SEBI's recent announcement of amendment to clause 49 of the Listing Agreement is an attempt to balance the practical realities of implementation with the need for better governance practices in corporate India, according to Institutional Investor Advisory Services (IIAS).
The amendment to clause 49 of the listing agreement is a mixed bag of relaxations and clarifications to the new requirements that were to become effective from October 1.
Welcoming the move today, the IIAS said that SEBI has listened to what the companies are saying. "It (Sebi) has amended clause 49 by clarifying some requirements, diluting others, and, in some cases, postponing implementation. Corporate India now needs to reciprocate SEBI's trust," it said.
KPMG in India Partner and Head, Accounting Advisory Services Sai Venkateshwaran said, "It is encouraging to note that SEBI, through its outreach to large corporates had gauged their readiness and identified the areas with implementation challenges, which led to these amendments, which take into account practicality of implementation as well.
"These changes to some extent align the requirements of Clause 49 with those in the Companies Act but in many other areas, still retain the more stringent requirements, although they have provided some clarifications," Venkateshwaran said in a statement here.
Venkateshwaran said that alignment of the definition of related parties and the extension of timeline for appointment of woman director are changes that corporates were looking forward to.
"The increase in threshold for determining materiality of related party transactions to 10 per cent of annual consolidated turnover and permitting omnibus approvals are also welcome changes.
"On the other hand, the restriction on all related parties voting on any related party transaction, whether they are a party or not, is an area where SEBI hasn't provided relaxations like the MCA has done under the Companies Act 2013," Venkateshwaran said.
