Clause -49

Following are the highlights and salient features of Clause 49 :-

Company Board of Directors:-

The clause defines an Independent Directors as a non-executive director of the company who:

Receives only director’s remuneration and should have no other pecuniary relationships or transactions with the company or its promoters
Is not related to promoters or management at the board level has not been an executive of the company in the immediately preceding three financial years
Has had no associations in three preceding years with audit firms, legal or consulting firms associated with the company does not hold substantial shares in the company

The compensation paid to non-executive directors including independent directors will be fixed by the board and should have prior approval of shareholders.

The Board should meet at least four times a year, with a maximum time gap of three months between any two meetings.

A Board director should not be a member of more than 10 committees or act as Chairman of more than five committees across all companies of which he is a director.

Code of Conduct:-
The board should lay down a code of conduct for all its members and senior management of the company. All the members and senior management personnel have to affirm compliance with the code every year. The annual report of the company should contain a declaration stating this signed by the CEO.

Audit Committees:-
The audit committee should comprise:

A minimum of three directors as members
Two thirds of the members should be independent directors
All members have to be financially literate
At least one member should have accounting or related financial management expertise

The committee should meet at least four times in a year. The gap between each meeting should not exceed four months.

CEO/CFO Certification:- The CEO/CFO should certify to the board that:-
They have reviewed financial statements and cash flow statements for the year.

The company has not entered into fraudulent or illegal transactions to the best of their knowledge and belief
They accept responsibility for establishing, maintaining and evaluating internal controls.

They have informed the auditors and the audit committee about the significant changes to internal control and accounting policies as well as instances of fraud.

Subsidiary Companies
Regarding subsidiary companies, Clause 49 stipulates that:

At least one independent director on the board of the holding company should be a director on the board of a material non listed Indian subsidiary company.
The audit committee of the listed holding company should review the financial statements, in particular, the investments made by the unlisted subsidiary company.
The management should present the board of the listed holding company a statement of all significant transactions and arrangements entered into by the unlisted subsidiary company.

Corporate Governance Report
According to Clause 49, annual reports of listed companies should contain a separate section on corporate governance. This section should contain:

A detailed compliance report. Non-compliance of mandatory requirements of Clause 49 should be explained with reasons.

The extent to which non-mandatory requirements have been adopted and implemented should be highlighted
Companies should submit quarterly compliance report to stock exchanges.

These reports should be signed either by the compliance officer or CEO of the company.

Just to add cause 49 is now become Regulation 17-27 of LODR ,which is a model listing agreement mandated by SEBI to be followed by all listed entities w.e.f.Dec 2015..It is amended every year ,majorly from yr 2017..with latest amendment of RPT In Nov 21..

Now the clause 49 is not there in the listing agreement. In Listing Agreement every stock exchange is refferring that the listing entity shall comply with all the terms and conditions of LODR whichever are applicable. So no clause 49 just regulations of LODR. They have taken the step to ease the listing agreement.