At present, there is no such tab on the rotation of audit partner or audit firm under the Companies Act, 1956. However, in the annual general meeting, the shareholders have to appoint the statutory auditors and firm that can be the same auditor and firm as well. The ministry of corporate affairs is seeking suggestions on the corporate governance practices to be followed and would come out with a mandatory code after a year. The corporate governance code would be a mix of these voluntary guidelines and recommendations of India Inc.
According to the ICSI report, a maximum tenure of six years in aggregate should be specified for independent directors. At present, there is no such limit for the independent directors under the Companies Act, 1956. It also mentions that Clause 49 of the listing agreement needs to be suitably amended by specifying positive attributes for independent directors such as integrity, experience and expertise, foresight, managerial qualities and ability to read and understand financial statements.
The report further suggests that the board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. Apart from this, induction training of directors should be made mandatory covering roles, responsibilities and liabilities of a director. There should be a statement to this effect by the board in the annual report.
The report specifies there should be a clear demarcation of the roles and responsibilities of the chairman of the board and that of the managing director. The role of chairman and CEO should be separated to promote balance of power. Further the report suggests that the secretarial audit should be made mandatory in respect of listed firms.