Corporate Governance

 Corporate Governance 

SMDRP Department 

Corporate Governance is an important instrument of investor protection, and it is therefore a priority on SEBI’s agenda. The development of capital market is dependent on good corporate governance without which investors do not repose the confidence in the companies. It is imperative for the companies to maximize the shareholders value and wealth. Hence to further improve the level of corporate governance, need was felt for a comprehensive approach at this stage of development of capital market, to accelerate the adoption of globally acceptable practices of corporate governance. This would ensure that the Indian investors are in no way less informed and protected as compared to their counterparts in the best developed capital markets. 

In the above context, the SEBI appointed a Committee on Corporate Governance under the chairmanship of Shri Kumar Mangalam Birla, Member, SEBI Board. The members of the committee consisted of academicians, management experts, representatives of investor association, Chambers of Commerce, stock exchanges and SEBI. 

The draft report of the Committee was made public through the media and also put on the web site of SEBI for comments. The report was also sent to the Chambers of Commerce, Financials Institutions, stock exchanges, investor associations, the Association of Merchant Bankers of India, Association of Mutual Funds of India, The Institute of Chartered Accounts of India, Institute of Company Secretaries of India, academicians, experts and eminent personalities in the Indian capital markets, foreign investors etc. Comments were received from most of the above groups. The Committee also held meetings with the representative of Chambers of Commerce, Chairmen of the Financial Institutions, the stock exchanges, investor associations. The Committee finalized the report taking in to views of these respondents and submitted its report to SEBI. 

The report of the Committee was considered and adopted by SEBI Board in its meeting held on January 25, 2000. The recommendations are to be implemented through the amendment to listing agreement of the stock exchanges. Internationally listing agreement has been used in most markets to implement corporate governance in the listed companies. Accordingly, today SEBI has issued directions to stock exchanges to amend the listing agreement in this regard. 

The amendments to the listing agreement shall be implemented as per schedule of implementation given below:

• By all entities seeking listing for the first time, at the time of listing. 
• Within financial year 2000-2001,but not later than March 31, 2001 by all entities, which are included either in Group ‘A’ of the BSE or in S&P CNX Nifty index as on January 1, 2000. However to comply with the recommendations, these companies may have to begin the process of implementation as early as possible. 
• Within financial year 2001-2002,but not later than March 31, 2002 by all the entities which are presently listed, with paid up share capital of Rs. 10 crore and above, or networth of Rs.25 crore or more any time in the history of the company.
• Within financial year 2002-2003,but not later than March 31, 2003 by all the entities which are presently listed, with paid up share capital of Rs.3 crore and above

The first phase to be completed by march 31, 2001 would cover more than 80% of the market capitalization. 

A copy of the direction issued to the stock exchanges is enclosed.