Clause 49 - Corporate Governance

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CORPORATE GOVERNANCECORPORATE GOVERNANCE

Good governance- expectation of stakeholdersGood governance- expectation of stakeholders Enhancing business performance and accountabilityEnhancing business performance and accountability Governance code for corporatesGovernance code for corporates A structure within specific legal, regulatory and A structure within specific legal, regulatory and

institutional environment through whichinstitutional environment through which

– Objectives are setObjectives are set– Means of attaining those objectives are determinedMeans of attaining those objectives are determined– Performance monitoring is establishedPerformance monitoring is established– Disclosure of timely and accurate information is Disclosure of timely and accurate information is

ensured. ensured.

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Clause 49 of the Listing Agreement deals with Corporate Clause 49 of the Listing Agreement deals with Corporate Governance and lays down certain regulations that Governance and lays down certain regulations that governs:-governs:-

Board of DirectorsBoard of Directors Audit committeeAudit committee Remuneration of directorsRemuneration of directors Board ProcedureBoard Procedure ManagementManagement ShareholdersShareholders Report on Corporate GovernanceReport on Corporate Governance ComplianceCompliance

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Board of DirectorsBoard of Directors

Optimum Composition of Executive & non-executive directors

When Chairman is an Executive Director on the Board - 1/3rd of the Board should comprise of independent directors

When the Chairman is a Non Executive Director on the Board – ½ of the Board should comprise of independent directors.

‘Independent director’ shall mean non-executive director of the company who:

a) apart from receiving director’s remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates which may affect independence of the director;

b) is not related to promoters or persons occupying management positions at the board level or at one level below the board;

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c) has not been an executive of the company in the immediately preceding three financial years;

d) Is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following:

i) the statutory audit firm or the internal audit firm that is associated with the company, and

ii) the legal firm(s) and consulting firm(s) that have a material association with the company.

e) is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the director; and

f) is not a substantial shareholder of the company i.e. owning two percent or more of the block of voting shares.

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NON-EXECUTIVE DIRECTOR- COMPENSATION AND NON-EXECUTIVE DIRECTOR- COMPENSATION AND DISCLOSURES.DISCLOSURES.

Compensation/ fees to Non-executive directors to be approved by Compensation/ fees to Non-executive directors to be approved by the board and prior approval of the shareholders is requiredthe board and prior approval of the shareholders is required

A compensation philosophy and statement of entitled A compensation philosophy and statement of entitled compensation in respect of Non-executive directors shall be compensation in respect of Non-executive directors shall be published in annual report/ web site.published in annual report/ web site.

Disclosure on annual basis regarding the shares held by non-Disclosure on annual basis regarding the shares held by non-executive directorsexecutive directors

Non-executive directors to disclose their share holding( both held Non-executive directors to disclose their share holding( both held by them or on beneficial basis) prior to their appointment by them or on beneficial basis) prior to their appointment

Requirement of obtaining prior approval of shareholders in Requirement of obtaining prior approval of shareholders in general meeting shall not apply to payment of sitting fees to non-general meeting shall not apply to payment of sitting fees to non-executive directors, if made within the limits prescribed under the executive directors, if made within the limits prescribed under the Companies Act, 1956 for payment of sitting fees without approval Companies Act, 1956 for payment of sitting fees without approval of the Central Government.of the Central Government.

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Other provisions as to Board and Committees

The board shall meet at least four times a year, with a maximum time gap of four months between any two meetings.

A director shall not be a member in more than 10 committees or act as Chairman of more than five committees across all companies in which he is a director.

Furthermore it should be a mandatory annual requirement for every director to inform the company about the committee positions he occupies in other companies and notify changes as and when they take place.

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CODE OF CONDUCTCODE OF CONDUCT

A code of conduct shall be prepared for board members A code of conduct shall be prepared for board members and senior management which shall be posted on the and senior management which shall be posted on the website.website.

Board members/ Senior management to affirm Board members/ Senior management to affirm compliance of the code and the annual report should compliance of the code and the annual report should contain such a declaration signed by chairman.contain such a declaration signed by chairman.

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AUDIT COMMITTEEAUDIT COMMITTEE The audit committee shall have minimum three directors as members. The audit committee shall have minimum three directors as members.

Two thirds of the members of audit committee shall be independent directors.Two thirds of the members of audit committee shall be independent directors.

All members of the audit committee shall be financially literate with one member All members of the audit committee shall be financially literate with one member having accounting/ financial management expertise.having accounting/ financial management expertise.

The Chairman of the Audit Committee shall be an independent director

The Chairman of the Audit Committee shall be present at Annual General Meeting to answer shareholder queries

The audit committee may invite such of the executives, as it considers appropriate (and particularly the head of the finance function) to be present at the meetings of the committee, but on occasions it may also meet without the presence of any executives of the company.

The finance director, head of internal audit and a representative of the statutory auditor may be present as invitees for the meetings of the audit committee;

The Company Secretary shall act as the secretary to the committee.

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ROLE OF AUDIT COMMITTEEROLE OF AUDIT COMMITTEE

Oversight of the company’s financial reporting processes and Oversight of the company’s financial reporting processes and the disclosure of its financial information to ensure that the the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.financial statement is correct, sufficient and credible.

Recommending the appointment and removal of external Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment auditor, fixation of audit fee and also approval for payment for any other services.for any other services.

Review annual as well as quarterly financial statements with Review annual as well as quarterly financial statements with the management before submitting the same to BODthe management before submitting the same to BOD

Discussion with external auditors before the audit Discussion with external auditors before the audit commences about nature and scope of audit as well as post commences about nature and scope of audit as well as post audit discussion to ascertain any area of concern.audit discussion to ascertain any area of concern.

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Reviewing the company’s financial and risk Reviewing the company’s financial and risk management policies.management policies.

To look into the reasons for substantial defaults in the To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, payment to the depositors, debenture holders, shareholders (in case of non payment of declared shareholders (in case of non payment of declared dividends) and creditors.dividends) and creditors.

Discussion with internal auditors any significant Discussion with internal auditors any significant finding and follow up thereonfinding and follow up thereon

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AUDIT COMMITTEE : MANDATORY REVIEWSAUDIT COMMITTEE : MANDATORY REVIEWS Financial statement / audit report / quarterly / half- Financial statement / audit report / quarterly / half-

yearly financial information.yearly financial information.

Management Discussions and Analysis and results of Management Discussions and Analysis and results of operationoperation

Legal compliance and risk managementLegal compliance and risk management

Observations of statutory / internal auditors.Observations of statutory / internal auditors.

Appointment / Removal of chief internal auditor.Appointment / Removal of chief internal auditor.

Record of significant related party transactionsRecord of significant related party transactions

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POWERS OF AUDIT COMMITTEEPOWERS OF AUDIT COMMITTEE

To investigate any activity within its terms of referenceTo investigate any activity within its terms of reference

To seek information from any employeeTo seek information from any employee

To obtain outside legal or other professional advice.To obtain outside legal or other professional advice.

To secure attendance of outsiders with relevant To secure attendance of outsiders with relevant expertise, if it considers necessary.expertise, if it considers necessary.

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WHISTLE BLOWER POLICYWHISTLE BLOWER POLICY

Company to have an internal policy on access to audit Company to have an internal policy on access to audit committee by employees on unethical and improper committee by employees on unethical and improper practice.practice.

The policy to be communicated to employees and The policy to be communicated to employees and included in the HR manual.included in the HR manual.

Company shall affirm that it has not denied any Company shall affirm that it has not denied any personal access to audit committee and has provided personal access to audit committee and has provided protection to whistle blowers from unfair termination protection to whistle blowers from unfair termination etc.etc.

The affirmation shall from part of the board report on The affirmation shall from part of the board report on corporate governance.corporate governance.

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SUBSIDIARY COMPANIESSUBSIDIARY COMPANIES

One independent director of holding company to be on One independent director of holding company to be on the board of non-listed subsidiary company.the board of non-listed subsidiary company.

Audit committee of the holding company shall review Audit committee of the holding company shall review financial statements / investments of subsidiary financial statements / investments of subsidiary company.company.

Board minutes of subsidiary company shall be placed Board minutes of subsidiary company shall be placed for review by the board of holding company.for review by the board of holding company.

Directors report of the holding company shall confirm Directors report of the holding company shall confirm that the affairs of the subsidiary companies have been that the affairs of the subsidiary companies have been reviewedreviewed

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DISCLOSURES: ACCOUNTING TREATMENTDISCLOSURES: ACCOUNTING TREATMENT

Where in the preparation of financial statements, a treatment different from that prescribed in an Accounting Standard has been followed, the fact shall be disclosed in the financial statements, together with the management’s explanation as to why it believes such alternative treatment is more representative of the true and fair view of the underlying business transaction in the Corporate Governance Report.

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DISCLOSURES:DISCLOSURES:RISK MANAGEMENTRISK MANAGEMENT

The company shall lay down procedures to inform Board members about the risk assessment and minimization procedures.

These procedures shall be periodically reviewed to ensure that executive management controls risk through means of a properly defined framework.

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DISCLOSURES: RELATED PARTY TRANSACTIONSDISCLOSURES: RELATED PARTY TRANSACTIONS

Summary of related party transactions, their Summary of related party transactions, their basis bifurcating transactions in normal course basis bifurcating transactions in normal course of business and individual transactions not in of business and individual transactions not in normal course of business and normal course of business and

Details and management’s justification for any Details and management’s justification for any material transaction not on arms length basismaterial transaction not on arms length basis

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DISCLOSURES: BY MANAGEMENTDISCLOSURES: BY MANAGEMENT

By senior management of all material By senior management of all material financial and commercial transactions, financial and commercial transactions, where they have personal interestwhere they have personal interest

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CERTIFICATION BY CEO/CFO TO THE BOARDCERTIFICATION BY CEO/CFO TO THE BOARD

That they have reviewed the financial statements and That they have reviewed the financial statements and cash Flow statement for the year and:cash Flow statement for the year and:

These do not contain any materially untrue These do not contain any materially untrue statement or omit any material factstatement or omit any material fact

There were no fraudulent, illegal transactions There were no fraudulent, illegal transactions violative of the Company’s Code of Conductviolative of the Company’s Code of Conduct

They accept responsibility for establishing and They accept responsibility for establishing and maintaining internal controls and have maintaining internal controls and have evaluated their effectiveness.evaluated their effectiveness.

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REPORT ON CORPORATE GOVERNANCE TO THE STOCK REPORT ON CORPORATE GOVERNANCE TO THE STOCK EXCHANGESEXCHANGES

A compliance report within 15 days from the close of the quarter in A compliance report within 15 days from the close of the quarter in the revised format.the revised format.

The report contains the entire provisions of the new corporate The report contains the entire provisions of the new corporate governance clause.governance clause.

A separate cell is being set up by the stock exchanges to monitor A separate cell is being set up by the stock exchanges to monitor the compliance of the provisions.the compliance of the provisions.

The company shall obtain a certificate from either the auditors or practicing company secretaries regarding compliance of conditions of corporate governance as stipulated in this clause and annex the certificate with the directors’ report, which is sent annually to all the shareholders of the company.

The same certificate shall also be sent to the Stock Exchanges along with the annual report filed by the company.

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Thank you.Thank you.