Corporate Governance in India

Checklist on Compliance of Corporate Governance for Listed Companies

Sr.	Subject	Requirement	
			
1	Non-executive		
	Directors		
			
1.1		Not less than fifty percent of total number of Directors should	
		be Non-executive. Non-executive means all Directors other	
		than Whole Time Directors OR Managing Director.	
			
1.2		If not complied – what steps Board has taken for compliance.	
			
1.3		Non-executive can continue upto 3 terms of three years	
		continuously.	
			
1.4		Any new such Director has to declare his shareholding in a	
		company when he is appointed along with Notice of	
		appointment.	
			
2	Independent		
	Directors		
			
2.1		Means Non-executive Directors who does not have pecuniary	
		relationship with :-	
			
2.1.1		Company	
			
2.1.2		Its Promoters.	
			
2.1.3		Its Senior Management.	
			
2.1.4		Its Holding Company.	
			
2.1.5		Its Subsidiaries.	
			
2.1.6		Its Associated Companies.	
			
2.2		Not related to Promoters or Management at Board Level or one	
		level below the Board.	
			
2.3		He was not executive of the Company in immediately preceding	
		three financial years.	
			
2.4.1		He is not Partner / Executive of Audit firm or legal firm or	
		Consulting firm which is associated with Company or was not	
		partner in last 3 years of firm.	
			
2.5		He is not Vendor, Supplier, Customer, Lessor, Lessee of the	
		Company.	
			
2.6		He is not holding more than two percent of company’s shares	
			
2.7		If Chairman of the Board is Executive – at least half of the	
		number should be Independent.	

Corporate Governance in India

Checklist on Compliance of Corporate Governance for Listed Companies (contd.)

Sr.	Subject	Requirement	
			
2	Independent		
	Directors		
			
2.7.1		If Chairman is non-executive – at least half of the Board should	
		be Independent.	
			
2.8		Company to place before them Legal Compliance Report and	
		steps taken by Company to cure any taint.	
			
2.8.1		In case of any proceedings against independent directors – no	
		defence is available on unawareness.	
			
3	Board Meetings		
			
3.1		Not less than Four Board Meetings held in a year.	
			
3.2		Gap between two meetings is not more than four months.	
			
3.3		Whether following information was given to the Board.	
			
3.3.1		Operating Plans & Budget.	
			
3.3.2		Capital Budget.	
			
3.3.3		Quarterly Results.	
			
3.3.4		Minutes of all Committee Meetings including Audit.	
			
3.3.5		Terms of any new recruitment of CFO, company secretary or	
		any senior Executive one level below Board and information on	
		removal of such officers.	
			
3.3.6		Materially important Notice of Demand, Prosecution, Penalty.	
			
3.3.7		Information on fatal accident, dangerous occurrence, material	
		effluent, environment / pollution problem.	
			
3.3.8		Material Financial default on payment to be received or paid by	
		the Company.	
			
3.3.9		Details of any Public or Product liability claims or stricture by	
		judiciary against the Company.	
			
3.3.10		Details of Joint Venture of Foreign Collaboration.	
			
3.3.11		Transactions for substantial payment for intellectual property	
		rights.	
			
3.3.12		Significant Labour problem.	
			
3.3.13		Sale of investments, assets, subsidiary.	
			
3.3.14		Quarterly results with segmentwise.	

Corporate Governance in India

Checklist on Compliance of Corporate Governance for Listed Companies (contd.)

Sr.	Subject	Requirement	
			
3	Board Meetings		
			
3.3.15		Foreign Exchange Exposure.	
			
3.3.16		Non-compliance of any regulatory or listing rules.	
			
3.4		All disclosures by Directors for transactions having conflict of	
		interest with Company.	
			
3.5		Disclosure of Directorships / Chairmanship of each director in	
		other company.	
			
3.5.1		Total number of directorship should not be more than ten (other	
		than private & foreign companies).	
			
3.5.2		Total number of Chairmanship should not be more than five.	
			
3.5.3		Each director to inform the company of any change during the	
		year in directorships or chairmanships.	
			
3.6		Remuneration of non-executive directors decided by Board	
		subject to Members approval.	
			
3.7		Remuneration of independent directors decided by Board	
		subject to Members approval.	
			
3.8		Management to place report duly certified by Compliance	
		Officer on business risks, measures taken to minimize risks.	
			
4	Compensation		
	Policy for Non-		
	executive Directors		
			
4.1		Company philosophy and details of remuneration to non-	
		executive directors in annual report and also in website.	
			
4.2	Stock Options to non-	Limits to be set for maximum numbers to be granted in a	
	executive directors	financial year.	
			
4.2.1		Stock options granted to non-ex. Directors to be vested after	
		one year of retirement from Board	
			
5	Share Transfers		
			
5.1		Board has delegated powers to officer or committee or	
		Registrars	
			
5.2		Delegated authority to meet once in fortnight to attend share	
		transfer formality	

Corporate Governance in India

Checklist on Compliance of Corporate Governance for Listed Companies (contd.)

Sr.	Subject	Requirement		
				
6	Code of Conduct for			
	Board & Seniors			
	Mgmt.			
				
6.1		Company has laid down Code.		
				
6.2		Coverage of Board and senior executive one level below Board.		
				
6.3		Code is placed on website.		
				
6.4		All covered persons affirm compliance annually.		
				
6.5		Annual report to contain declaration signed by CEO and COO.		
				
7	Investor’s Grievance			
	Committee			
				
7.1		Investor’s Grievance Committee is constituted.		
				
7.2		Chairman of Committee is Non-executive.		
				
7.3		Committee to look into share transfers, non-receipt of annual		
		reports, non-receipt of dividends.		
				
8	Audit Committee			
				
8.1		Company has set up an audit committee.		
				
8.2		Minimum members is three.		
				
8.3		All members are non-executive.		
				
8.4		Majority of members are independent.		
				
8.5		All members are financially literate i.e. ability to read and		
		understand basic financial statement.		
				
8.6		At least one member to be expert in accounts and finance i.e		
		having professional degree or experience.		
				
8.7		Chairman of Audit Committee to remain present at Members		
		Annual meeting to answer members queries.		
				
8.8		Company Secretary of the company to act as Secretary of Audit		
		Committee.		
				
8.9		To invite such executives as it may consider appropriate.		

8.10		Head of Finance to remain present in most of meetings.		
				
8.11		Head of Finance and Internal Audit as well as statutory auditor		
		to be invited when required.		
				
8.12		Committee to meets atleast three times a year.		

Corporate Governance in India

Checklist on Compliance of Corporate Governance for Listed Companies (contd.)

Sr.	Subject	Requirement	
			
8	Audit Committee		
			
8.13		One meeting to be held before finalisation of annual accounts.	
			
8.14		At least two or one-third, whichever is higher, members remain	
		present to form quorum.	
			
8.15		Committee to have powers to:	
			
8.15.1		Seek information from employees.	
			
8.15.2		Investigate any activity within terms of reference.	
			
8.15.3		Obtain legal or professional advice.	
			
8.15.4		Secure attendance of outsiders when relevant.	
			
8.16		Role of Audit Committee to include:	
			
8.16.1		Oversight financial reporting and disclosures.	
			
8.16.2		Ensure financial statements id correct, credible and sufficient.	
			
8.16.3		Appointment / Removal of external auditors, their fees and	
		additional scope.	
			
8.16.4		Review of Annual Accounts to check:	
			
		a. Change in accounting policies.	
			
		b. Major accountings on judgment of management.	
			
		c. Any qualification by external auditors.	
			
		d. Major adjs. Due to audit.	
			
		e. Going concern assumption.	
			
		f. Compliance of accounting standards.	
			
		g. Compliance of stock exchange regulations.	
			
		h. Compliance of legal requirements.	
			
		i. Any related party transactions as per AS 18 defined by ICAI.	
			
8.17		Review with Management on Internal Control Systems.	
			
8.18		Review of Internal Audit functions, staffing, reporting etc.	
			
8.19		Major points arising from Internal Audit and its findings.	
			
8.20		Pre and Post Audit discussion with external auditors.	
			
8.21		Review of Company’s financial and management policies.	

Corporate Governance in India

Checklist on Compliance of Corporate Governance for Listed Companies (contd.)

Sr.	Subject	Requirement	
			
8	Audit Committee		
			
8.22		To look into reasons for major defaults in payments to	
		creditors, depositors, debenture holders and members.	
			
8.23		All related party transactions are approved / ratified.	
			
8.24		Check uses of IPO funds.	
			
8.25		Recommendation to Board if IPO funds are diversified.	
			
8.26		Review of :	
			
8.26.1		All financial results and audit report.	
			
8.26.2		Management Discussion on financial conditions and	
		operations.	
			
8.26.3		Report on compliance of laws and risk management.	
			
8.26.4		Weakness letters from Internal / External auditors and	
		management’s communication.	
			
8.26.5		Records of related party transactions.	
			
8.26.6		Usage of IPO funds in capital assets, working capital etc.	
			
8.26.7		Financials of subsidiaries.	
			
8.27		Ensure that any deviation in AS to be justified by management	
		and such justification to appear in financial statement as foot	
		note.	
			
8.28		Review appointment and removal of Chief Auditor and	
		remuneration.	
			
8.29		Ensure Audit committee is set up as per Companies Act having	
		all functions as per Listing Agreement.