SEBI, in its February 2014 board meeting, approved several alterations to the listing agreement in an attempt to revamp the corporate governance norms in the country. These changes, a preview to which is available in the agenda paper of the board meeting, were brought in after relying heavily on "Consultative Paper on Corporate Governance norms in India" (4 January, 2013) and the various comments that were received in response to it. While a number of the changes have already been incorporated within the Companies Act, 2013, the relevant sections have not been notified as of today. In certain circumstances, SEBI has chosen to lay down norms that are more stringent than what is present in the Companies Act.

SEBI has proposed the creation of General Principles of Corporate Governance which will aid in understanding how specific rules in the Listing Agreement are to be interpreted.

Independent Directors: One of the major focuses of the new norms is in relation to independent directors. With the primary concern being ensuring independence and effectiveness of such directors, limits on tenure, limits on number of directorships, provisions for separate meetings of such directors, etc. have been brought in. Succession planning and performance evaluation of directors are some other requirements imposed on boards.

Related Party Transactions: The proposed new norms deal heavily with related party transactions. They further expand the definition of RPTs and include the requirement to obtain prior approval from the audit committee and also from non-interested shareholders, in cases of major RPTs.

Policies: Additionally, companies will be required to come out with policies for whistle-blowers, remuneration, risk management, divestment of material subsidiaries, etc.

With these new norms set to come into force on 1 October, 2014, all listed companies will soon be required to pay greater attention to adequate corporate governance. It would not only increase the cost of running business for listed companies, but may also have several adverse effects, for instance, disqualification of independent directors who have overstayed their tenure.

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Date:September 28, 2015