Recommendations of the Committees_1

8/6/2019 Recommendations of the Committees_1

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1. Recommendations of1998 Confederation of Indian Industry (Desirable Corporate Governance a code)Board Structure and Business

1. German system of two-tier board not necessary to ensure desirable corporate governance.2. The full board should meet at least six times a year, preferably at an interval of two months and the meetings

should have enough agenda to require at least half a days deliberations. Recording and disseminating

information on attendance of directors.

3. All key information must be made available to the board (annual operating plans, budgets, quarterly resultsetc.)

Non-executive directors:

1. Any listed company with a turnover of Rs 100 crore and above should have professionally competent,independent NEDs who should constitute at least 30% of the board if the chairman is a NED or 50% if the

chairman and managing director positions are held by the same person.

2. NEDs should be paid well.3. Active participation of NEDs considered important.Interlocking directorates

1. No single person should hold directorships in more than ten listed companies.Audit Committees

1. Recommends setting up of audit committees for companies with a turnover of Rs 100 crore or more or paid-up capital of Rs 20 crore or more within two years.

Financial Statements to investors

1. Major stock exchanges should gradually seek a compliance certificate from the CEO and CFO, to hold themresponsible for the financial statements.

2. Recommendations of 2000 Kumar Mangalam Birla Committee on Corporate GovernanceScope - Appointed by SEBI Recommendations include mandatory and non-mandatory compliances

Board of Directors

1. The board of a company should have an optimum combination of executive and non-executive directors withNEDs comprising not less than 50% of the board strength. Companies with non-executive chairman should

have at least one-third independent directors in their board and those with executive chairman should have at

least 50% independent directors in their board.

2. Board meetings should be held at least four times a year, with a maximum time gap of four months betweenany two meetings.


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3. Financial institutions should appoint nominees on the boards only on a selective basis where suchappointment is pursuant to a right under loan agreements or where such appointment is considered necessary

to protect the interest of the institution.

Interlocking Directorates

1. A director should not be a member in more than ten committees or act as chairman of more than fivecommittees across all companies in which he is a director.

Audit Committees

1. Qualified and independent audit committees should be set up with a minimum of three members, all beingNEDs and the majority being independent. The chairman of the committee should be an independent director

Financial Statements to investors

1. The companies should be required to give consolidated accounts in respect of all its subsidiaries in which theyhold 51% or more of the share capital.

3. Recommendations of the 2003 Naresh Chandra Committee on Audit and Corporate GovernanceScope - Appointed by Department of Company Affairs to recommend a defined role of auditor-company

relationship

Independent Directors

1. Minimum of 50% of seats on boards of companies with paid up capital of RS10 crore (and above) and turnoverof RS50 crore (and above) to go to independent directors. Nominees of financial institutions do not count as

independent.

Audit Committees

1. To be staffed by independent directors only.Financial Statements to investors

1. Annual accounts have to be certified by CEO and CFO.Roles and responsibilities of auditors

1. Compulsory for auditors to forward copies of qualified accounts to SEBI, Registrar of Companies and StockExchanges

1. Audit firms not permitted to provide non-audit services to their clients Institutional reforms2. Setting up of quality review boards for the Institute of Chartered Accountants of India (ICAI), the Institute of

Company Secretaries of India, and the Institute of Cost and Works Accountants of India


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3. Setting up of a Serious Frauds Office to deal with bigger corporate crimesLegal Changes

1. Amendments of the Company Act to enable the Department of Company Affairs to order compliance auditsand also provide it with powers of attachment of bank accounts to ensure that proceeds from illegal acts and

fraud do not escape recovery.

Documents

Recommendations of the Committees_1