Sebi breather for PSUs

Written by Ashish Sinha | Noor Mohammad | Noor Mohammad | Updated: Sep 24 2014, 07:56am hrs
The 78 listed central public sector enterprises (CPSEs) have got another six months to comply with market watchdog Sebis guidelines on appointment of at least a woman director on their board.

The Sebi has also provided similar relief to PSUs on appointment of independent directors. CPSEs, which had to show compliance on October 1 earlier, can now do so by April 1.

Large CPSEs may also get relaxation from the stringent norms on related party transactions (RPTs), according to experts. In its earlier norms, Sebi had tightened the procedures for intra-group transactions or RPTs by making prior approval of the audit committee mandatory for all material RPTs. Sebi has now changed the definition for RPTs and exempted mandatory prior approval for certain RPTs.

Now the audit committee can grant omnibus approval for RPTs proposed to be entered into by the company, subject to conditions, like where the transaction value doesnt exceed R1 crore and has a shelf-life of not more than a year.

Sebi has also exempted RPT between two government companies from prior approval, a move expected to help CPSEs like Coal India and its various subsidiaries. Also, a transaction shall be considered material in nature only if it exceeds 10% of the annual consolidated turnover. Earlier, material transaction was that exceeding 10% of a company's standalone turnover.

According to data on woman directors, around 23 PSUs, including ONGC, NHPC and NMDC, were yet to comply with Sebis directive. Though October is close by. As per Prime Database, only three CPSEs: Bhel, Nalco and NBCC had appointed a woman director after the Sebi issued the directive in February.

Appointment of a board member in CPSEs is lengthy compared to private companies, as the respective ministries have the power to select and recommend candidates for such appointments, which in itself is a time-consuming process.

Sebi has also relaxed the tenure for independent directors, which is expected to help most CPSEs. Previously, Sebi had restricted the total tenure of an independent director to two terms of five years and also said that if a person who has already served as an independent director for five years or more in a listed company, he/she shall be eligible for appointment for one more term of five years only. Now, Sebi has amended the norm, aligning it to the tenure spelled out in the Companies Act, 2013.

Sebis earlier norms had also restricted the terms of independent directors to only seven listed companies. Now, an independent director can serve on the boards of 10 listed companies, in line with the Companies Act, 2013 provisions.

As per recent data, of the 840 director-level positions on the boards of 78 listed PSUs, 95% is occupied by men. Experts said there is an immediate need of 2,700 women directors for listed companies within the next 12 months.

The earlier corporate governance directives of Sebi made it mandatory for listed companies having five or more board members to have at least one woman director from October 1, 2014. Now this has been amended and aligned with the new Companies Act, 2013 that gives time till March 26, 2015 to comply.

Overall, there are about 770 listed companies which do not have a woman director. The Companies Act 2013 provides that every listed company and every public company with a minimum paid-up capital of R100 crore or a turnover of R300 crore is required to induct at least one woman director on their boards within the stipulated time-frame.

According to Indianboards.com, a joint initiative by the National Stock Exchange and Prime Database, as many as 904 companies had not yet appointed a woman director on their board as on June 30. Of the 14,947 directorial positions available on the boards of 1,469 NSE-listed companies, only 950 positions are occupied by women. Conversely, this means over 92% of the directors are men. In comparison, 95% of director-level positions in the CPSEs are being held by men.