A company failing to comply with the listing agreement, including the appointment of independent directors on their boards by December 31, may not be allowed to trade their shares on the stock exchanges.M Damodaran, chairman of Sebi, has indicated that the regulator will modify rules to make penalties more stringent for listed companies not adhering to corporate governance norms, which are part of clause 49 of the listing agreement."Listing agreement is entered between a stock exchange and a company, which seeks to have its shares listed on the bourses. If some firm is not in compliance with the listing agreement, clearly its shares cannot be traded on the exchanges," Damodaran said when asked whether a company could be delisted from a bourse if it violates the listing norms.The market regulator had tightened the corporate governnance norms required for listing shares based on the recommendation of the N R Narayana Murthy committee. The regulator specifically decided to enhance the role of independent directors in a company.Sebi had initially set a deadline of April 2005 for companies to appoint the requisite number of independent directors as part of the new norms. It was later extended to December 31, 2005 considering the difficulties faced by companies in finding the requisite number of independent directors before April.
