Acceding to representations from market participants, companies and industry associations on practical difficulties in implementing the corporate governance norms, SEBI has amended them (requests or suggestions) even before they are scheduled to come into force from October 1.

Short-term Exemption

Companies with share capital of less than ₹10 crore and net worth of less than ₹25 crore, besides those listed on the SME and SME’s institutional trading platforms (ITP), have been given the option of implementing SEBI’s corporate governance norms.

The date of appointing a woman director on board has been postponed to the next fiscal (April 1, 2015).

Independent directors should not have or have had any material pecuniary relationship with a company, its parent/ subsidiary/ associate/ promoters/ or directors during the last two financial years or during the current fiscal. The maximum tenure for independent would be according to the Companies Act 2013 as against the 10 years stipulated earlier.

The Chairman of a company has been allowed to be a member of the nomination and remuneration committee (earlier he was not a part), but cannot chair these committees — the chairmanship would remain with an independent director, said SEBI.

Risk management body

SEBI added the risk management committee of a company should have majority representation from the board, and has to be chaired by a board member, though senior executives may be inducted as members. Earlier, this was not specified.

For related party transactions (RPT), SEBI has explained that a “transaction” with a related party shall be construed to include single transaction or a group of transactions in a contract. SEBI has substituted its definition of a related party by the one defined by the Companies Act 2013 and the applicable accounting standards.

A material RPT is one that if a transaction exceeds 10 per cent of a company’s annual turnover. Earlier, it was the higher of 5 per cent of turnover or 20 per cent of net worth.

The audit committee of the company has been allowed to grant omnibus approvals for proposed RPTs, provided the committee lays down a criteria for such approval.

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