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With less than two months to go for implementation of the new corporate governance norms, Securities and Exchange Board of India (Sebi) has warned India Inc to comply or face the music. The capital markets regulator has ruled out extension of the October 1 deadline. Nearly 1,000 companies are yet to comply with some or the other provision of the corporate governance norms.
U K Sinha, the chairman of Sebi, hinted on Monday that it would act against non-compliant companies as briskly as it did last year against those which’d failed to meet the 25 per cent minimum public shareholding requirement. “We passed an order against non-compliant companies a day after the deadline for meeting the minimum public shareholding norms got over. That should indicate our seriousness over compliance issues,” he said.
Adding: “I’d suggest (companies) come to us if facing any issues while complying with the regulations. We will make reasonable accommodation,” he said on the sidelines of an event organised by the Institute of Companies Secretaries of India (ICSI). Under these norms, issued by Sebi in February, companies need to have at least one woman on the board of directors. Also, independent directors (IDs) can serve a maximum of up to seven years on the board, not more; nominee directors can no longer be IDs. Besides, companies have to rotate their auditors periodically and expand the role of the audit committee.
“Sebi’s corporate governance norms have gone beyond what has been stated in the Companies Act. Many companies are finding difficulties in adhering to these,” said Somasekhar Sundaresan, partner, J Sagar Associates. Not all agree. “IDs and women directors are only one part of the new norms. There is no dearth of qualified professionals. There is also the aspect of mandatory disclosures and expanding the role of the audit committee. These are doable, if there is intent,” said M S Sahoo, secretary, ICSI.
A Sebi official said the market regulator would try to protect the minority shareholders in companies that fail to comply. “Suspension of companies ends up hurting the investor. So, we might look at monetary penalty and censure,” said Prashant Saran, wholetime member, Sebi.
Sebi also stated on Monday that the new listing agreement regulations would also be implemented from October 1.
