New Delhi, October 9, 2017
The Ministry of Corporate Affairs (MCA) has opposed some of the recommendations made by the Securities and Exchange Board of India (Sebi) committee on corporate governance on the grounds that they concern matters already covered by the Companies Act.
The committee, which was set up by Sebi to suggest ways in which to enhance corporate governance standards, has called for an increase in the minimum number of directors and the inclusion of at least one independent woman board member — areas under the ambit of the Companies Act and therefore not under the remit of the market regulator.
“Committee proposes to make recommendations which seek to empower Sebi to prescribe a number of additional requirements on matters which have been core company law principles and find place, rightly so, under Companies Act,” MCA joint secretary AK Bhatia said in a letter to Uday Kotak, chairman of the Sebi committee on corporate governance. The letter was among the annexures attached to the report. Sebi released the report for feedback on Thursday.
Regarding women directors, MCA said: “The woman director may not be restricted to the independent director only. The issue can be addressed if a provision is made whereby there may be one woman director who is not a relative.”
The corporate affairs department also expressed concern that some recommendations seek to extend jurisdiction to unlisted companies, which are regulated by MCA. This relates to the obligations of a listed company’s board with respect to subsidiaries.
It said the recommendation on a minimum four board meetings a year wasn’t necessary. “There is a provision under proviso to Section 173 whereby the central government may change the requirement of minimum number of board meetings for a certain class of companies,” MCA said. “Necessary changes if required can be brought under the Companies Act, 2013, through issue of a notification.”
It also objected to the committee’s suggestion that independent directors can’t be swapped for alternate directors, saying this conflicted with existing provisions of the Companies Act. “There is no need for a separate prescription under the Sebi’s Listing Obligations and Disclosure Requirements,” MCA said.
In a separate letter also attached as an annexure, the finance ministry said that such an amendment would create practical difficulties. “On the one hand the committee recommends requirement of at least 50% attendance for independent directors (ID) and on the other hand it is suggesting that no alternate director may be permitted in the place of ID,” the finance ministry’s letter said. The committee had also called for splitting the posts of chairman and managing director/CEO, which is held by one person in many companies.
Union minister Piyush Goyal had said Friday that the Kotak panel report was “completely off the mark” on some matters while welcoming other recommendations.
[The Economic Times]