b)  "independent director" means a non-executive director, other than a nominee director of the listed entity:

(i)   who, in the opinion of the board of directors, is a person of integrity and possesses relevant expertise and experience;

(ii)  who is or was not a promoter of the listed entity or its holding, subsidiary or associate company;

(iii) who is not related to promoters or directors in the listed entity, its holding, subsidiary or associate company;

(iv) who, apart from receiving director's remuneration, has or had no material pecuniary relationship  with  the listed  entity,  its  holding,  subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;

(v)  none of whose relatives has or had pecuniary relationship or transaction with the listed entity, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed from time to time, whichever is lower, during the two immediately preceding financial years or during the current financial year;

(vi) who, neither himself, nor whose relative(s) —

(A) holds or has held the position of a key managerial personnel or is or has been an employee of the listed entity or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;

(B) is or has been an employee or proprietor or a partner, in any of the three  financial  years  immediately  preceding  the  financial  year  in which he is proposed to be appointed, of —

(1)a  firm  of  auditors  or  company secretaries  in  practice  or  cost auditors of the listed entity or its holding, subsidiary or associate company; or

(2) any legal or a consulting firm that has or had any transaction with the listed entity, its holding, subsidiary or associate company amounting to ten per cent or more of the gross turnover of such firm;

(C) holds together with his relatives two per cent or more of the total voting power of the listed entity; or

(D) is a chief executive or director, by whatever name called, of any non-

profit organisation that receives twenty-five per cent or more of its receipts or corpus from the listed entity, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the listed entity;

(E) is a material supplier, service provider or customer or a lessor or lessee of the listed entity;

(vii)who is not less than 21 years of age.

Boardof Directors.

17.     (1) The composition of board of directors of the listed entity shall be as follows:

(a)  board of directors shall have an optimum combination of executive and non- executive directors with at least one woman director and not less than fifty percent. of the board of directors shall comprise of  non-executive directors;

(b)  where the chairperson of the board of directors is a non-executive director, at least one-third of the board of directors shall comprise of independent directors and where the listed entity does not have a regular non-executive chairperson, at least half of the board of directors shall comprise of independent directors: Provided that where the regular non-executive chairperson is a promoter of the listed entity or is related to any promoter or person occupying management positions at the level of board of director or at one level below the board of directors, at least half of the board of directors of the listed entity shall consist of independent directors.

Explanation.-For  the  purpose  of  this  clause,  the  expression  ―related   to  any

promoter" shall have the following meaning:

(i)  if  the  promoter  is  a  listed  entity,  its  directors  other  than  the  independent directors, its employees or its nominees shall be deemed to be related to it;

(ii) if the promoter is an unlisted entity, its directors, its employees or its nominees shall be deemed to be related to it.

(2) The board of directors shall meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings.

(3) The board of directors shall periodically review compliance reports pertaining to all laws applicable to the listed entity, prepared by the listed entity as well as steps taken by the listed entity to rectify instances of non-compliances.

(4) The board of directors of the listed entity shall satisfy itself that plans are in place for orderly succession for appointment to the board of directors and senior management.

(5)  (a) The board of directors shall lay down a code of conduct for all members of board of directors and senior management of the listed entity.

(b) The code of conduct shall suitably incorporate the duties of independent directors as laid down in the Companies Act, 2013.

(6)  (a) The board of directors shall recommend all fees or compensation, if any, paid to non-executive directors, including independent directors and shall require approval of shareholders in general meeting.

(b)The requirement of obtaining approval of shareholders in general meeting shall not apply to payment of sitting fees to non-executive directors, if made within the limits  prescribed  under  the  Companies  Act,  2013  for  payment  of  sitting  fees without approval of the Central Government.

(c) The approval of shareholders mentioned in clause (a), shall specify the limits for the maximum number of stock options that may be granted to non-executive directors, in any financial year and in aggregate.

(d)Independent directors shall not be entitled to any stock option.

(7) The minimum information to be placed before the board of directors is specified in

Part A of Schedule II.

(8) The chief executive officer and the chief financial officer shall provide the compliance certificate to the board of directors as specified in Part B of Schedule II.

(9)  (a)  The  listed  entity  shall  lay  down  procedures  to  inform  members  of  board  of directors about risk assessment and minimization procedures.

(b)The  board  of  directors  shall  be  responsible  for  framing,  implementing  and monitoring the risk management plan for the listed entity.

(10) The performance evaluation of independent directors shall be done by the entire board of directors:

Provided that in the above evaluation the directors who are subject to evaluation shall not participate:

Audit Committee.

18.     (1) Every listed entity shall constitute a qualified and independent audit committee in

accordance with  the terms of reference, subject to the following:

(a) The audit committee shall have minimum three directors as members.

(b)Two-thirds of the members of audit committee shall be independent directors.

(c) All  members  of  audit  committee  shall  be  financially  literate  and  at  least  one member shall have accounting or related financial management expertise.

Explanation (1).-For the purpose of this regulation, ―financially literate‖ shall mean the ability to read and understand basic financial statements i.e. balance sheet, profit and loss account, and statement of cash flows.

Explanation (2).-For the purpose of this regulation , a member shall  be considered to have accounting or related financial management expertise if he or she possesses experience in finance or accounting, or requisite professional certification in accounting, or any other comparable experience or background which results in the individual‘s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

(d)The chairperson of the audit committee shall be an independent director and he shall be present at Annual general meeting to answer shareholder queries.

(e) The Company Secretary shall act as the secretary to the audit committee.

(f) The audit committee at its discretion shall invite the finance director or head of the finance function, head of internal audit and a representative of the statutory auditor and any other such  executives to be present at the meetings of the committee: Provided that occasionally the audit committee may meet without the presence of any executives of the listed entity.

(2)  The listed entity shall conduct the meetings of the audit committee in the following manner:

(a) The audit committee shall meet at least four times in a year and not more than one hundred and twenty days shall elapse between two meetings.

(b)The quorum for audit committee meeting shall eitherbe two members or one third of the members of the audit committee, whichever is greater, with at least two

independent directors.

(c) The audit committee shall have powers to investigate any activity within its terms of reference, seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.

(3)  The role of theaudit committee and the information to be reviewed by the audit committee shall be as specified in Part C of Schedule II.

Nomination and remuneration committee.

19.      (1)     The  board  of  directors  shall  constitute  the  nomination  and  remuneration

committee as follows:

(a) the committee shall comprise of atleast three directors ;

(b)all directors  of the committee shall be non-executive directors; and

(c) at least fifty percent of the directors shall be independent directors.

(2) The Chairperson of the nomination and remuneration committee shall be an independent director:

Provided that the chairperson of the listed entity,whether executive or non-executive, may be appointed as a member of the Nomination and Remuneration Committee and shall not chair such Committee.

(3) The Chairperson of the nomination and remuneration committee may be present at the annual general meeting, to answer the shareholders' queries; however, it shall be up to the chairperson to decide who shall answer the queries.

(4) The role of the nomination and remuneration committee shall be as specified as in Part D

of the Schedule II.

Stakeholders Relationship Committee.

20.     (1)  The  listed  entity  shall  constitute  a  Stakeholders  Relationship  Committee  to

specifically  look  into  the  mechanism  of  redressal  of  grievances  of  shareholders, debenture holders and other security holders.

(2) The chairperson of this committee shall be a non-executive director. (3) The board of directors shall decide other members of this committee.

(4) The role of the Stakeholders Relationship Committee shall be as specified as in Part D of the Schedule II.

Risk Management Committee.

21.     (1)The board of directors shall constitute a Risk Management Committee.

(2) The majority of members of Risk Management Committee shall consist of members of the board of directors.

(3) The Chairperson of the Risk management committee shall be a member of the board of directors and senior executives of the listed entity may be members of the committee.

(4) The board of directors shall define the role and responsibility of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to the committee and such other functions as it may deem fit.

(5) The provisions of this regulation shall be applicable to top 100 listed entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year.

Vigil mechanism.

22.    (1) The listed entity shall formulate a vigil mechanism for directors and employees to

report genuine concerns.

(2) The  vigil  mechanism  shall  provide  for  adequate  safeguards  against  victimization  of director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases.

Obligations with respect to independent directors.

25.     (1) A person shall not serve as an independent director in more than seven listed

entities:

Provided that any person who is serving as a whole time director in any listed entity shall serve as an independent director in not more than three listed entities.

(2) The maximum tenure of independent directors shall be in accordance with the Companies

Act, 2013 and rules made thereunder, in this regard, from time to time.

(3) The independent directors of the listed entity shall hold at least one meeting in a year, without the presence of non-independent directors and members of the management and all the independent directors shall strive to be present at such meeting.

(4) The independent directors in the meeting referred in sub-regulation (3) shall, interalia-

(a) review the performance of non-independent directors and the board of directors as a whole;

(b) review the performance of the chairperson of the listed entity, taking into account the views of executive directors and non-executive directors;

(c) assess  the  quality,  quantity  and  timeliness  of  flow  of  information  between  the management of the listed entity and the board of directors that is necessary for the board of directors to effectively and reasonably perform their duties.

(5) An independent director shall be held liable, only in respect of such acts of omission or commission by the listed entity which had occurred with his knowledge, attributable through processes of board of directors, and with his consent or connivance or where he had not acted diligently with respect to the provisions contained in these regulations.

(6) An independent director who resigns or is removed from the board of directors of the listed entity shall be replaced by a new independent director by listed entity at the earliest but not later than the immediate next meeting of the board of directors or three months from the date of such vacancy, whichever is later:

Provided that where the listed entity fulfils the requirement of independent directors in its board of directors without filling the vacancy created by such resignation or removal, the requirement of replacement by a new independent director shall not apply.

(7) The listed entity shall familiarise the independent directors through various programmes about the listed entity, including the following:

(a) nature of the industry in which the listed entity operates; (b) business model of the listed entity;

(c) roles, rights, responsibilities of independent directors; and

(d) any other relevant information.

Read More