CORPORATE GOVERNANCE GUIDELINE

The Securities and Exchange Commission has initiated 'Corporate Governance' guidelines for the listed companies on 9th February 2006. The guidelines are not compulsory for the listed companies but the reasons for non-compliance of the provision of the guidelines have to be explained to the Commission:

Salient features of the guidelines are:

• The number of Board of Directors should not be less than 5 (five) and more than twenty. The Banks, non-bank financial institutions, insurance companies and statutory bodies shall follow the prescription of their respective primary regulators in this regard.
• Appointment of at least one-fifth of the total number of the company's board of directors should be 'independent non-shareholders directors' in the Board.
• The Chairman and the Chief Executive officer simultaneously can not be the same person and the Board should clearly define their respective roles and responsibilities.
• The "Directors' Report" prepared as per Companies Act may include additional statements on :-
  • The financial statement presents fairly company's state of affairs, the results of its operation, cash flows and change is equity. While preparing the financial statement -
    
    The accounting estimates are based on reasonable and prudent judgement
    
    Appropriate accounting policies have been consistently applied
    
    IAS is followed in preparation of the financial statements
    
    Proper books of accounts have been maintained
    
    
  • Disclosure on company's ability as a going concern and if not so then the fact along with the reasons thereof,
  • Explanation on the significant deviation from last year in operating results, if so happened,
  • Summarize of at least last three years key operating and financial data,
  • Reasons for non declaration of dividend (if not declared) for the year,
  • Significant plans and decisions along with future prospects and risks
  • Number of Board Meetings held during the year and attendance by directors,
  • Aggregate number of shares held by:
    
    Parent/Subsidiary/Associate companies,
    
    Directors, CEO, Company Secretary, CFO, Head of Internal Audit and their spouse and minor children,
    
    Top five salaried employs other than the above mentioned persons
    
    Shareholders holding ten percent or more voting interest in the company
    
    
• The Companies is required to appoint a Chief Financial Officer (CFO), a Head of Internal Audit and a Company Secretary. The CFO and Company Secretary are required to attend the Board meeting.
• The companies will form an Audit Committee comprising of at least three members including at least one independent non - shareholder director. The Audit Committee shall assist the Board in handling the issues, which might be overlooked and ensures a good monitoring system within the business.
• The Committee is required to make report on its activities to the Board. An immediate report have to made to the Board on the following findings:
  • conflict of interest;
  • suspected or presumed fraud or irregularity or material defect in the internal control system
  • suspected infringement of laws
• The Board of Director shall rectify everything, which as per Committee Report has material impact on the financial condition and results of operation of the Company. The Committee has to report to the Commission if the Board has unreasonably ignored the rectification.
• The company will not engage its external/statuary auditors to provide the Bookkeeping, Broker-dealer, Actuarial, Internal audit services or any other service that the Audit committees determine.
  
  The guidelines will definitely help to protect the rights of minority shareholders as well as ensure more transparency and accountability in the Management of the companies.