Circular, CIR/CFD/DIL/4/2014, dated 01st August,
2014
Monitoring of Compliance by Stock Exchanges
1. SEBI, vide Circular No. CIR /
MRD / DSA / 31 /2013 dated September 30, 2013 and Circular No. CIR / CFD /
POLICYCELL / 13 / 2013 dated November 18, 2013 advised stock exchanges to,
inter-alia, put in place a system to monitor and review the compliance of listing
conditions by listed companies. Clause 5.2 of the Circular dated November 18,
2013 also advised stock exchanges to devise framework to detect any
non-compliance / violation of the applicable laws.
2. SEBI vide circular dated April
17, 2014 has also made certain amendments to the Clause 49 of the Listing
Agreement. The amended Clause 49, inter-alia, provides for Principles of
Corporate Governance to be mandatorily complied with by listed companies.
3. The Principles of Corporate
Governance, inter-alia, provide that shareholders should have opportunity to
participate effectively and vote in general shareholder meetings. These
principles also require companies to facilitate effective shareholder
participation and exercise of ownership rights and require that company
procedures shall not make it unduly difficult or expensive to cast votes.
4. In this regard, it is observed
that some listed companies belonging to a common group have held their AGMs,
with a time gap of 15 minutes between two AGMs. It is also observed that these
companies were formed out of demergers and had 80% common shareholding thereby
leaving only 15 minutes each for the common shareholders to attend the AGM of
these companies.
5. It is observed that allocation
of 15 minutes for conducting AGM of a public listed company having more than
one lakh shareholders does not appear to be adequate enough to facilitate a
constructive discussion on various matters transacted at the AGM. Such a
practice affects the rights of investors to seek clarifications/hold
discussions and prima-facie appears to be prejudicial to the interest of the
investors.
6. In view of the above, Clause 5.2
of the Circular dated November 18, 2013 and the provisions of the revised
Clause 49 which are scheduled to take effect from October 01, 2014, all
recognised stock exchanges are advised to step up and equip their monitoring
framework to identify and monitor such practices and to ensure that
requirements laid down by Principles of Corporate Governance in the revised
Clause 49 of the Listing Agreement are followed in letter and spirit.
7. This circular is issued in
exercise of the powers conferred under Section 11 read with Section 11A of the
Securities and Exchange Board of India Act, 1992.
8. Stock Exchanges are advised to
ensure compliance with this circular.
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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