The Ministry of Corporate Affairs (MCA) had taken many initiatives on a continuous basis relating to provide less strict regulations, which includes measures regarding filing requirements for small corporations, One Person Companies (OPCs) as well as start-ups.
This has been stated by Shri Anurag Thakur, the Union Minister of State for Finance and Corporate Affairs, in a written reply towards a query in Lok Sabha.
The changes relating to this regard shall be made in the Companies Act, 2013 as well as several Rules and Forms thereunder from time to time. The Companies (Auditor’s Report) Order, 2016 (CARO, 2016) had not been extended towards private schools and hospitals built on concession plot.
According to the National Financial Reporting Authority (Manner of Appointment and other Terms and Conditions of Service of Chairperson and Members) Rules, 2018, the board of NFRA has 13 members out of which 3 members represented ICAI in accordance with clause (v), (vi) and (vii) of Rule 4(6). The key functions as per section 132(2) and (4) shall be performed by means of the executive body of the NFRA and as such, no conflict of interest would be there.
Under the Department of Economic Affairs (Ministry of Finance) the Securities and Exchange Board of India (SEBI) had stated on 20th November 2019 that the following current measures was taken by SEBI in order to improve governance standard in rating agencies:-
• Credit Rating Agencies (CRA) towards segregating the activity excluding the rating of financial instruments under the respective rules of a financial sector regulator or any authority as might be set by SEBI.
• MD/CEO of a CRA would not be a member of rating committees of the CRA.
• Rating committees of a CRA would report towards a Chief Ratings Officer (CRO).
• One-third of the board of a CRA would consist of independent directors, in case the board is directed by a non-executive director. If the board of the CRA is directed through an executive director, half of the board would comprise of independent directors.
• The board of a CRA would have the following committees:
• Ratings Sub-Committee
• Nomination and Remuneration Committee
• The Chief Ratings Officer (CRO) would also require to directly reporting to the Ratings Sub-Committee of the board of the CRA.
• The Nomination and Remuneration Committee would be directed through an independent director.
• CRAs would meet the audit committee of the rated body, minimum once in a year, to talk about the concerns which include the related party transactions, internal monetary control as well as other material disclosures made through the management, which have a bearing on rating of the listed Non-Convertible Debentures (NCDs).
• Minimum net worth requisite of CRA increased from prevailing Rs. 5 Crore to Rs. 25 Crore.
• The promoter of a CRA is required towards maintaining a minimum shareholding of 26% in the CRA for at least a period of 3 years from the date of grant of registration through the Board.
• A CRA would not, directly or indirectly, have 10% or more than that shareholding and voting rights in another CRA and a CRA would not have representation on the Board of any other CRA.
The Minister also had held that SEBI has specified that the following measures shall be required to be taken by SEBI in order to improve the corporate governance of listed entities:-
• Corporate governance guidelines have been introduced through insertion of Clause 49 in the Listing Agreement on 21st February 2000 which was made on the recommendations of the Kumaramangalam Birla Committee. Consequently, clause 49 has been revised as well as strengthened in the year 2004 based on the references of the Narayana Murthy Committee. In the year 2015, the listing norms in the entire listing agreement which includes clause 49 has been also streamlined by SEBI in the form of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• SEBI established a committee on corporate governance in June 2017 which has been chaired by of Mr. Uday Kotak with a view towards improving the standards of corporate governance of listed entities in India. The committee had furnished its report towards SEBI in October 2017.
• Depending on the public comments as well as discussions with many stakeholders, various measures on the recommendations of Kotak Committee has been permitted by SEBI Board and inconsistent with that the amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been notified on 9th May 2018.
• Major reforms coming out of the references of Kotak Committee was applied in a phased manner. Some of these reforms include:-
• Minimum one woman independent director in the top 500 listed entities through market capitalization by 1st April 2019 and in the top 1000 listed entities, by 1st April 2020,
• Separation of CEO or MD and Chairperson (which shall be initially made applicable towards the top 500 listed entities through market capitalization from 1st April, 2020).
• Enhancing the disclosure of related party transactions (RPTs) as well as related parties to be allowed to vote against RPTs.
• Lessening in the maximum number of listed entity directorships from 10 to 8 by 1st April 2019 and to 7 by 1st April 2020.
• Enhancing the role of the Audit Committee, Nomination and Remuneration Committee (NRC) as well as Risk Management Committee.
• Disclosures of auditor credentials, audit charge, reasons for resignation of auditors, etc.,
• Disclosure of expertise or skills of the directors.
• Compulsory disclosure of consolidated quarterly results with effect from Financial Year 2019-20.
• Secretarial Audit that is compulsory for listed entities as well as their material unlisted subsidiaries.
• At least 6 directors in the top 1,000 listed entities by means of market capitalization through 1st April, 2019 and in the top 2000 listed entities, by 1st April, 2020.
• Quorum for Board meetings (1/3rd of the Board size or 3 members, whichever is higher) in the top 1000 listed entities through market capitalization by 1st April 2019 and in the top 2000 listed entities, by 1st April 2020.
• Top 100 entities shall be holding Annual General Meetings within 5 months from the end of Financial Year 2018-19 that is, by 31st August 2019.
• Webcast of Annual General Meetings would be mandatory for top 100 entities by market capitalization.
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