A brief on report submitted by Kotak committee on corporate governance

The SEBI formed a committee on Corporate Governance in June, 2017 under the Chairmanship of Mr. Uday Kotak with a view to enhancing the standards of Corporate Governance of listed companies in India. Committee has submitted its report on Corporate Governance, on which SEBI seeks public comments by November 5, 2017 in prescribed format. Committee’s recommendation in brief are as under:

1. Minimum 6 directors on board of listed entities, of which at least one should be an independent woman director;

2. On directors' attendance in board meetings, Committee recommends that if a director does not attend at least half the number of board meetings over 2 Financial Years on a rolling basis, his/ her continuance on the board should be ratified by shareholders at next Annual General Meeting;

3. Committee recommends that Board of Directors of every listed entity should be required to list competencies/ expertise that it believes its directors should possess;

4. Committee recommends Special Resolution requirement for appointment/ continuation of non-executive directors ('NEDs') on attaining age of 75 years for the relevant term;

5. Recommends at least 5 board meetings every year and suggests at least once every year, an interaction between NEDs and senior management;

6. Suggests that quorum for every board meeting should be minimum 3 directors or 1/3rd of total strength of the Board, whichever is higher, including at least 1 Independent Director;

7. Committee recommends certain listed entities (withover 40% public shareholding) to separate roles of Chairperson and MD/ CEO w.e.f. April 1, 2020;

8. Committee recommends that every listed entity, irrespective of whether Chairperson is executive or non-executive, shall have at least half of its total number of directors as Independent Directors(IDs);

9. Proposes amendments to Board evaluation process, eligibility criteria, minimum compensation, disclosure on resignation, induction and training for Independent Directors;

10. Suggests mandatory Directors and Officers Insurance Policy for Top 500 companies by market capitalisation, and subsequently be extended to all listed entities;

11. Proposes amendment in the definition of Senior Management under SEBI (LODR) Regulations by specifically including Company Secretary and Chief Financial Officer in the definition;

12. Recommends that in annual report along with Corporate Governance Report, certificate from Practicing Company Secretary pertaining to disqualification of directors be submitted.

13. Recommends Secretarial Audit may be extended to all material unlisted Indian Subsidiaries along with all listed companies.

14. Recommends changes relating to minimum number of Committee Meetings, role of Audit Committee, composition and role of Nomination and Remuneration Committee, composition and role of Stakeholders’ Relationship Committee, quorum for Committee Meetings, applicability and role of Risk Management Committee, and Secretarial Audit;

15. Proposes changes in sharingof informationbetween controlling promoters/ shareholders and Nominee Directors, re-classification of Promoters/ Classification of Entities as Professionally Managed, disclosure of Related Party Transactions;

16. Committee also makes recommendations on:

(i) Royalty and Brand Payments to Related Parties,
(ii) Remuneration to Executive Promoter-Directors,
(iii) Remuneration of Non-executive Directors,
(iv) Materiality Policy, etc.

The Corporate Governance Committee suggests in its report overhaul of provisions of Board Composition, frequency of board meetings and committee meetings, Corporate Governance Report, etc.