The Hindu Business Line : SEBI to allow 4-month gap between board meetings

The stipulation of a three-month time gap between two board meetings actually ended up limiting the time available for companies to release end-of-the-year audited accounts, especially if the previous board meeting had already been held say, a month before the close of the financial year.

FOR BETTER GOVERNANCE: The SEBI Chairman, Mr M. Damodaran, and the CEO of ICICI Bank Ltd, Mr K.V. Kamath, at the Corporate Governance Summit organised by CII in Mumbai on Wednesday. — Paul Noronha

Mumbai , Sept. 14

THE SECURITIES and Exchange Board of India (SEBI) Chairman, Mr M. Damodaran, said on Wednesday that the market regulator would allow a maximum four-month gap between two board meetings for companies. Currently, SEBI regulations require companies to have board meetings within three months of the previous one.

The announcement allows companies greater leeway in the timing of the release of the fourth quarter results. A SEBI stipulation permits companies to release their fourth quarter results within 90 days of the close of the financial year provided it has been duly audited.

Since the audit process requires that the Board of Directors to have approved the accounts in the first place, the stipulation of a three-month time gap between two board meetings actually ended up limiting the time available for companies to release end-of-the-year audited accounts, especially if the previous board meeting had already been held say, a month before the close of the financial year. For then, the effective time limit is reduced to just 60 days from the last date of the financial year.

The proposed change thus confers on a company, the full benefit 90-day limit for publication of audited financial results. Mr Damodaran was speaking at a CII seminar on corporate governance in the city.

He also said that SEBI expects company boards to be functional boards. "They should not be boards where people come to mark attendance. The board meeting should not be ones that last 20 minutes. Sometimes, the minutes of the meeting are presented along with the agenda of the Board meeting, even before the meeting has begun," he added.

He also urged companies to ensure that there are systems in place to ensure compliance before December 31, 2005, when the modified Clause 49 of the Listing Agreement comes into force.

"If small companies fail, no one will notice, but if big companies fail, the whole world will notice. That is a price that we cannot pay," he said.

Speaking about the compensation for independent directors, the regulator conceded that it was a tough call. "Too little will not attract the right people; and if they are paid too much, they would not remain independent. Each company will have to ask itself how much is too much. But they should make sure that they do not over compensate, else they will lose their independence," he said. Independent directors must challenge company managements on a continuous basis, he added.

Speaking about audit committees, Mr Damodaran said that their functioning varies from the sublime to the ridiculous. There is a need to look for audit committees that see themselves as discharging their function while, at the same time, recognising that there is a management team running the company, he added.

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