THE FIRM Feb 14 : Corporate Governance: SEBI vs Companies Act, 2013 Effective October 1st -- all public listed companies in India will be held to higher corporate governance standards! In its Board meeting this week, market regulator SEBI approved a variety of proposals to amend the Listing Agreement. One of these proposals is brand new -- the compulsory creation of a whistleblower mechanism. That's a big one and SEBI has done what our parliament has failed to do all these years. But most of the proposals approved by SEBI's Board - align SEBI's corporate governance requirements to those in the Companies Act 2013 -- for instance • A separate meeting of independent directors • Prohibition of stock options to independent directors • Exclusion of nominee director from definition of independent director • Enhanced role of audit committee and their prior approval for all material rpts • At least one woman director on board; and the like And then there are 2 proposals the SEBI Board approved that go beyond the Companies Act, 2013 The first one - the Companies Act, 2013 says a director can hold a maximum 10 public company board positions -- SEBI has narrowed that to limit an independent director to 7 public listed company board positions, and only 3 as Whole Time Director. The second one -- the Companies Act says an independent director can hold up to two 5 year terms after which there needs to be a 3 year cooling off period. SEBI has maintained that. But the Companies Act applies this prospectively -- that is, it doesn't count the time served already. SEBI has decided that if a person has served as independent director on a board for 5 years or more, starting October 1st he shall be eligible to only one term of 5 years. In that one decision SEBI has forced the old boys club of independent directors to face retirement in 5 years- which is good news for all governance activists but the question is can SEBI do that? Many lawyers I spoke to say SEBI can impose standards higher than in company law. Will that argument stand up in a court of law? To Answer that question, Menaka Doshi talks to well known Counsel Tushad Cooper WATCH 'THE FIRM' AT THESE TIMES ON CNBC-TV18 FRI: 10.30PM, SAT: 11.30AM, SUN 9.30 AM & 11PM

• published: 14 Feb 2014
• views: 13