26. September 2021
Legislative Framework On Listing Agreement
2.1 Composition of the Board of Directors and its Committees: For example, according to companies Act, at least 1/3 of the board of directors of a listed company must be composed of independent directors. However, Regulation 17 maintains the previous threshold, according to which 50% of the board of directors must be independent if the chairman is not a non-executive director. Although the Companies Act requires that the members of the audit committee be financially constituted (i.e. they be able to read and understand the financial statements), Regulation 18 (1) (c) maintains the mandate to have at least 1 member with „accounting or financial expertise“6. Audit Committee meeting. It is therefore indirectly mandatory for all listed companies to appoint at least two independent directors. The 2015 regulation also provides for the creation of a „risk management committee“ for the top 100 companies listed on the basis of market capitalization at the end of the previous year. Previously, the listing agreement had simply instructed the board of directors to inform shareholders of the risk assessment and minimisation procedures that were taken for them without the request of a specific committee as such. In addition, the establishment of the remuneration committee and the definition of the whistleblower policy are now made mandatory, contrary to the voluntary practice under the listing agreement. In addition, Regulation 46 requires the publication of the composition of different board committees on the company`s website. 1. The requirement to comply with a listing agreement with the Stock Exchange is defined by different rules relating to the first issue of capital, the details of which are specified as follows: the new clause obliges companies to set up a Vigil mechanism allowing directors and employees to report unethical behaviour and fraud.
The mechanism should also provide appropriate safeguards to avoid victimisation of the reporting person. In the face of growing corporate fraud and scandals, the development of a legal framework for an appropriate whistleblowing mechanism is a step in the right direction. The report of the Kumar Mangalam Birla Committee contained a mandatory segment of the discussion on the management and analysis of the annual report, which contains a debate on the structure and development of the sector, opportunities, threats, prospects, risks, etc. .