Submitted by - Dewang Thakur

Topic – Research on Corporate

Governance (1997-2022)
DETAILED EXPLAINATION (SOURCE – SEBI)
1997-98 annual report

In order to enhance corporate democracy, the concept of Postal Ballot to be introduced to enable
shareholders to vote through postal ballot.

1998-99 annual report

Accounting Standards’ Committee Accounting standard is an important tool of financial disclosure of

companies and is essential for good corporate governance as well as for investor protection. To
harmonise Indian accounting standards with the international standards, the SEBI constituted a
standing committee. The Committee is currently deliberating on issues such as valuation methods
and norms for the NAV of mutual funds, reviewing the continues listing requirements, etc.

Corporate governance Considering the significance of corporate governance for the protection of
investor interests and the need to augment corporate governance in the listed companies, a
seventeen-member Committee was set up under the chairmanship of Shri Kumar Mangalam Birla,
member SEBI board, to suggest measures. The terms of reference of this Committee encompass
suggestions for amendments to listing agreement executed by the stock exchange with the
companies in areas such as continuous disclosure of material information both financial and non-
financial information, accounting information, manner and frequency of such disclosure,
responsibility of directors, etc. The Committee has also been entrusted to draft a code of corporate
best practices and also suggest safeguards to be instituted within the companies to deal with insider
information and against insider trading.

1999-2000 annual report

Corporate Governance · A Committee was appointed by the SEBI under the chairmanship of Shri
Kumar Mangalam Birla, member SEBI Board, to enhance the standard of corporate governance. The
draft Report of the Committee was widely circulating d and deliberated. The recommendations were
accepted by the SEBI Board and implemented by the SEBI through the amendment of the listing
agreement of the s stock exchanges. The recommendations applicable first to all the listed
companies which are included either in group A of the BSE and in S& P CNX Nifty index as on January
1, 2000 to be completed by March 31, 2001 and in the subsequent years to other companies in a
phased manner. This will substantially enhance the standard of corporate governance in India.

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Committee on corporate governance A committee on corporate governance set up by the SEBI

under the chairmanship of Shri Kumar Mangalam Birla, member SEBI Board with the objective of
strengthening and promoting the standard of corporate governance of listed companies, had made
several recommendations. Corporate governance is an important tool of investor protection. This
would be the first formal code of corporate governance in the country through the listing
agreement. It is expected that the introduction of these measures will raise the awareness and make
a good beginning for raising standard of functioning of corporate. The SEBI board accepted the
recommendations of the committee followed by a notification issued to the concern agencies. The
major recommendations of the committee accepted by the board are presented in the Box 1.4
below:

Box 1.4 :

Major recommendations of Kumar Mangalam Birla Committee

· The board of director of the company shall have an optimum combination of executive and
non-executive directors with not less than fifty percent of the board of directors com prising
of non-executives .
· All pecuniary relationship or trans actions of the non-executive directors viz.-a-viz. the
company, should be dis clos e d in the Annual Report.
· Board mee ting s h all beheld at least four times a year with a minimum time gap of at least
four months between any two meetings.
· The Committee re commended the constitutions of Audit Committee in a listed company.
· The committee recommended that audit committee shall have minimum three members, all
being non-executive directors, with the majority of them being independent, and with at
least one director having financial and accounting knowledge, the chairman of the
committee shall be an independent director.
· The audit committee shall meet at least thrice a year. One mee ting s h all beheld before
finalization of annual accounts and one e very six months. The audit committee shall have
powers which should include to investigate any activity within its terms of reference, to seek
information from any employee, to obtain outs ide legal or other professional advice, to s e
cure attendance of outsiders with relevant expertise, if it considers necessary.
· The committee will re view with the management, the external and internal auditors, the
adequacy of internal control systems, the adequacy of internal audit function including the
structure of the internal audit department, staffing and seniority of the official heading the
department, re porting structure, discussion with internal auditors, reviewing the findings of
any internal investigations by the internal auditors, discussions with external auditors.
· The audit committee will re view the company’s financial and risk management policies and
will look into the reasons for substantial de faults in the payment to the depositors,
debenture h older, shareholders (in case of non-payment of declared dividends) and
creditors.
· The committee has recommended that remuneration of directors including non-executive
directors will be decided by the board of directors.
· A director shall not be a member in more than 10 companies or act as chairman of more
than 5 companies in which he is a director. He will keep inform e d the company about the
committee positions he occupies in other companies.

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· As part of the directors’ report or as an addition there to, a Management Discussion and
Analysis Report should form part of the annual report to the share h older. The management
discussion and analysis will include industry structure and developments, opportunities and
threats, segment–wise or product-wise performance, outlook, risks and concerns, internal
control systems and the adequacy, discussion on financial performance with respect to
operational performance, material developments in human resources / industrial relations
front, including number of people employed.
· Disclosures must be made by the management to the board relating to all important
financial and commercial transactions.
· In case of the appointment of a new director or re -appointment of a director, the
shareholder be provided with a brie f resume of the director; nature of his expertise in
specific function are as; and names of companies in w h ich the proposed directors h olds
directorship and the membership of committees of the board.
· Information like quarterly results and presentation made by companies to analysts, shall be
put on company’s web-site, or shall be in such a forms o as to enable the stock exchange on
w h ich the company is listed, to put it on its own web-site.

A board committee under the chairmanship of a non-executive director s h all be form e d to

specifically look into the dressing of s h are h older and investors’ com plaints like transfer of share
non-receipt of balance sheet, non-receipt of declare d dividends etc.

· To expedite the process of s h are transfers, the board of the company s h all de le gate the pow e r
of share transfer to an office r or a committee or to the registrar and s h are transfer agents

· A company will have to include separate sections on corporate governance in its annual report
with de tails on compliance, non-compliance of any mandatory requirement. The company will have
to obtain a certificate from the auditors of the company regarding compliance of conditions of
corporate governance.

· Almost all the companies listed on stock exchanges or seeking listing for the first time will have to
complete all mandatory corporate governance requirements in a phased manner by March 31, 2003.
The companies seeking listing for the first time will have to complete corporate governance at the
time of listing.

Annual report 2000-2001

Corporate Governance The recommendations of the Kumar Mangalam Birla Committee on

corporate governance in relation to listing agreement entered into by the companies with the stock
exchanges implemented. According to the recommendations of the Accounting Standards
Committee, the companies required to immediately disclose all material information simultaneously
to all the stock exchanges where the securities of the company are listed.

i. Secondary Securities Market

Corporate governance
Strong corporate governance is indispensable to resilient and vibrant capital markets
and is an important instrument of investor protection. The development of capital
market is dependent on good corporate governance without which investors do not
repose the confidence in the companies. The committee on corporate governance set up
by the SEBI under the chairmanship of Shri Kumar Mangalam Birla, member SEBI Board

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with the objective of strengthening and promoting the standard of corporate

governance of listed companies, had made several recommendations. This is the first
formal code of corporate governance in the country implemented through the listing
agreement entered into by the companies with the stock exchanges. It is expected that
the introduction of these measures will raise the awareness and make a good beginning
for raising the standard of functioning of corporates. The SEBI board accepted the
recommendations of the committee.
The recommendations of Kumar Mangalam Birla Committee for listed companies are
mandatory and non-mandatory. The mandatory recommendations have been enforced
on the listed companies for initial and continuing disclosures in a phased manner within
specified dates, through the listing agreement. The non-mandatory recommendations
would be implemented by the companies voluntarily. However, these companies are
required to disclose the compliance with nonmandatory requirement. The SEBI has also
written letters to RBI and other relevant authorities to consider the recommendations of
the committee while issuing guidelines to entities under their jurisdiction. The SEBI has
also written letters to financial institutions, chambers of commerce and other entities to
observe the recommendations contained in the report that would help in raising the
standards of corporate governance. With a view to ensure compliance with the
provisions of corporate governance in the listing agreement of the stock exchanges, the
SEBI issued guidelines to stock exchanges that they will be required to set up separate
monitoring cells with identified personnel. The companies, which are scheduled in the
first phase, will be required to submit a quarterly compliance report to the stock
exchanges. The SEBI has also stipulated that all the IPOs seeking listing for the first time
will be required to comply with corporate governance provisions at the time of listing,
except in cases where there are genuine legal issues. The stock exchanges must ensure
that these have been complied with before granting listing. For this purpose, it will be
enough if these companies have set up the Boards and constituted the committees such
as audit committee, shareholder grievance committee etc., before seeking listing. In
addition, the lead merchant bankers will also be required to incorporate the compliance
as a part of the ‘Due Diligence Certificate’ submitted to SEBI. In case of companies failing
to comply with this requirement, the application money will be kept in an escrow
account till compliance.

Annual Report2001-2002
Vide Circular dated 10th July 2000, amendment to the Listing Agreement was made in
connection with the recommendation of Shri Kumar Mangalam Birla Committee on
corporate governance as under Except in the case of Government companies,
institutional directors on the Boards of Companies should be considered as independent
directors whether the institution is an investment institution or a lending institution. For
the purpose of considering the limit on committees of which a director can serve public
limited companies whether listed or not shall be included all other companies i.e.
private limited companies or foreign companies shall be excluded. Further, 3
committees i.e. audit committee, the shareholder grievance committee and the
remuneration committees shall be considered for this purpose. Clause 43 of the Listing
Agreement amended vide circular dated 10th August 2000 to provide that the funds
raised through preferential offers and their actual utilisation as per the objects of the
preferential offer shall also be made part of the same provision of disclosure as are
applicable in case of raising of funds through public or rights issues.

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Vide Circular dated 2nd September 2001, SEBI advised setting up of a separate
monitoring cell to monitor compliance with provisions of corporate governance and the
companies to submit a quarterly compliance report to the stock exchanges within 15
days from the under of the quarter.

Annual Report2002-2003
SEBI constituted a new committee on corporate governance under the chairmanship
Shri N.R. Narayana Murthy to have a fresh look on the corporate governance with a view
to further improving the corporate governance standards, to review the adequacy of the
existing requirements of the corporate governance and suggest revisions /
improvements, wherever necessary. The Committee has submitted its report to SEBI
which is under consideration. Meanwhile, SEBI has worked with the credit rating
agencies to prepare “Corporate Governance Index” as a measure of wealth creation,
management and its distribution by the corporates. Some companies have already been
rated on this index. At present the index is voluntary. It is expected that over time, as
more and more companies will get themselves rated voluntarily and the rating
methodology is refined. This index would be regarded as a valuable indicator of
corporate governance of companies and will be widely used by the market.

ANNUAL REPORT 2003-04

SEBI constituted a Committee on Corporate Governance under the Chairmanship of

Shri N.R. Narayanamurthy to frame new standards for corporate governance. Based
on the recommendations of the committee and the submission of public comments,
the listing agreement has been amended suitably. All the listed companies with paid
up capital of Rs. 3 crore and above, or networth of Rs.25 crore and above, at any
time in the history of the companies are covered under these corporate governance
principles with effect from March 31, 2004. Implementation of the
recommendations of the Committee have been, put on hold for the time being,
owing to representations received from various market participants. i. Book Closure
Date The notice period for intimation of record date has been reduced to 15
calendar days from the earlier 30 days in case of demat scrips and to 21 calendar
days from 42 days with respect to physical scrips. j. Central Listing Authority (CLA)
Standardization of listing requirements and implementation of the same across all
exchanges are very important prerequisites for a uniform national market. To
achieve this objective SEBI has set up a single listing authority called ‘Central Listing
Authority’. The Regulations for setting up of this authority were notified on August
21, 2003. The CLA has been set up under the presidentship of Justice M N
Venkatachaliah, former Chief Justice of IndiA.

A. Corporate Governance / Professionalism Governance and disclosure standards

are important pillars of the industry. Good governance standards enhance
confidence of the investors in mutual fund the industry. The following measures
have been taken in this direction. a. Certification and Code of conduct With a view to
utilizing the services of experienced distributors/agents, the certification standards
have been relaxed in certain categories of agents/distributors. b. Role of Chief
Executive Officer (CEO) and Fund Manager (FM) The positions of CEOs and FMs have

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been strengthened as they hold a specific accountability to protect the interest of

the investors. CEOs are required to ensure mutual fund compliance as per the
regulations and the Fund Managers are required to ensure investment as per the
objective of the scheme and interest of unitholders. c. Investment/Trading in
Securities by Employees of Asset Management Companies and Mutual Fund Trust
Companies In consonance with SEBI (Insider Trading) Regulations, the time validity
of transactions by employees of AMCs and mutual fund trust companies has been
cut down to one week and the time limit for purchase and sale has been reduced to
30 days. d. Unique Client Code (UCC) Mutual Funds have been instructed to obtain
UCC either from the Bombay Stock Exchange or National Stock Exchange before
commencing trading on behalf of the schemes/clients. e. Uniform Cut Off Time One
of the main objectives of a regulator is to provide fairness to all concerned in the
market place. To achieve this, SEBI has issued the Guidelines for uniform cut off
timing for applicability of net asset value (NAV) of mutual fund schemes/plan (s).
This is applicable both for subscription and redemption. f. Minimum Number of
Investors Skewed distribution of investors may lead to some anomalies in the
management and distribution of funds. Therefore, SEBI prescribed that each scheme
of an an individual plan should have a minimum of 20 investors and that no single
investor should account for more than 25 per cent of the corpus. g. Bank Account
Number and PAN by Investors Reliable and up to date information of market
participants is essential for regulatory effectiveness. Towards this objective, SEBI has
been strengthening the process of “know your client”. Mutual funds have also been
advised to collect adequate information regarding the investors, wherever the total
value of investment is Rs.50,000/- or more.

ANNUAL REPORT 2004-05

Corporate Governance To improve the standards of corporate governance, SEBI

amended Clause 49 of the Listing Agreement. The major changes in the new Clause
49 include amendments/additions to provisions relating to definition of independent
directors, strengthening the responsibilities of audit committees, improving quality
of financial disclosures, including those pertaining to related party transactions and
proceeds from public/rights/preferential issues, requiring Boards to adopt formal
code of conduct, requiring CEO/CFO certification of financial statements and
improving disclosures to shareholders. Certain non-mandatory clauses like whistle
blower policy and restriction of the term of independent directors have also been
included. The implementation schedule of the amended Clause 49 which was
initially proposed to be effective from April 1, 2005 for listed companies has been
extended to December 31, 2005.

Corporate Governance SEBI constituted a Committee on Corporate Governance

headed by Shri N. R. Narayana Murthy, which submitted its report on February 8,
2003. Taking a cue from the same, SEBI amended Clause 49 of the Listing Agreement
to revise the requirements of corporate governance as mandated by the listing
agreement. For entities seeking listing for the first time, the corporate governance
requirements are to be complied at the time of seeking in-principle approval for
such listing. However, for listed entities having a paid-up share capital of Rs. 3 crore
and above or net worth of Rs. 25 crore or more at any time in the history of the

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company, corporate governance requirements were proposed to be complied by

April 1, 2005. Taking into account the fact that many companies are still not in a
state of preparedness to be fully compliant with the requirements, the date for
ensuring compliance with the corporate governance requirements of the listing
agreement has been extended up to December 31, 2005. m. Debt Listing Agreement
In order to develop the corporate debt market, SEBI prescribed a model debenture
listing agreement for listing of all debenture securities issued by an issuer
irrespective of the mode of issuance. The model agreement has three parts. Part (I)
of this agreement contains clauses which shall be complied by all issuers irrespective
of the mode of issuance. Part (II) contains clauses which shall be complied only if the
debentures are issued either through public issue or rights issue and Part (III)
contains clauses which are required to be complied only if the debentures are issued
on private placement basis. In case of issuers whose equity shares are listed and
which have already entered into a listing agreement for its equity shares, clauses of
equity listing agreement shall have an overriding effect over the debenture listing
agreement, in case of inconsistency, if any.

ANNUAL REPORT 2005-06

ANNUAL REPORT 2006-07

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The basic intention of establishing the Regional Stock Exchanges (RSEs) was to
enable regional companies to raise capital and to spread the awareness about stock
market investment amongst investors across the country. However, with emergence
of competition among exchanges aided by globalisation and technological change,
the survival of RSEs was threatened. One central problem with the RSEs was that
there are very few liquid shares traded on these Exchanges. With the extension of
screenbased trading network of NSE and BSE across the country, majority of the
RSEs became redundant. Moreover, with a view to enhancing corporate governance,
all stock exchanges have been undergoing the process of corporatisation and
demutualisation.
Self-listing should be permitted, either through the IPO route or by way of listing
with appropriate exemptions from Rule 19(2)(b) of Securities Contracts (Regulation)
Rules, in case, a stock exchange does not make a public offer. The regulatory
conflicts, which are likely to arise, will have to be dealt with by suitable provisions in
the listing agreement of the stock exchanges. The stock exchanges will have to fully
comply with the provisions of corporate governance incorporated in clause 49 of the
listing agreement. Overseas listing will also be permitted after the exchange has
been listed on the domestic exchange

ANNUAL REPORT 2007-08

Proposed Ammendments-
Board composition and Disclosures: It is proposed that a provision be added stating
that if the non-executive Chairman is a promoter or is related to promoters or
persons occupying management positions at the Board level or at one level below
the Board, he would not be treated as independent director and the company in
such a case, would be required to have 50% independent directors on its Board.

Relation between independent directors: It is proposed to stipulate that companies

shall disclose the relation between independent directors interse as well as other
directors of the company not holding management position, in all documents where
the details of the Board of directors are incorporated/ given for information of the
public/ shareholders. It may not be possible to mandate a blanket provision that
independent directors should not be related to each other.

Time gap between the resignation /removal of an independent director and the
appointment of another in his place: It is proposed to stipulate that an independent
director who resigns or is removed from the Board shall be replaced by a new
independent director within a time-gap of not more than 90 days from such
resignation / removal. Without any time limit, a company may continue to remain
non-compliant and may take a plea that it has not been able to find an independent
director.

Entry norms for independent directors in terms of age, qualifications and

experience: It is proposed to stipulate that the minimum age of an independent
director shall be atleast 21 years. It may not be possible to stipulate experience,

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maximum age or qualifications for an independent director since it would differ from
company to company based on the line of activities it is engaged in. Further, the
Companies Act does not specify the experience/ qualifications/ age limit for a
director.

Nominee directors as independent directors: It is proposed to stipulate that

nominee directors would not be considered as independent directors and
consequently, the provision which allows nominee directors appointed by
institutions to be considered as independent directors may be deleted.

ANNUAL REPORT 2008-09

NISM, in association with the Global Corporate Governance Forum, conducted a

three-day workshop on “Board leadership workshops toolkit: Training the trainers”
during July 16-18, 2008 in Mumbai. Another programme, “Media Workshop on
Corporate Governance”, was held in Mumbai during July 21-23, 2008

ANNUAL REPORT 2009-10

NISM, along with the Global Corporate Governance Forum and the Confederation of
Indian Industries, organised a number of events on corporate governance. Two
workshops on “Reporting on Corporate Governance in India” were held for media
persons in New Delhi and Mumbai. A roundtable conference on “Corporate
Governance in India: A Reality Check” was organised in Mumbai on April 16, 2009.
“Directors’ Colloquia” was held in Mumbai, Kolkata and New Delhi. 61 participants
(including eight women participants) representing 47 companies participated in the
three colloquia. In addition, one “Board Leadership Workshops Toolkit: Training the
Trainers” programme was offered. 20 participants from 13 organisations
participated in this Training of Trainers (ToT).

(Source Companies Bill 2009 -) During their discussions on the Bill, the Committee
have been stressing on Corporate Governance norms and its statutory recognition.
The Corporate Governance Voluntary Guidelines 2009 were issued by the Central
Government (Ministry of Corporate Affairs) in December, 2009 for voluntary
adoption by the Companies. Pursuant to the Committee‘s suggestion that the
substantive matters covered in these guidelines may be appropriately included in
the Bill itself, the Ministry while agreeing to this suggestion in principle, has
proposed that the following matters may be included in the Bill :- (i) Separation of
Offices of Chairman & Chief Executive Officer (ii) Nomination Committee to consider
proposals for searching, evaluating, and recommending appropriate Independent
Directors and Non-Executive and Executive Directors (iii) Number of Companies in
which an Individual may become a Director (iv) Attributes for Independent Directors
All Independent Directors to provide a detailed Certificate of Independence. (v)
Tenure for Independent Director (vi) Independent Directors expected to act as
‗whistle blower.‘ (vii) Remuneration Committee to determine, recommend and
monitor principles, criteria and the basis of remuneration policy of the company
(viii) Risk Management The Board to affirm and disclose in its report to members

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about critical risk management policy for the company. (ix) Evaluation of
Performance of Board of Directors, Committees thereof and of Individual Directors
(x) Board to place Systems to ensure Compliance with Laws (xi) More specific role
and responsibilities for audit committee to be provided specifically in respect of
related Party Transactions. A statement in a prescribed/structured format about all
related party transactions to be included in the Board‘s report. (xii) Appointment of
Auditors: Audit Committee to examine eligibility, independence etc of the auditor
recommend his/its appointment to the Board (xiii) Certificate of Independence of
the auditor to be obtained by the company :- The Certificate of Independence
should certify that the auditor together with its consulting and specialized services
affiliates, subsidiaries and associated companies or network or group entities has
not/have not undertaken any prohibited non-audit assignments for the company
and are independent vis-àvis the client company. (xiv) Rotation of Audit Partners
and Firms. (xv) Need for clarity on information to be sought by auditor and/or
provided by the company to him/it. (xvi) Appointment of Internal Auditor. 17.
Corporate Governance Guidelines issued by the Ministry of Corporate Affairs are
presently voluntary. The Committee are happy to note that the Ministry have acted
upon the suggestions of the Committee and have also agreed to include these
guidelines appropriately in the Bill. In addition to the afore-mentioned aspects
impinging on Corporate governance, the Committee desire that other significant and
substantive matters included in the Guidelines and the Listing Agreement prescribed
by SEBI may also be mandated for listed companies and considered for inclusion
appropriately in the Bill. For unlisted companies, the Guidelines may remain
voluntary.

ANNUAL REPORT 2010-11

NISM, in collaboration with the Global Corporate Governance Forum (GCGF) of IFC
Washington and Confederation of Indian Industries (CII), has delivered a series of
programmes on corporate governance. These include: (1) Workshop for Media
Persons; (2) Directors Toolkit Workshops; (3) Directors’ Colloquium; and (4) Risk
Management workshop for Board of Directors. During 2010-11, NISM organized two
media workshops, one each in Mumbai and Delhi, one risk management workshop
for Board of Directors, two directors toolkit workshops in Mumbai and one alumni
meet. Training of trainers (TOT) programme for corporate governance board
leadership was conducted twice in 2010-11: July 22 to 25, 2010 and March 9 to 12,
2011. An alumni meet of TOT was conducted on July 22, 2010 to take feedback from
the participants of earlier TOT participants. A two-day workshop on “Risk
Management and Board of Directors” was held in Grand Hyatt, Mumbai, during
September 7 to 8, 2010. Also, two media workshops “Reporting on Corporate
Governance in India” were conducted, one each in Mumbai and Delhi, in March
2011.

ANNUAL REPORT 2011-12

ANNUAL REPORT 2012-13

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The SECC Regulations provide for methods to promote good corporate governance.
For example oversight committees to deal with issues of conflict of interest are
mandated. Also, provisions for appointment of compliance officer are mandated.
Further, clearing corporations and stock exchanges are mandated to ensure equal,
unrestricted, transparent and fair access to all persons without any bias towards
associates and related entities.

ANNUAL REPORT 2013-14

The Companies Act, 2013 was enacted on August 30, 2013 which provides for a
major overhaul in the corporate governance norms for all companies. SEBI has also
revised the existing Corporate Governance framework (Clause 49 of Listing
agreement) which would be applicable with effect from October 01, 2014 to align
with the provisions of the Companies Act, 2013, adopt best practices on corporate
governance and to make the corporate governance framework more effective.

Fostering corporate governance through workshops, conferences, seminars for

raising awareness and standards of market integrity; consultancy pertaining to the
securities markets and the financial sector for staff of regulators, policy-makers and
such other bodies and research in topics pertaining to the securities markets and the
financial sector, and their publication through monographs, reports, papers etc

NISM has entered into an MoU with ICSI for undertaking various activities in capacity
building for securities market. One of the initiatives in this regard is to organise
conference on ‘ ethics and Corporate Governance ‘ at strategic centres. During The
year , four conferences were organised at Mumbai , Delhi , Chennai and Kolkaata in
association with ICSI . The deliberations at these conferences focused on three
aspects of the topic – Ethics and Corporate Governance viz. Regulatory Perspective,
Practitioners’ Perspective and Academic Perspective. Senior functionaries from the
industry spoke on these occasions.

ANNUAL REPORT 2014-15

SEBI reviewed the extant regulatory framework for corporate governance in India.
Towards this end, a discussion paper was put up on SEBI’s website for public
comments on January 4, 2013. The proposals were further discussed in several
meetings of the PMAC. Final norms were approved by the SEBI board on February
13, 2014. Subsequently, Clause 49 of the Listing Agreement was revised by aligning
the provisions with the Companies Act, 2013 and also prescribing additional
conditions in this regard. The major changes are: a. Principles on corporate
governance have been incorporated based on OECD principles. b. At least one
woman director on the board of every listed company. c. Exclusion of nominee
director from the definition of independent director. d. Prohibition of stock options
to independent directors. e. Maximum tenure of independent directors restricted to
two terms of up to five years each. f. Performance evaluation of independent
directors by the entire board of directors. g. Limit on number of directorships for
independent directors to seven. h. Definition of ‘related party’ extended to cover

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persons in control and having significant influence. i. Pre-approval of related party

transactions by the audit committee. j. Approval of shareholders for material related
party transactions through special resolution with related parties abstaining from
voting. k. Mandatory nomination and remuneration committees. l. Board
responsible for framing, implementing and monitoring the risk management plan for
the company. m. Disposal of shares in a material subsidiary which would reduce its
shareholding to less than 50 percent or ceasing the exercise of control over the
subsidiary through approval of shareholders by a special resolution in the general
meeting.
Good corporate governance standards are essential for the integrity of corporations,
financial institutions and markets and they also have a bearing on the growth and
stability of the economy. ‘Protecting minority investors’ is considered an important
indicator of corporate governance.
The School for Corporate Governance (SCG) undertakes activities in the corporate
governance space. SCG conducts workshops and round table conferences on
matters pertaining to corporate governance. It has undertaken many initiatives for
capacity building in the corporate governance space. In 2014-15, SCG mainly focused
its efforts on ethics and corporate governance, creating awareness about the revised
Clause 49 of the Listing Agreement and initiatives to promote gender balance and
board leadership for women directors programmes. During this process, NISM
worked in close collaboration and built partnerships with institutes such as the
Institute of Company Secretaries of India (ICSI), ICSI-CCGRT, the Indian Institute of
Corporate Affairs (IICA), the IL&FS Academy of Applied Development and
international organisations/networks such as the International Corporate
Governance Network (ICGN) and Deutsche Gesellschaft für Zusammenarbeit (GIZ).
NISM organised 11 programmes in corporate governance during 2014-15.

Amendments were carried out to clause 49 of the equity listing agreement to revise
norms on corporate governance in listed entities.
Stock exchanges were advised to step up monitoring of compliance by listed entities
with the principles of corporate governance.
Further amendments were carried out to clause 49 of the equity listing agreement
on corporate governance in listed entities.

ANNUAL REPORT 2015-16

The Listing Regulations provide the broad principles (in line with the IOSCO
Objectives and Principles of Securities Regulation) for periodic disclosures by listed
entities and also incorporate the principles for corporate governance (in line with
the G20/OECD Principles of Corporate Governance). These principles underlie the
specific requirements prescribed in the different chapters of the Listing Regulations.
In the event of the absence of any specific requirement or if there is ambiguity,
these principles will serve to guide the listed entities.
NISM conducts workshops and round table conferences on matters pertaining to
corporate governance. NISM, in association with the IL&FS Academy of Applied
Development (IAAD), organised a training programme on ‘Integrating Environment,
Social and Governance Perspectives in Investment Decisions’ and a workshop on

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‘Proposed Clause 36 and Revised Clause 49 of the Listing Agreements’ jointly with
ICSI during 2015-16.
Development Research Centre of China’s State Council and CFFEX A joint delegation
of officials of the Development Research Centre of China State Council and the China
Financial Futures Exchange (CFFEX) visited SEBI for a study tour in June 2015. The
study focused on corporate governance for listed companies in India and regulatory
aspects related to capital market infrastructure institutions.

ANNUAL REPORT 2016-17

Enhanced Corporate Governance Standards To address concerns related to private

equity funds entering into compensation agreements to incentivize promoters,
directors and key managerial personnel of listed investee companies which could
potentially lead to unfair practices, the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2016 (Listing Regulations) were amended to put in place
provisions for disclosures and approval of the board and shareholders. The revised
norms are: a) No employee including key managerial personnel or director or
promoter of a listed entity shall enter into any agreement for himself or on behalf of
any other person, with any shareholder or any other third party with regard to
compensation or profit sharing in connection with dealings in the securities of such a
listed entity unless prior approval has been obtained from the board of directors as
well as public shareholders by way of an ordinary resolution. b) Such an agreement,
if any, whether subsisting or expired, entered during the preceding three years from
the date of this sub-regulation coming into force, shall be disclosed to the stock
exchanges for public dissemination. c) A subsisting agreement, if any, as on the date
of this sub-regulation coming into force shall be placed for approval before the
board of directors in the forthcoming board meeting. d) If the board of directors
approves such an agreement, this shall be placed before the public shareholders for
approval by way of an ordinary resolution in the forthcoming general meeting. e) All
interested persons involved in the transaction covered under the agreement shall
abstain from voting in the general meeting. For the purposes of this sub-regulation
and ‘interested person’ means any person holding voting rights in the listed entity
and who is in any manner, whether directly or indirectly, interested in an agreement
or a proposed agreement, entered into or to be entered into by such a person or by
any employee or key managerial personnel or director or promoter of such a listed
entity with any shareholder or any other third party with respect to compensation or
profit sharing in connection with the securities of such a listed entity.

NISM conducts workshops and round table conferences on matters pertaining to

corporate governance. In 2016-17, NISM, in association with the National
Foundation for Corporate Governance (NFCG) and the Institute of Company
Secretaries of India (ICSI) organized three workshops on the ‘Role of Compliance
Officers of Listed Companies’ for the benefit of concerned stakeholders

ANNUAL REPORT 2017-18

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SEBI set up a committee under the Chairmanship of Shri Uday Kotak to advise SEBI
on issues relating to corporate governance in India. The terms of reference of the
Committee included making recommendations to SEBI on the following issues: 1.
Ensuring independence in spirit of Independent Directors and their active
participation in functioning of the company.
2. Improving safeguards and disclosures pertaining to Related Party Transactions; 3.
Issues in accounting and auditing practices by listed companies; 4. Improving
effectiveness of Board Evaluation practices; 5. Addressing issues faced by investors
on voting and participation in general meetings; 6. Disclosure and transparency
related issues, if any 7. Any other matter, as the Committee deems fit pertaining to
corporate governance in India. The Committee was represented by diversified
stakeholders including the Government, industry, stock exchanges, academicians,
proxy advisors, professional bodies, lawyers, etc. The Committee analysed the issues
in corporate governance in India and submitted its report in October 2017, which
was placed on SEBI website for public comments. The report includes more than 80
recommendations for improving corporate governance for listed entities in India.
The SEBI Board in its meeting held on March 28, 2018 considered the
recommendations of the Committee and the public comments thereon and
approved actions to be taken on the recommendations. SEBI accepted most of the
recommendations of the Committee without any modifications, some of which are
mentioned below: i. Reduction in the maximum number of listed entity directorships
from 10 to 8 by April 01, 2019 and to 7 by April 1, 2020, ii. Expanding the eligibility
criteria for independent directors, iii. Enhanced role of the Audit Committee,
Nomination and Remuneration Committee and Risk Management Committee, iv.
Disclosure of utilization of funds from QIP/ preferential issue, v. Disclosures of
auditor credentials, audit fee, reasons for resignation of auditors, etc., vi. Disclosure
of expertise/ skills of directors, vii. Enhanced disclosure of related party transactions
(RPTs) and related parties to be permitted to vote against RPTs, viii. Mandatory
disclosure of consolidated quarterly results with effect from FY 2019-20, ix.
Enhanced obligations on the listed entities with respect to subsidiaries. x. Secretarial
Audit to be mandatory for listed entities and their material unlisted subsidiaries
under SEBI LODR Regulations. SEBI accepted several recommendations with
modifications, some of which included the following: i. Minimum 6 directors in the
top 1000 listed entities by market capitalization by Apr 1, 2019 and in the top 2000
listed entities, by Apr 1, 2020, ii. At least one woman independent director in the top
500 listed entities by market capitalization by Apr 1, 2019 and in the top 1000 listed
entities, by Apr 1, 2020, iii. Separation of CEO/MD and Chairperson (to be initially
made applicable to the top 100 listed entities by market capitalization w.e.f. April 1,
2019), iv. Quorum for Board meetings (1/3rd of the size of the Board or 3 members,
whichever is higher) in the top 1000 listed entities by market capitalization by Apr 1,
2019 and in the top 2000 listed entities, by Apr 1, 2020.
v. Top 100 entities to hold AGMs within 5 months after the end of FY 2018-19 i.e. by
August 31, 2019. vi. Webcast of AGMs will be compulsory for top 100 entities by
market capitalization w.e.f. FY 2018-19, i. Shareholder approval (majority of
minority) for Royalty/brand payments to related party exceeding 2 per cent of
consolidated turnover (instead of the proposed 5 per cent). SEBI referred certain
recommendations to various agencies (i.e. government, other regulators,
professional bodies, etc.), considering that the matters involved relate to them. Such

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recommendations, inter-alia, include strengthening the role of ICAI, internal

financial controls, adoption of Ind-AS, treasury stock, governance aspects of PSEs,
etc. SEBI did not accept certain recommendations at this stage. Some of these are -
minimum compensation to independent directors, matrix organization structures,
minimum number of independent directors, requirement of shareholder approval
on appointment in case of casual vacancy of directors, at least two-thirds of the NRC
to be independent, information sharing with promoters/ other shareholders,
minimum number of board meetings to be increased to five, appointment of lead
independent directors, etc.
Under the Chairmanship of Shri Uday Kotak, SEBI in June 2017, set up a committee
to obtain advice on issues relating to corporate governance for listed entities in
India. In its report, the committee came up with more than 80 recommendations for
improving corporate governance. SEBI decided to accept several recommendations
of the Committee. The sweeping changes in governance standards will cover areas
including composition of boards, the make-up of board committees, treatment of
subsidiaries, disclosure for related-party transactions, audit evaluations and conduct
of annual general meetings.
NISM conducts workshops and round table conferences on matters pertaining to
corporate governance. In 2017-18, NISM, in association with the Institute of
Company Secretaries of India (ICSI) organized two workshops on the ‘Role of
Compliance Officers of Listed Companies’ for the benefit of concerned stakeholders.
Data pertaining to Corporate Governance activities undertaken in comparison to
previous year
ANNUAL REPORT 2018-19

Implementation of recommendations made by Kotak Committee The amendments

to LODR Regulations, based on recommendations of the committee on Corporate
Governance under Shri Uday Kotak as approved by SEBI Board, were notified vide
amendment dated May 9, 2018.
Effective governance is a necessary and important tool for protecting the interests of
various stakeholders, particularly small investors, in the market. This has been and
will always remain an important area of focus for SEBI. In order to ease the process
of casting e-voting thereby facilitating greater participation of the retail investors,
the designing of a common mobile app for e-voting is in progress. Further, to
facilitate investors to take informed decisions on the proposals of the listed entities,
the option of providing relevant links to the recommendations of SEBI registered
proxy advisors is also under consideration. The Indian investors will soon be
provided with the facility to hold securities issued overseas in their demat accounts
in India. Continuing with the initiatives taken in previous years to strengthen the
norms for governance in the Indian securities market, in 2019-20, SEBI shall review
the existing disclosure framework pertaining to environmental, social and
governance based disclosures in India relating to business responsibility report and
integrated reporting. The framework of Ombudsman Regulations will be perused in
order to make it adaptive to the present needs of the securities market.
The School for Corporate Governance of NISM had conducted 20 programmes
during the year 2018-19, covering around 1,000 participants. The programmes
include Workshops, Training Programmes, Interactive Sessions and Conferences on
various areas of corporate governance which include SEBI Listing Regulations,

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Prohibition of Insider Trading Regulations, governance issues relating to Takeover

Regulations, Companies Act and Secretarial Standards. The targeted audience
include Executive Directors, Independent Directors, Compliance Officers, Auditors,
Legal Practitioners and Academicians. Data pertaining to Corporate Governance
activities undertaken in comparison to previous .
Amendment Notification dated May 09, 2018: Amendments in respect of improving
corporate governance norms pursuant to the recommendations of the Kotak
Committee on Corporate Governance. Rationale: SEBI constituted a Committee
under the Chairmanship of Shri Uday Kotak to make recommendations to SEBI for
improving standards of corporate governance of listed entities in India. This
Committee submitted its recommendations on October 5, 2017. Pursuant to the
recommendations, amendments were made for improving corporate governance
norms. Insertion of “fugitive economic offender” and disclosures pertaining to
Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)
Act under the ‘Corporate Governance’ section of the Annual Report. Further, to
revise provisions relating to re-classification of promoter/public, provide procedure
for filing exemption requests under regulation 102 and align the transmission
provisions in Schedule VII of the regulations.

ANNUAL REPORT 2019-20

Enhanced corporate governance: Companies having SR shareholders shall be subject to enhanced

corporate governance, such as at least half of the Board and two-third of the Committees (excluding
Audit Committee) as prescribed under SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 (“SEBI LODR Regulations”) shall comprise of Independent Directors. The Audit
Committee shall comprise only of Independent Directors.

Modification of circular on ‘Format for compliance report on Corporate Governance to be submitted

to Stock Exchange (s) by Listed Entities’: Regulation 27(2) of SEBI LODR Regulations specifies that a
listed entity shall submit a quarterly compliance report on corporate governance in the format
specified by the Board from time to time to recognised stock exchange(s) within 15 days from close
of each quarter. Accordingly, SEBI had prescribed format for compliance report on Corporate
Governance by listed entities vide Circular dated September 24, 2015. Subsequent to the report of
the Committee on Corporate Governance under the Chairmanship of Shri Uday Kotak, various
amendments were made to SEBI LODR Regulations, thereby necessitating changes to the format of
the quarterly compliance report. The revised format was made applicable with effect from the
quarter ended September 30, 2019.

CORPORATE GOVERNANCE FOR LISTED ENTITIES

1. Stewardship Code for all Mutual Funds and all categories of Alternative Investment Funds, in
relation to their investment in listed equities The importance of institutional investors in capital
markets is increasing the world over; they are expected to shoulder greater responsibility towards
their clients / beneficiaries by enhancing monitoring and engagement with their investee companies.
Such activities are commonly referred to as ‘Stewardship Responsibilities’ of the institutional
investors and are intended to protect their clients’ wealth. Such increased engagement is also seen
as an important step towards improved corporate governance in the investee companies and gives a
greater fillip to the protection of the interest of investors in such companies. SEBI has already

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implemented principles on voting for Mutual Funds, which prescribed detailed mandatory
requirements for mutual funds in India to disclose their voting policies and actual voting by mutual
funds on different resolutions of investee companies. Subsequently a proposal for introducing
stewardship principles in India was approved by a sub-committee of the Financial Stability and
Development Council (FSDC-SC). In view of the above, SEBI prescribed a Stewardship Code for all
mutual funds and all categories of Alternative Investment Funds (AIFs) in relation to their investment
in listed equities. These entities are mandatorily required to follow the Stewardship Code.

2. Extension of business responsibility reporting Vide amendment to SEBI LODR Regulations on

December 26, 2019, the applicability of submission of Business Responsibility Reporting (BRR) as
part of the Annual Report, was extended to top One thousand listed entities based on market
capitalization from the earlier requirement of top 500 listed entities. This requirement will be
effective for Annual Report submitted for the year FY 2019- 20 onwards. 3. OECD-Asian Roundtable
on Corporate Governance: In November 2019, SEBI and the Organisation for Economic Co-operation
and Development (OECD) co-hosted the OECD-Asian Roundtable. 4. Amendment to SEBI LODR
Regulations on payments relating to royalty and brand usage: The Committee on Corporate
Governance under the Chairmanship of Shri. Uday Kotak had inter-alia recommended that payments
made by listed entities to related parties with respect to brands usage/royalty, exceeding Five per
cent of annual consolidated turnover of the listed entity, may be considered as material, requiring
approval of the shareholders, with no related party having a vote to approve such transactions.
Based on the comments received on this recommendation, SEBI had made amendments to SEBI
LODR Regulations, setting this threshold at Two per cent. Subsequently, based on the examination of
various representations received on this issue, the above threshold was increased from Two per cent
to Five per cent. 5. Amendment to SEBI LODR Regulations on separation of the roles of Chairperson
of the board and Managing Director / Chief Executive Officer in listed entities. In terms of SEBI LODR
Regulations, the top 500 listed entities by market capitalization were mandated to comply with the
requirement of separation of the roles of Chairperson of the Board and Managing Director / Chief
Executive Officer with effect from April 01, 2020. Based on examination of representations received
from the industry, vide an amendment to SEBI LODR Regulations on January 10, 2020, an additional
time-period of Two years was given to listed entities to comply with this regulatory provision. The
School for Corporate Governance of NISM has conducted 38 programmes during the year 2019-20,
covering around 2,000 participants. There is a two-fold increase in the number of programmes
conducted by the School, compared to the last financial year. The School reached out to the
participants through conferences, conclaves, seminars, workshops and familiarization programmes.
The regulatory topics covered include SEBI Listing Regulations, SEBI SECC Regulations, Prohibition of
Insider Trading Regulations, Companies Act and Secretarial Standards and recent challenges such as
risk management, cyber security, business continuity plan and other emerging issues were also
covered.

ANNUAL REPORT 2020-21

Filing of quarterly corporate governance report for which due date was April 15, 2020 was extended
by one month to May 15, 2020.

Applicability of Corporate Governance Provisions to Listed Entities Regulation 15 (2)(b) of the LODR
Regulations contains a proviso which provides a special dispensation to listed entities which are not
companies but are body corporates or are subject to regulation under other statutes, thereby
limiting the applicability of the corporate governance provisions of the LODR Regulations to such

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entities. With a view to ensure uniform applicability of the minimum standards of corporate
governance as specified in the LODR Regulations to all listed entities, SEBI in its Board meeting dated
March 25, 2021 decided to delete this proviso, with effect from September 01, 2021.

INITIATIVES TAKEN BY SEBI FOR ENHANCING TRANSPARENCY AND IMPROVING GOVERNANCE The
following measures were taken by SEBI for enhancing transparency and improving governance of
listed entities.

 Disclosure of Information related to Forensic Audit of Listed Entities

 B. Advisory on Disclosure of Material Impact of COVID-19 on Listed Entities
 C. E-voting Facility provided by Listed Entities
 Applicability and Role of Risk Management Committee
 Review of Norms for Re-Classification of Promoter/ Promoter Group Entities
 Review of Disclosures Pertaining to Analyst Meets, Investor Meets and
Conference Calls
 Review of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015
 Applicability of Corporate Governance Provisions to Listed Entities
 Business Responsibility and Sustainability Reporting by Listed Entities.

In view of the disruptions arising from the COVID-19 pandemic, during the year, SEBI had provided a
number of relaxations to listed entities including extensions for submission of financial results and
other reports (details given at Chapter 3) for the quarter / year ended March 30, 2020. It was
observed that over 90 per cent of listed entities submitted financial results while more than 93 per
cent of listed entities submitted other reports, (viz. shareholding pattern, quarterly corporate
governance report and investor grievance report) within the extended timelines. • In light of the
uncertainty resulting from the COVID-19 pandemic, SEBI had issued an advisory on disclosure of
material impact of the pandemic on listed entities (as detailed at Chapter 3). Prior to issuing the
advisory on disclosure of material information, SEBI had observed that listed entities had made
disclosures under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,
primarily intimating shutdown of operations owing to the pandemic and resultant lockdowns, but
not the impact of the COVID-19 pandemic on its financials. Pursuant to issuance of the said advisory,
it was observed that out of the top 500 listed entities, 254 entities had made disclosures on the
impact of the COVID-19 pandemic on the business as per the indicative list given in the advisory. •
SEBI had mandated listed entities to make disclosures regarding forensic audit, as detailed at
Chapter 3. Pursuant to the said mandate, seven entities have made disclosures regarding fact of
initiation of audit, of which two entities have also submitted the final forensic report.

ANNUAL REPORT 2021-22

Corporate Governance and Corporate Restructuring

(Including details of Merger & Acquisition deals, regulatory action taken by Securities and Exchange
Board of India (SEBI) for enhancing transparency and improving governance, open offers, issuance of
observations on offer documents, details of listed companies being wound up, details of defaulter
companies, regulatory coordination with Ministry of Corporate Affairs and consequent steps taken
by the Board).

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