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Richa Mishra

New Delhi, March 22

THE board meeting of the Securities and Exchange Board of India scheduled for Wednesday gains significance as it is expected to discuss the contentious issues surrounding the revised Clause 49 of the Listing Agreement outlining the corporate governance norms.

SEBI has come under criticism from a large section of India Inc on its revised corporate governance norms, which is scheduled to come into effect from April 1.

Besides the corporate sector, the Ministry of Company Affairs has also been expressing concern on certain provisions of the revised norms. It has been arguing that the norms are not in sync with the existing Companies Act, which is the mother Act, and any regulation or norms cannot have an overriding effect on it.

Apex chambers like the Confederation of Indian Industry have been arguing that a large number of sub-clauses in the revised Listing Agreement can be interpreted in diverse ways. The revised Clause 49 contains a number of provisions taken from the Companies Bill (which was later withdrawn) and in some areas it is far more restrictive, the industry associations pointed out.

The CII is of the view that defining the criteria for independence of directors as provided in the revised norm needs careful considerations, as unless the board is made accountable, it would be difficult for monitoring the independence of directors.

Among the norms that have irked the industry include the one that envisaged the composition of the corporate board. In fact, this is a key issue, which the Company Affairs Ministry has also taken up with SEBI.

The Ministry has been stressing that the existing Companies Act does not have a comprehensive definition of an independent director. Further, the Companies Act does not stipulate that the corporate board should have 50 per cent representation from independent directors.

Further, getting new independent directors and reconstituting the audit committee is an onerous task. If at all an audit committee is required to be reconstituted, due to amendment in Clause 49, the status of existing directors should be continued to be allowed as independent for two years. The CII has recommended that a minimum time frame of two years should be allowed to companies for the smooth transition.

India Inc has also pointed out ambiguities in definitions of independent director and requirements to give details of any joint venture or collaboration agreements in the revised Clause 49.

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