CLAUSE 49 OF THE LISTING AGREEMENT REVISED
SEBI has revised Clause 49 of the Listing Agreement pertaining to corporate governance vide circular dated October 29, 2004, which supersedes all other earlier circulars issued by SEBI on this subject.
The major changes in the new clause 49 include amendments/additions to provisions relating to definition of independent directors, strengthening the responsibilities of audit committees, improving quality of financial disclosures, including those related to related party transactions and proceeds from public/rights/preferential issues, requiring Boards to adopt formal code of conduct, requiring CEO/CFO certification of financial statements and for improving disclosures to shareholders. Certain non-mandatory clauses like whistle blower policy and restriction of the term of independent directors have also been included.
The provisions of the revised Clause 49 shall be implemented as per the schedule of implementation given below:
a) For entities seeking listing for the first time, at the time of seeking in-principle approval for such listing.
b) For existing listed entities which were required to comply with Clause 49 which is being revised i.e. those having a paid up share capital of Rs. 3 crores and above or net worth of Rs. 25 crores or more at any time in the history of the company, by April 1, 2005.
The revised Clause 49 shall apply to listed companies, in accordance with the schedule of implementation given above. However, for other listed entities which are not companies, but body corporate incorporated under other statutes, the revised Clause 49 will apply to the extent that it does not violate their respective statutes and guidelines or directives issued by the relevant regulatory authorities. The revised Clause 49 is also not applicable to Mutual Funds.
In its constant endeavour to improve the standards of corporate governance in India, SEBI, in October 2002 constituted a Committee on Corporate Governance under the Chairmanship of Shri N. R. Narayana Murthy. Based on the recommendations of the Committee and public comments received thereof, SEBI issued a circular on August 26, 2003 revising Clause 49 of the Listing Agreement.
After issuance of the circular, SEBI continued to receive representations/suggestions from the corporate/public on various provisions of the said circular. It was decided to defer the implementation of the provisions of the August 26, 2003 circular and revisit Clause 49. The Narayana Murthy Committee then considered and deliberated on the suggestions and comments received from corporate/public. Based on the revised recommendations of the Committee, it was decided to further revise the provisions of Clause 49 of the Listing Agreement.
The full text of the revised circular is available on our website www.sebi.gov.in
Mumbai
October 29, 2004