The committee is proposing major amendments with regard to disclosures relating to utilisation of IPO proceeds, deletion of the clause concerning contingent liability and rationalisation of clauses linked with independent directors.
According to sources, the current provisions in clause 49 require companies to disclose use of IPO proceeds without specifying any time limit. The proposed amendment recommends that such disclosures are to be made to the audit committee only till such time that IPO proceeds have been fully spent.
Provisions of the listing agreement dealing with disclosures about contingent liabilities are proposed to be deleted. This is being done to prevent duplication. Such disclosures are already covered by Schedule VI of the Companies Act, sources said.
A slew of measures rationalising provisions related with independent directors have also been proposed. As far as tenure of independent directors is concerned, a limit of nine years is proposed. If a person continues to be a director beyond that term, he/she will be deemed to be a non-executive director.
The amendments do not propose any term limit for non-executive directors.
For the purposes of calculation of limit on the number of independent directors on statutory committees of companies, membership of only two committees audit committee and shareholders grievance committee are to be considered. As per the current stipulation the list also includes remuneration committee but since this panel is not mandatory and it meets occasionally, it is proposed not to include it.
Sources said the changes have been brought about since there is a shortage of independent directors and the Companies Act places limit on the number directorships a person can hold. The Act also restricts the size of committees. Because of these restrictions independent directors who are willing to serve on the committees of companies are unable to do so.
It may be recalled that based on the recommendations of the committee and public comments received, certain amendments were made in Clause 49 in August, 2003. However, Sebi continued to receive representations and the final discussions were held in the November 17, 2003 meeting, which gave shape to the final report.
Sebi specified principles of corporate governance and introduced a new clause 49 in the listing agreement of stock exchanges through a circular in February 2000. These principles of corporate governance were made applicable in a phased manner and all the listed companies with the paid up capital of Rs 3 crore and above or net worth of Rs 25 crore were covered as of March 31, 2003.