The SEBI (Securities and Exchange Board of India) - Corporate Governance in India

The SEBI (Securities and Exchange Board of India)

The SEBI (Securities and Exchange Board of India) Corporate Governance Guidelines are a set of principles and recommendations designed to enhance corporate governance standards among listed companies in India. These guidelines are part of SEBI's continuing efforts to align Indian corporate governance practices with global standards. Here are the salient features:

Board Composition and Independence:

The guidelines emphasize a balanced composition of executive and non-executive directors, with at least one woman director.

Independent directors should constitute at least 50% of the board if the chairman is an executive director, or at least one-third of the board if the chairman is non-executive.

Board Meetings and Processes:

·????? Specific requirements for the frequency and quorum of board meetings are outlined.

·????? The guidelines encourage transparent and effective communication between the board, management, and shareholders.

Audit Committee:

·????? Listed companies are required to have a qualified and independent audit committee.

·????? The audit committee should have a minimum of three directors, with independent directors forming a majority and possessing financial literacy.

Nomination and Remuneration Committee:

·????? The guidelines stipulate the formation of a nomination and remuneration committee to oversee director appointments and remuneration policies.

·????? The committee should consist of at least three directors, predominantly independent, and be chaired by an independent director.

Risk Management:

·????? Companies are required to have mechanisms for identifying and mitigating risks.

·????? The board is responsible for framing, implementing, and monitoring the risk management plan.

Related Party Transactions:

The guidelines require that all related party transactions must be approved by the board and in certain cases, by the shareholders, through a special resolution.

Corporate Social Responsibility (CSR):

·????? Companies meeting specified profitability, net worth, or turnover thresholds are required to spend a certain percentage of their profits on CSR activities.

·????? The guidelines mandate the formation of a CSR committee to monitor CSR policy and activities.

Disclosures and Reporting:

·????? The guidelines emphasize transparent, accurate, and timely disclosures to shareholders and the public.

·????? Companies are required to disclose financial and non-financial information, including details about subsidiaries, related party transactions, and remuneration of directors.

Whistleblower Policy:

Companies must establish a whistleblower mechanism to enable stakeholders to report unethical or improper practices without fear of reprisal.

Performance Evaluation:

The guidelines recommend a formal mechanism for evaluating the performance of the board, its committees, and individual directors.

Shareholder Rights:

The guidelines emphasize the protection of shareholder rights and encourage companies to facilitate effective shareholder participation in meetings.

These guidelines reflect SEBI's commitment to fostering a culture of good corporate governance in India, with an emphasis on transparency, accountability, and responsibility. They aim to protect the interests of all stakeholders, particularly minority shareholders, and enhance investor confidence in the Indian capital market.