Comments On SEBI's Draft CG Norms

SEBI’s consultative paper on review of corporate governance norms released in early January 2013 seeks to revisit the existing Clause 49 which was codified in 2004. Since 2004 SEBI has made minor modifications in the code of corporate governance, most notably in the post Satyam episode. These include amongst others disclosures in terms of promoters pledged shares, general information dissemination on websites, voting results disclosures, peer review of auditors and electronic voting enablement. The Companies Bill, passed by the Lok Sabha in December 2012, has made significant changes that have Corporate Governance (CG) impact. SEBI is now seeking to align with the Corporate Governance (CG) changes proposed in the Companies Bill 2012 as well as other recommendations such as MCA voluntary guidelines and the Adi Godrej report. It has also examined good international practices from OECD to the extent they are relevant to India, taking into consideration the concentrated nature of holdings of controlling interest and promoter driven companies. SEBI has stated that it intends to advance the implementation of the proposed changes and not await the passage of the Companies Bill 2012. This article analyses the proposed changes and makes recommendations where necessary. The analysis of the proposals in the Consultative paper consists of three parts:

Part I: Proposed Principles of Corporate Governance These are the overarching principles of corporate governance which will mandatorily be made applicable to all companies and will override the specific rules of corporate governance. Part II: Proposed Amendments These are the proposed and definite changes to the existing mandatory and non mandatory rules for Corporate Governance which form part of Clause 49 of the Listing Agreement. The intent is to align these with provisions of the Companies Bill or where the existing Clause 49 guidelines are more stringent, to retain them. Part III: Proposals for Discussion These relate to various suggestions and proposals on which a decision will be taken after feedback is received. In this alert, InGovern has summarised all the three types of proposals, highlighting the key changes, provided our feedback and recommendations.

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