When the shares of the Company
are listed on any Stock Exchange. The basic document which is executed between Company
and that Stock Exchange is the Listing Agreement.
However, it does not contain any
listing or trading related clause. Now question arises what is the scope and purpose
of the Listing Agreement.
The basic criterion on which the
whole Listing Agreement based is Corporate Governance. Currently
there are 54 Clauses in the Listing Agreement and all of them based on this very
concept. Further, there is a clause which specifically deals with Corporate Governance
i.e. Clause 49. By way of Listing Agreement inter alia Stock Exchange
ensures on behalf of SEBI that the Companies are following good Corporate Governance
As such, the Listing Agreement is of great importance
and is executed under the common seal of a company. Under the Listing Agreement,
the Company is required to make certain disclosures and perform certain acts, failing
which the company may face disciplinary action, including suspension / delisting
of securities. A Company undertakes, amongst other things, to provide facilities
for prompt transfer, registration, sub-division and consolidation of securities;
to give proper notice of closure of transfer books and record dates, to forward
copies of Annual Reports, Balance Sheets and Profit and Loss Accounts to Stock Exchange,
to file shareholding patterns and financial results on a quarterly basis; to intimate
promptly to the Exchange the happenings which are likely to materially affect the
financial performance of the Company and its stock prices, to comply with the conditions
of Corporate Governance, etc.
The Listing Department of Stock Exchange monitors
the compliance by the companies with the provisions of the Listing Agreement, specially
with regard to timely payment of annual listing fees, submission of results, shareholding
patterns and corporate governance reports on a quarterly basis
of Listing Agreement :
Clauses 1 to 14
deals with investor services such as to provide facilities for prompt transfer,
registration, sub-division and consolidation of securities. Clause 11(c) requires
that in case of any physical transaction or off-market trade copy of PAN Card of
transferee is necessary.
Clause 15 to 16
deals with the Book Closure. Accordingly, a Company is required to close its Transfer
Books atleast once a year and advance notice of 7 working days is required to be
given to the Stock Exchange for the same. Furthermore, there should be atleast 30
days time gap between two book closures.
Under Clause 19
the Company is required to give prior intimation to the Stock Exchange about the
date of Board Meeting if the company is going for Buy Back, declaration / recommendation
of Dividend, Rights Issue.
Under Clause 20
the Company immediately on the date of Board Meeting intimate the outcome of Board
Meeting to the Stock Exchange by way of fax/letter if the Board Meeting was for
dividend, results or Buyback. The date of payment of divided is also required to
be informed to the stock exchange.
Under Clause 22
any change in Capital is required to be disclosed to the Stock Exchange within 15
minutes of the Board Meeting.
Under Clause 24(a)
the Company is required to take in-principal approval for listing from the Stock
Exchange before issuing any further shares. Under sub clause (f)
the Company shall file any scheme / petition proposed to be filed before any Court
or Tribunal under Section 391, 394 and 101 of the Companies Act, 1956, with the
stock exchange for approval atleast 1 month before presenting it to the Court or
Tribunal. And under sub clause (i) a certificate of Auditors is
also required to be obtained
Under Clause 30
the Company promptly notify the Stock Exchange any change in director, Managing
Director, Manager, Auditors or Secretary.
Under Clause 31
the Company will forward to the Stock Exchange promptly 6 copies of Annual Report
all notices prior to the dispatch to Shareholders, Minutes of General Meeting.
Clause 32 deals
with the change of name of Listed Company and according to this clause atleast 1
year should be elapsed from the last name change and atleast 50% revenue of the
company should be from the new activity suggested by the new name.
Under Clause 35
the Company has to file with the Stock Exchange Shareholding pattern on quarterly
basis within 21 days of the end of each quarter.
Under Clause 36
the Company will keep the Stock Exchange informed about the lock outs, strikes,
closure of business, change in business operations, any litigation or dispute, Revision
Clause 38 deals
with payment of listing fees to the Stock Exchange and payment of Annual Custodian
Fees to Depositories. The company has to pay on or before 30th April
each year Annual Listing Fee to Stock Exchange and Annual Custodian Fee to the Depositories
computed on the basis of capital of the company as on 31st March that
Clause 40 deals
with minimum level of public shareholding and accordingly every company shall have
to maintain a minimum level of public shareholding. It means promoters can not take
more that specified percentage of Share Capital of the Company.
Clause 41 deals
with preparation and submission of Financial Results. The Company has to disclose
its quarterly and yearly results in the following manner:-
The Company has an option to submit
audited or unaudited quarterly and year to date financial results within 45 days
of the end of each quarter (other than the last quarter). If the Company opts to
submit unaudited results it shall be subject to Limited Review by the Statutory
Auditors of the Company and the Limited Review Report shall be furnished to the
Stock Exchange within 45 days from the end of quarter. If the Company opts to submit
audited results it shall be accompanied with audit report.
In respect of last quarter, the
Company has an option to submit unaudited financial results for the quarter within
45 days of the end of quarter or to submit audited results for the entire financial
year within 60 days of the end of financial year.
In case the Company opts to submit
unaudited results for the last quarter it shall also be subject to limited review
by Statutory Auditors and the copy of limited review report shall be submitted to
Stock Exchange within 45 days form the end of quarter. Further, the Company will
also submit audited results for the entire financial year as soon as they are approved
by the Board.
If the Company opts to submit
audited results for the entire financial results, it shall intimate to the Stock
Exchange in advance within 45 days of the end of financial year.
As a part of audited or unaudited
financial results for every half year the Company shall also submit by way of note
a Statement of Assets and Liabilities
The results as above are to be
submitted within 15 days of the Board Meeting to the Stock Exchange.
The Company shall give prior intimation
about the Date and Time and Purpose of the meeting in which the financial results
will be considered to the Stock Exchange at least 7 clear days prior to the meeting.
The Company shall simultaneously issue a public notice in at least 2 daily news
papers (one in English daily and one in regional language daily).
The Company shall within 48 hours
of conclusion of the Board or Committee meeting at which the Financial Results were
approved, publish a copy of the financial results which were submitted to the Stock
Exchange in atleast one in English daily news paper and one in regional language
daily news paper.
Under Clause 42
the Company has to deposit 1% of the value of securities before offering to the
public or existing shareholders which is refundable or forfeitable in the manner
stated in the rules of stock exchange.
Under Clause 47(a)
the Company has to appoint a Company Secretary to act as a Compliance Officer to
deal with all the shareholders requests and to deal with Stock Exchange.
Under Clause 47(c)
the Company has to submit to the Stock Exchange a certificate from the Practicing
Company Secretary within one month of each half year certifying that all certificates
have been issued timely and such certificate is required to made available to the
Stock Exchange within 24 hours of receipt of the certificate by the Company.
Under Clause 47(e)
the Company will execute Memorandum of Understanding with RTA and shall submit copy
of the same to the Stock Exchange within 48 hours for its record.
Under Clause 47(f)
the Company will designate an email ID of the grievance redressel division / compliance
officer exclusively for the purpose of redressing investor grievances and inform
it to the Stock Exchange.
Clause 49 Corporate
1. Board of Directors
there shall be optimum combination of executive and non executive directors
with not less than 50 % of the Board comprising non executive directors.
Where the chairman of the Board
is non executive, at least 1/3rd of the Board should comprise independent
directors. Where the Chairman is executive director, at least of the Board should
comprise of independent directors.
The expression Independent Director
shall mean a Non Executive Director of the Company who:
a. apart from receiving Directors remuneration, does not have any material pecuniary
relationships or transactions with the company, its promoters, its directors, its
senior management or its holding company, its subsidiaries and associates which
may affect independence of the director;
b. is not related to promoters or persons occupying management positions at the
board level or at one level below the board;
c. has not been an executive of the company in the immediately preceding three financial
d. is not a partner or an executive or was not partner or an executive during the
preceding three years, of any of the following:
i) the statutory audit firm or the internal audit
firm that is associated with the company, and
ii) the legal firm(s) and consulting firm(s) that have a material association with
e. is not a material supplier, service provider or customer or a lessor or lessee
of the company, which may affect independence of the director.
is not a substantial shareholder of the company i.e. owning two percent
or more of the block of voting shares.
Is not less than 21 years of age.
a. Associate shall mean a company, which is an associate
as defined in Accounting Standard (AS) 23, Accounting for Investments in Associates
in Consolidated Financial Statements, issued by the Institute of Chartered Accountants
b. Senior management shall mean personnel of the company
who are members of its core management team excluding Board of Directors. Normally,
this would comprise all members of management one level below the executive directors,
including all functional heads.
c. Relative shall mean relative as defined in section 2(41) and section 6 read
with Schedule IA of the Companies Act, 1956.
appointed by an institution, which has invested in or lent to the Company shall
be deemed to be Independent Directors.
for this purpose means a public financial institution as defined in Section 4A of
the Companies Act, 1956 or a corresponding new bank as defined in section 2(d)
of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or
the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 [both
Other provisions as to Board
The Board shall meet atleast 4
times in a year, with a maximum time gap of four months between any two meetings.
A director shall not be a member
in more than 10 committees or act as chairman in more than 5 committees across all
The Board should lay down a code
of conduct for all Board members and senior management of the Company. The code
of conduct shall be posted on the website of the Company.
Information to be placed before
Board of Directors
plans and budgets and any updates.
and any updates.
for the company and its operating divisions or business segments.
Minutes of meetings
of audit committee and other committees of the board.
on recruitment and remuneration of senior officers just below the board level, including
appointment or removal of Chief Financial Officer and the Company Secretary.
Show cause, demand,
prosecution notices and penalty notices, which are materially important
Fatal or serious
accidents, dangerous occurrences, any material effluent or pollution problems.
Any material default
in financial obligations to and by the company, or substantial nonpayment for goods
sold by the company.
Any issue, which
involves possible public or product liability claims of substantial nature, including
any judgement or order which, may have passed strictures on the conduct of the company
or taken an adverse view regarding another enterprise that can have negative implications
on the company.
Details of any joint venture
or collaboration agreement.
Transactions that involve substantial
payment towards goodwill, brand equity, or intellectual property.
Significant labour problems
and their proposed solutions. Any significant development in Human Resources/ Industrial
Relations front like signing of wage agreement, implementation of Voluntary Retirement
of material nature, of investments, subsidiaries, assets, which is not in normal
course of business.
Quarterly details of foreign
exchange exposures and the steps taken by management to limit the risks of adverse
exchange rate movement, if material.
Non-Compliance of any regulatory, statutory or listing requirements and shareholders
services such as non payment of dividend, delay in share transfer etc.
2. Audit Committee
is required to be formed comprising minimum 3 directors as members. Two-third of
the members of Audit Committee shall be independent directors. All members of Audit
Committee shall be financially literate and atleast 1 member shall have accounting
or related financial management expertise. The Chairman of Audit Committee must
be independent director and shall present at the AGM to answer the queries of shareholders
queries. The Audit Committee shall also meet 4 times in a year with a maximum gap
of 4 months. The quorum shall be either 2 or 1/3rd of the members of
the Committee whichever is greater.
Review of information by Audit
The Audit Committee shall mandatorily
review the following information:
1. Management discussion and analysis
of financial condition and results of operations;
2. Statement of significant related
party transactions (as defined by the audit committee), submitted by management;
3. Management letters / letters of
internal control weaknesses issued by the statutory auditors;
4. Internal audit reports relating
to internal control weaknesses; and
5. The appointment, removal and terms
of remuneration of the Chief internal auditor shall be subject to review by the
1. At least one independent director
on the Board of Directors of the holding company shall be a director on the Board
of Directors of a material non listed Indian subsidiary company.
2. The Audit Committee of the listed
holding company shall also review the financial statements, in particular, the investments
made by the unlisted subsidiary company.
3. The minutes of the Board meetings
of the unlisted subsidiary company shall be placed at the Board meeting of the listed
holding company. The management should periodically bring to the attention of the
Board of Directors of the listed holding company, a statement of all significant
transactions and arrangements entered into by the unlisted subsidiary company.
The company shall obtain a certificate from either the auditors or practicing
company secretaries regarding compliance of conditions of corporate governance as
stipulated in this clause and annex the certificate with the directors report,
which is sent annually to all the shareholders of the company. The same certificate
shall also be sent to the Stock Exchanges along with the annual report filed by
The Company shall submit a quarterly compliance report to the stock
exchange within 15 days from the end of each quarter. This report shall be required
to be signed by Compliance officer or Company Secretary of the Company.
There shall be separate section of Corporate Governance Report in
the Annual Report of the Company.
A non-executive Chairman may
be entitled to maintain a Chairmans office at the companys expense and also allowed
reimbursement of expenses incurred in performance of his duties. Independent Directors
may have a tenure not exceeding, in the aggregate, a period of nine years, on the
Board of a company. The company may ensure that the person who is being appointed
as an independent director has the requisite qualifications and experience which
would be of use to the company and which, in the opinion of the company, would enable
him to contribute effectively to the company in his capacity as an independent director.
i. The board may set up a remuneration committee
to determine on their behalf and on behalf of the shareholders with agreed terms
of reference, the companys policy on specific remuneration packages for executive
directors including pension rights and any compensation payment.
ii. To avoid conflicts of interest, the remuneration
committee, which would determine the remuneration packages of the executive directors
may comprise of at least three directors, all of whom should be non-executive directors,
the Chairman of committee being an independent director.
iii. All the members of the remuneration committee
could be present at the meeting.
iv. The Chairman of the remuneration committee could
be present at the Annual General Meeting, to answer the shareholder queries. However,
it would be up to the Chairman to decide who should answer the queries.
declaration of financial performance including summary of the significant events
in last six-months, may be sent to each household of shareholders.
move towards a regime of unqualified financial statements.
Training of Board Members
may train its Board members in the business model of the company as well as the
risk profile of the business parameters of the company, their responsibilities as
directors, and the best ways to discharge them.
Mechanism for evaluating non-executive Board Members
evaluation of non-executive directors could be done by a peer group comprising the
entire Board of Directors, excluding the director being evaluated; and Peer Group
evaluation could be the mechanism to determine whether to extend /continue the terms
of appointment of non-executive directors.
Whistle Blower Policy
The company may establish a mechanism
for employees to report to the management concerns about unethical behaviour, actual
or suspected fraud or violation of the companys code of conduct or ethics policy.
This mechanism could also provide for adequate safeguards against victimization
of employees who avail of the mechanism and also provide for direct access to the
Chairman of the Audit committee in exceptional cases. Once established, the existence
of the mechanism may be appropriately communicated within the organization.
Under Clause 50
the Company has to mandatorily comply with the Accounting Standards issued by the
Clause 52 deals with Corporate
Filing and Dissemination System (CFDS), under this clause the company agrees
(a) to file on the CDFS,
such information, statements and reports as may be specified by the Participating
Stock Exchanges in this regard.
(b) that the Compliance
Officer, appointed under clause 47(a) and the company shall be responsible for ensuring
the correctness, authenticity and comprehensiveness of the information, statements
and reports filed under this clause and also for ensuring
that such information is in conformity with the applicable laws and the listing
(c) to ensure that the
electronic filing of information through CFDS, pursuant to compliance with any clause
of the listing agreement, shall be done within the time limit specified in the respective
clause of the listing agreement.
(d) to put in place such
infrastructure as may be required to comply with the clause.
For the purposes of this clause
(i) The term Corporate
Filing and Dissemination System (CFDS) shall mean the portal at the URL www.corpfiling.co.in
or such other website as may be specified by the participating stock exchanges from
time to time to take care of exigencies, if any.
(ii) The term Participating
Stock Exchanges shall mean the stock exchanges owning and maintaining CFDS.
Clause 53 and 54
are new clause which provides that if the Company enters into any agreement with
Media Company, it is required to be informed to the Stock Exchange. The company
is required to maintain its functional website containing basic information about
the Company, details of business, financial performance, shareholding pattern, compliance
with corporate governance, contact information, email id of compliance officer etc.