Uday Kotak Committee on Corporate Governance- Recommendations (Important)

21-member committee on corporate governance headed by banker Uday has submitted its report to the Securities and Exchange Board of India (SEBI) . Panel was constituted by SEBI in June 2017 and given four months to submit recommendations.

Corporate Governance

Recommendations of Committee

  • Panel has recommended major overhaul of corporate governance norms for listed firms.

Separation of the Roles

  • Roles of chair and managing director at listed firms should be separated and chair should be limited to only non-executive directors.
  • Listed firms with more than 40% public shareholding should have separate roles of chairperson and MD⟋CEO from April 1,2020.
  • After 2020, SEBI may extend requirement to all listed entities from 2022.

Minimum Board Strength

  • Be increased to 6 members with at least one woman as independent director.
  • At least five board meeting for listed firms should be held a year up from current four meetings.
  • Firms board once a year should discuss succession planning and risk management.

Independent Directors

  • At least half of board should be independent directors at listed companies
  • All directors must attend at least half of board meets.
  • Public shareholders nod mandatory for appointing non-executive directors over 75 years of age.

Shareholder Meetings and Cash Flow Statements

  • Top 100 firms by market capitalization should be required to webcast shareholder meeting
  • All listed firms should produce cash flow statement every six months
  • Mandatory to disclose quarterly consolidated earnings by listed firms

Credit Ratings

  • Updated credit ratings for the listed entity must be made available centrally- helping investors and stakeholders.

    Minimum Remuneration

  • Independent directors must get minimum remuneration of ₹ 5 lakh per annum and sitting fee of ₹ 20,000 - 50,000 for each board meet.
  • Mandatory for firms to seek public shareholders approval for providing annual remuneration of executive directors from promoter family for amounts above ₹ 5 crore or 2.5% of firm՚s net profit.
  • If more than one family director condition for approval applies for aggregate annual remuneration exceeding 5% of the net profit.
  • Approval of shareholders required every year in which annual remuneration payable to single non-executive director exceeds 50% of total annual remuneration payable to all non-executive directors.

Risk Management and IT Committee

  • Top-500 listed companies required to have risk management committee of boards for cyber security.
  • Listed entities must constitute an information technology committee to focus on digital and technological aspects.

Examrace Team at Aug 20, 2021