Securities Exchange Board of India (SEBI)
October 9, 2014
SEBI Amendments to Clause 49 of Equity Listing Agreement – SEBI has vide its circular CIR/CFD/POLICY CELL/7/2014 dated September 15, 2014 made amendments in Clause 49 of the Listing Agreement : Some of them are as follows :
- The Clause 49 of the Listing Agreement shall be applicable to all companies whose equity shares are listed on a recognized stock exchange. However, it shall not be mandatory for the following class of companies:
- Companies having paid up equity share capital not exceeding Rs.10 crore and Net Worth not exceeding Rs.25 crore, as on the last day of the previous financial year;
- Companies whose equity share capital is listed exclusively on the SME and SME-ITP Platforms.
- The provisions regarding appointment of woman director shall be applicable with effect from April 01, 2015.
- Clause 49(II)(B)(1)(c) in relation to Independent Directors shall be substituted with the following:– “apart from receiving director's remuneration, has or had no material pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year."
- Clause 49(II)(B)(3)(a) shall be substituted with the following:– The maximum tenure of Independent Directors shall be in accordance with the Companies Act, 2013 and clarifications/ circulars issued by the Ministry of Corporate Affairs, in this regard, from time to time.
- Clause 49(II)(B)(4)(b) shall be substituted with the following:- The terms and conditions of appointment of Independent Director shall be disclosed on the website of the company.
- Clause 49(II)(B)(7) shall be substituted with the following: Familiarisation programme for Independent Directors The company shall familiarize the independent directors with the company, their roles, rights, responsibilities in the company, nature of the industry in which the company operates, business model of the company, etc., through various programmes. The details of such familiarization programmes shall be disclosed on the company's website and a web link thereto shall be given in the Annual Report.
- Clause 49(IV)(A) shall be substituted with the following: The company through its Board of Directors shall constitute a nomination and remuneration committee which shall comprise at least three directors, all of whom shall be non-executive directors and at least half shall be independent. Chairman of the committee shall be an independent director. The Chairperson of the company may be appointed as a member of the committee but he shall not chair such Committee.
- Clause 49(V)(D) shall be substituted with the following: The Subsidiary Company shall formulate a policy for determining ‘material’ subsidiaries and such policy shall be disclosed on the company's website and a web link thereto shall be provided in the Annual Report.
- Clause 49(V) (F) shall be substituted with the following: No company shall dispose of shares in its material subsidiary which would reduce its shareholding (either on its own or together with other subsidiaries) to less than 50% or cease the exercise of control over the subsidiary without passing a special resolution in its General Meeting except in cases where such divestment is made under a scheme of arrangement duly approved by a Court/Tribunal.
- Clause 49(V)(G) shall be substituted with the following: (G). Selling, disposing and leasing of assets amounting to more than twenty percent of the assets of the material subsidiary on an aggregate basis during a financial year shall require prior approval of shareholders by way of special resolution, unless the sale/disposal/lease is made under a scheme of arrangement duly approved by a Court/Tribunal."
- Clause 49(VI) shall be substituted with the following: © The company through its Board of Directors shall constitute a Risk Management Committee. The majority of the Committee shall consist of members of the Board of Directors. Senior executives of the company may be members of the said Committee but only a member of the Board of Directors shall be the Chairman of the Committee.
- Clause 49(VII)(A) The following explanation shall be inserted after Clause 49(VII)(A): "Explanation: A "transaction" with a related party shall be construed to include single transaction or a group of transactions in a contract."
- Clause 49(VII)(B) shall be substituted with the following: "B. For the purpose of Clause 49 (VII), an entity shall be considered as related to the company if: (i) such entity is a related party under Section 2(76) of the Companies Act, 2013; or (ii) such entity is a related party under the applicable accounting standards."
- Clause 49(VII)(C) shall be substituted with the following: "(C) The company shall formulate a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. Provided that a transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the company."
- Clause 49(VII)(D) shall be substituted with the following: "(D) All Related Party Transactions shall require prior approval of the Audit Committee. However, the Audit Committee may grant omnibus approval for Related Party Transactions proposed to be entered into by the company subject to the following conditions: The Audit Committee shall lay down the criteria for granting the omnibus approval in line with the policy on Related Party Transactions of the company and such approval shall be applicable in respect of transactions which are repetitive in nature. b. The Audit Committee shall satisfy itself the need for such omnibus approval and that such approval is in the interest of the company; c. Such omnibus approval shall specify (i) the name/s of the related party, nature of transaction, period of transaction, maximum amount of transaction that can be entered into, (ii) the indicative base price / current contracted price and the formula for variation in the price if any and (iii) such other conditions as the Audit Committee may deem fit; Provided that where the need for Related Party Transaction cannot be foreseen and aforesaid details are not available, Audit Committee may grant omnibus approval for such transactions subject to their value not exceeding Rs.1 crore per transaction. d. Audit Committee shall review, atleast on a quarterly basis, the details of RPTs entered into by the company pursuant to each of the omnibus approval given. e. Such omnibus approvals shall be valid for a period not exceeding one year and shall require fresh approvals after the expiry of one year"
- Clause 49(VII)(E) The following proviso and explanations shall be inserted after Clause 49(VII)(E): "Provided that sub-clause 49 (VII)(D) and (E) shall not be applicable in the following cases: (i) transactions entered into between two government companies; (ii)transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.
- Clause 49(VIII)(A)(2) The clause shall be substituted with the following: "(2) The company shall disclose the policy on dealing with Related Party Transactions on its website and a web link thereto shall be provided in the Annual Report."
- Amendment to Clause 49(VIII)(F), (G) and (H) These clauses shall stand deleted.
- Amendment to clause 49(IX) The words " The CEO, i.e. the Managing Director or Manager appointed in terms of the Companies Act, 1956 and the CFO i.e. the whole-time Finance Director or any other person heading the finance function discharging that function shall certify to the Board that:" shall be substituted with: "The CEO or the Managing Director or manager or in their absence, a Whole Time Director appointed in terms of Companies Act, 2013 and the CFO shall certify to the Board that :"