The Hindu Business Line : ‘SEBI to deal with specific provisions on corporate governance for listed cos’

Corporate - Corporate Governance
Markets - Regulatory Bodies & Rulings
‘SEBI to deal with specific provisions on corporate governance for listed cos’

‘All concerns of SEBI and the C&AG have been addressed and there are no more major differences with them’

Richa Mishra

New Delhi, Jan. 17 The new company law is likely to stipulate that specific provisions on corporate governance for listed companies, including the number of independent directors on the board, will be outlined by the Securities and Exchange Board of India.

This would help curb the possible overlaps between SEBI and the Ministry of Corporate Affairs (MCA), an official source said.

“SEBI will have the liberty to prescribe higher standards of corporate governance for listed companies,” he said.

Certain provisions of the new law, to be placed in Parliament soon, had seen the Finance Ministry and the Comptroller and Auditor -General (C&AG) expressing concern. The Ministry was of the view that the law should make only enabling provisions and prescribe a minimum threshold limit, official sources said.

On the issue pertaining to trading in securities and non-payment of dividend, the new law is likely to provide an enabling provision and leave precise details for unlisted companies to the Ministry and for listed companies to SEBI.

As regards the issue raised by the C&AG on the appointment of an auditor, the law is likely to stipulate that if the C&AG is unable to appoint an auditor within a stipulated timeframe then the company board or the Government may do it, as the case may be.

“All concerns of SEBI and the C&AG have been addressed and there are no more major differences with them,” a senior official told Business Line.

The new law will only provide for a minimum threshold limit, leaving it to the regulator to give more specifications.

“The new law will provide for a common corporate law for all categories of companies. The Ministry is not for any restriction in the law, which constrains the sector specific regulators,” the official added.

On the issue of independent directors, the new law is likely to give a minimum threshold of one-third, leaving it up to SEBI to give the maximum requirement for listed entities.

The Ministry proposes to specify most of the regulations for the provisions of the new law through rules.

On whether the new law is likely to suggest transfer of the Investor Education and Protection Fund to SEBI, sources said, “IE&PF is very much part of the company law. The investor fund being handled by SEBI deals with trading in shares and non-payment of dividend, whereas the IE&PF in the Ministry addresses much broader investor complaints.

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