The Securities and Exchange Board of India (Sebi) on Wednesday accepted several recommendations made by the Uday Kotak Committee on Corporate Governance.
The committee had been set up by Sebi in June 2017 under the chairmanship of Uday Kotak to make recommendations for improving standards of corporate governance in listed companies. The report was submitted by the committee in October.
The key proposals that has got the market regulator's green light is splitting the post of chairman and the managing director/chief executive officer of the company. This will be effective April 1, 2020 and initially applicable for to the top 500 listed companies by market capitalisation.
In 2015, Sebi had issued guidelines, asking companies to appoint one woman director on the board. Now, there will have to be at least one independent woman director on board of the top 500 listed entities from April 1, 2019 and top 1,000 listed entities from April 1, 2020.
Maximum number of individual directorships in listed companies has been reduced from 10 to eight from April 1, 2019 and further down to seven from a year after that.
The role of audit committee, nomination and remuneration committee and risk management committee has been enhanced, and companies will also have to make enhanced disclosure of related party transactions.
Sebi has also fixed the quorum for board meetings at one third of the size of the board or three members, which ever is higher, for top 2,000 listed companies, and the top 100 companies by market-cap will now also have to compulsorily webcast annual general meetings from the financial year-ending March 2019.
The regulator has also revised the framework for non-compliance of listing regulations by companies. Stock exchanges have now been empowered to freeze the shareholding of the promoter and promoter group in such non-compliant company as well as their shareholding in other securities.
Several other issues were also cleared in the Sebi board meeting on Wednesday, including charges levied by mutual funds and strengthening the framework of equity derivatives market.
So far, mutual fund houses were allowed to charge additional expenses of up to 20 basis points (0.20 per cent) of the daily net assets of mutual fund schemes in lieu of the exit load credited to the scheme. This additional expenses have now been reduced to five basis points.
It has also been proposed to re-frame new set of regulations for buy-back of securities in lieu of the earlier 1998 regulations. Amendments have also been proposed in the existing regulations on takeovers and acquisition of shares, which include granting additional time to revise an open offer price.