The Hindu Business Line : Clause 49 deferment: India Inc relieved, but worried over duplication of laws

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Clause 49 deferment: India Inc relieved, but worried over duplication of laws

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"The deferment will definitely help industry implement Clause 49 in a more structured and cost effective manner."

New Delhi , March 24

EVEN as India Inc sighs with relief to be given a nine-month reprieve by SEBI to comply with Clause 49 of the Listing Agreement (Corporate Governance), it is worried about the duplication of authorities that now exist.

For, the same issues regarding number of independent directors, their role on the Company Board, certification by CEOs, CFO and other such issues are covered both in Clause 49 as well as the Companies Act, which is currently under revision.

"The deferment will definitely help industry implement Clause 49 in a more structured and cost effective manner. In the case of compliance with Sarbanes-Oxley Act in the US, companies had to incur massive costs to attain compliance levels. India Inc will now not be forced to outsource the complete implementation and can plan it systematically," said Mr Amitabh Jhingan, Associate Partner, Grant Thornton.

What is more, it would give independent directors much more time to sort out their new role and work towards asking their company boards pertinent compliance questions.

"We had a meeting with independent directors in Mumbai recently and the provisions under the amended Clause 49 were eye openers for many of them. In fact, they framed action points for themselves, especially to find out things like whether the company has an evaluation process in place for statutory and internal auditors, or are they independent as directors in the first place, do they have risk management processes worked out," explained Mr Richard Rekhy, Executive Director, Risk Advisory Services, KPMG.

"Now they have a year to sort it out," he added.

Meanwhile, Mr Onkar S. Kanwar, President of the Federation of Indian Chambers of Commerce and Industry (FICCI), has expressed hope that SEBI will amend Clause 49, if required, once the new Companies Act is finalised.

He emphasised that the duplication of law making powers for the same subject impinges on the functioning of the company and increases cost of compliance and that a single authority was desirable

He also felt that where mandatory disclosures under Clause 49 and the Company Law were concerned, "care had to be exercised to ensure that rules and regulations are so framed as to seek only relevant disclosures or information that is relevant for shareholders\stakeholders and does not lead to any leakage of information to competitors."

Apart from duplication, FICCI has also asked for the limit of independent directors in the board composition to be 25 per cent.

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