As per report published in Economic Times today, committee constituted by SEBI is considering proposal to amend Clause 49 of the Listing Agreement, as under:
Ø Relaxation - review of Minutes of unlisted subsidiaries:
Scrapping the requirement of reviewing the minutes of all the unlisted subsidiaries by the Board.
Remark: Proposal will help the boards of listed holding companies to focus on only the substantial issues. Presently, this clause is applicable for all subsidiaries irrespective of size or their contribution to the parent company. This consumes much of the time of the boards of companies which have many unlisted subsidiaries.
Ø Obligation/ more compliances
Whistleblower mechanism
Making whistleblower mechanism mandatory.
Remark: A whistleblower is typically a company insider who tips off the management about actual or suspected fraud or violation of the company’s code of conduct and such whistle blower is protected for tips made by him to the management. At present, under Clause 49, such mechanism is optional. The proposal is part of a review of certain aspects of clause 49 to effectively deal with instances of fraud in companies. Recently, the Union Cabinet cleared a bill to protect whistleblowers and punish those exposing the identity of people disclosing information.
Remuneration Committee
· To rename Remuneration Committee as ‘Nomination and Remuneration Committee’
· Remuneration Committee be made mandatory
· Increasing scope of remuneration committee to determine the remuneration for all the directors and other senior management personnel.
Remark: Presently, remuneration of senior management personnel is not determined by Remuneration Committee. Even constituting of Remuneration Committee is optional except in case company having inadequate profits in terms of the Companies Act, 1956. The requirement to determine remuneration package of Senior Management Personnel by Remuneration Committee may create hardship for large size corporates.
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