New corporate governance norms top SEBI’s policy action list in 2014

Introduction of new corporate governance norms was one of the major milestones of the market regulator’s policy initiatives in 2014. The new rules require companies to obtain shareholders’ approval for related-party transactions, establish whistle-blower mechanism and make elaborate disclosures on pay packages.

Another decision that will have far reaching consequences was Insider Trading Regulations. SEBI had widened the definition of insider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such persons access to unpublished price sensitive information.

In a bid to align with the new Companies Act, the Securities and Exchange Board of India’s norms aim at encouraging companies to “adopt best practices on corporate governance.” The new norms mandate a separate section in the annual report to include a compliance report on corporate governance and direct the companies to submit quarterly reports to exchanges.

The market watchdog also unveiled norms to ensure ‘equitable treatment of all shareholders including minority and foreign shareholders’. Apart from providing adequate and timely information to all shareholders, listed companies should also facilitate the exercise of voting rights by foreign shareholders, SEBI said during the year.

However, later SEBI relaxed the norms by giving an option of implementing its corporate governance norms for companies with share capital of less than ₹10 crore and networth of less than ₹25 crore, besides those listed on the SME and SME’s institutional trading platforms. SEBI also deferred the date of appointing a woman director on the boards to the next fiscal (April 1, 2015).

Another key regulation pertains to the mutual fund industry, which mandates a minimum networth of ₹50 crore.

In a landmark decision, SEBI expanded the framework of the offer-for-sale (OFS) through stock exchange mechanism by allowing non-promoters with over 10 per cent stake. Till then, only promoters of the company were allowed to tap the OFS window for stake dilution. The move can benefit large shareholders such as LIC.

The market watchdog also firmed up regulations that will govern real estate investment trusts (REITs), and infrastructure investment trusts (InvITs). SEBI cleared a long-pending proposal to allow firms to launch REITs — a move that will enable easier access to funds for cash-strapped developers and create a new investment avenue for institutions and high networth individuals, and ultimately ordinary investors.

Other decisions include Research Analyst Regulations, conversion of listing agreement into listing regulations and single registration for operating on all stock exchanges.