Sebi rings in tougher governance, more MF capital, whistle-blower

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The move will impact an estimated 710 directors across 1,500 listed. The move will impact an estimated 710 directors across 1,500 listed.
SummaryThe decision is in line with the provision incorporated in the newly-enacted Companies Act 2013.

Stregnthening the voice of minority shareholders, the Securities and Exchange Board of India (Sebi) on Thursday said all-related party transactions will need to be approved by them with related parties abstaining from voting on the special resolution. The decision is in line with the provision incorporated in the newly-enacted Companies Act 2013.

Sebi said companies must make their remuneration policies for independent directors more transparent and disallowed them from owning stock options. Moreover, an independent director can be on the boards of no more than seven companies and only three if the person is a whole-time director with a listed company. Nominee directors, typically those appointed by banks or private equity funds on the boards of companies, can no longer be treated as independent directors. The move will impact an estimated 710 directors across 1,500 listed

companies according to Indianboards.com.

Asked about the proposals to keep CEO salaries in check, Sebi chairman UK Sinha said the regulator had not considered imposing an arbitrary ceiling. “We have decided that there has to be a remuneration committee headed by an independent director,” Sinha said.

The new norms, which will be applicable to all listed companies from October 1, 2014, also require companies to have a compulsory whistle blower mechanism and at least one woman director. Further, the total tenure has been restricted to two terms of five years.

Sebi has directed that all related party transactions will require the prior approval of the audit committee. “The scope of the definition of RPT has been widened to include elements of Companies Act and Accounting Standards,” said the Sebi release.

“However, if a person who has already served as an independent director for five years or more in a listed company as on the date on which the amendment to Listing Agreement becomes effective, he shall be eligible for appointment for one more term of five years only,” clarified the release.

Meanwhile, for asset management companies (AMCs), the regulator has decided to increase the capital adequacy (minimum networth) to Rs 50 crore from the current Rs 10 crore. Further, AMCs will also require to put in 1% of the amount raised as ‘seed capital’ in all open-ended schemes during its lifetime. The Sebi chairman pointed out that at present, there are 19 companies whose net worth is less than Rs 50 crore and whose assets are 6% of the total assets under management of all MFs. “We have given

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