Clause 49

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AN OVERVIEW OF THE NEW CLAUSE 49 OF THE LISTING AGREEMENT
AN OVERVIEW OF THE NEW CLAUSE 49 OF THE LISTING AGREEMENT
Securities and Exchange Board of India (“SEBI”) has overhauled the existing Clause 49 of the Listing Agreement and replaced it with a revised Clause 49 (the “New Clause” or the “Clause”)[2]. The New Clause, which will be effective from 1 October 2014, serves the following objectives: align the provisions of Listing Agreement with the provisions of the newly enacted Companies Act, 2013 and also provide additional requirements to strengthen the corporate governance framework for listed companies in India. Most of the requirements under the New Clause are in line with the changes brought about in corporate governance by the Companies Act 2013. However, certain requirement under the New Clause goes a step further and imposes more stringent requirements of corporate governance to listed companies.
The New Clause is based on the principle of ensuring equitable treatment to all shareholders and recognising the rights of all stakeholders in the company. The New Clause is attempting to achieve this object by setting up an effective corporate governance frame work within the company and providing for timely and accurate disclosures.
The key aspects of the New Clause are discussed below:
Independent Directors
The New Clause confers greater power and responsibility on the independent directors to on matters relating to corporate governance. The Clause incorporates methods to ensure professional, independent and transparent approach for selection and appointment of independent directors. The Clause retains the requirement of having at least one third of directors as independent directors if the chairman of the board of directors is a non-executive director. If the company does not have a regular non-executive Chairman, at least half of the board of directors…...

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