Circular, CIR/CFD/POLICY CELL/2/2014, dated April
17, 2014
To,
All
Recognised Stock Exchanges
Corporate
Governance in listed entities - Amendments to Clauses 35B and 49 of the Equity
Listing Agreement
1. Please refer to master circular
No. SEBI/CFD/DIL/CG/2004/12/10 dated October 29, 2004 on Clause 49 of the
Equity Listing Agreement.
2. The Companies Act, 2013 was
enacted on August 30, 2013 which provides for a major overhaul in the Corporate
Governance norms for all companies. The rules pertaining to Corporate
Governance were notified on March 27, 2014. The requirements under the
Companies Act, 2013 and the rules notified there under would be applicable for
every company or a class of companies (both listed and unlisted) as may be
provided therein. It has been decided to review the provisions of the Listing
Agreement in this regard with the objectives to align with the provisions of
the Companies Act, 2013, adopt best practices on corporate governance and to
make the corporate governance framework more effective.
3. The full text of the revised
Clause 35B of the Equity Listing Agreement is given in Part-A of the
circular. The full text of the revised Clause 49 of the Equity Listing
Agreement is given in Part-B of the circular.
4. Applicability
4.1 The revised Clause 49 would be
applicable to all listed companies with effect from October 01, 2014. However,
the provisions of Clause 49(VI)(C) as given in Part-B shall be applicable to
top 100 listed companies by market capitalisation as at the end of the
immediate previous financial year.
4.2 The provisions of Clause 49(VII)
as given in Part-B shall be applicable to all prospective transactions. All
existing material related party contracts or arrangements as on the date of
this circular which are likely to continue beyond March 31, 2015 shall be
placed for approval of the shareholders in the first General Meeting subsequent
to October 01, 2014. However, a company may choose to get such contracts
approved by the shareholders even before October 01, 2014.
4.3 For other listed entities which
are not companies, but body corporate or are subject to regulations under other
statutes (e.g. banks, financial institutions, insurance companies etc.), the
Clause 49 will apply to the extent that it does not violate their respective
statutes and guidelines or directives issued by the relevant regulatory
authorities. The Clause 49 is not applicable to Mutual Funds.
4.4 The revised Clause 35B would be
applicable to all listed companies and the modalities would be governed by the
provisions of Companies (Management and Administration) Rules, 2014. Circular No.
CIR/CFD/DIL/6/2012 dated July 13, 2012 stands amended to that extent.
5. The monitoring cell formed by
the Stock Exchanges in terms of Circular No. CIR/CFD/POLICYCELL/13/2013 dated
November 18, 2013 shall also monitor the compliance with the provisions of the
revised Clause 49 on corporate governance for all listed companies. The cell
shall ascertain the adequacy and accuracy of disclosures in the quarterly
compliance reports received from the companies and shall submit a consolidated
compliance report to SEBI within 60 days from the end of each quarter.
6. The above listing conditions are
specified in exercise of the powers conferred under Section 11 read with
Section 11A of the Securities and Exchange Board of India Act, 1992. The said
listing conditions should form part of the existing Equity Listing Agreement of
the Stock Exchange.
7. All Stock Exchanges are advised
to ensure compliance with this circular and carry out the amendments to their
Listing Agreement as per Part-A and Part-B of this circular.
8. This master circular will
supersede all other earlier circulars issued by SEBI on Clauses 35B and 49 of
the Equity Listing Agreement.
9. This circular is available on
SEBI website at www.sebi.gov.in under the
categories “Legal Framework” and “Issues and Listing”.
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