NEW DELHI : In a major overhaul of corporate governance norms, the board of the Securities and Exchange Board of India today approved a slew of proposals ranging from mandatory appointment of a woman director to formulating a compulsory whistleblower policy to strengthen corporate governance in listed companies.
At a meeting in the capital, the regulator’s board approved most of the proposals that were made by a committee led by industrialist Adi Godrej and set up by the corporate affairs ministry in 2012. The new norms will come into effect from Oct 1.
These new proposals make it compulsory for all publicly traded firms to have a whistleblower policy in place to curb unfair practices that could have hurt minority shareholders’ interest.
The new rules will be imposed on firms by amending the existing equity listing agreement norms. The board also gave its nod to proposals related to regulating independent directors. SEBI has decided to exclude nominee director from the definition of independent director. It has also decided to prohibit stock options to independent directors.
The new rules will require all listed firms to have at least one woman independent director on the board, while the tenure for all independent directors will be restricted to two terms of five years.
SEBI has also restricted the number of listed companies an independent director can serve in to a maximum of seven. However, if someone is already a whole time director in a listed company, he can be independent director on the boards of only three other companies.
The regulator also decided to have performance evaluation of independent directors and board of directors. The new norms aim to improve transparency in remuneration policies. SEBI has approved mandatory constitution of a nomination and remuneration committee.
SEBI board also took decision about related-party transactions and it has decided that the definition of related-party transactions will be made very wide to include elements of Companies Act and accounting standards. SEBI increased the minimum net worth to 500 mln rupees from 200 mln rupees for asset management companies, Chairman U.K. Sinha told reporters.
Listing pact amendment from Oct 1
n SEBI board OKs compulsory whistle blower mechanism
n SEBI board prohibits stock options for independent directors
n Nominee director to not qualify as independent director
n SEBI board OKs policy for enhanced disclosure of remuneration
n Company boards to have at least one woman director
n Independent directors can serve on maximum 7 listed cos
n Restrict term of independent directors to 2 terms of 5 years
Sebi also made the KYC compliance easier for investors by allowing various kinds of intermediaries such as brokers and mutual funds to access the investor KYC details from the centralised KYC Registry Agency, rather than carrying out a fresh KYC process