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Monday, November 28, 2016

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 concerninfundamental corporate changes.
(ii) opportunity to participate effectively and vote in general shareholder meetings. (iii)beininformed 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  kecorporate  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  kecorporate  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  listeentity 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  entityits  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  relate 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 sucexecutives 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.