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    Presented By: Seema Sharma Prashant Tomar Pankaj Kumar: Corporate Governance: Narayan Murthy Committee

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    ramakantasahoo86
    The document discusses the Narayan Murthy Committee on corporate governance in India and key provisions of Clause 49 of the Listing Agreement. The committee was set up in 2002 to review existing corporate governance codes following the establishment of the Kumar Mangalam Birla Committee in 1999 and the passing of the Sarbanes-Oxley Act in the US. Key provisions established by Clause 49 include requirements for board composition and meetings, the role and composition of the audit committee, disclosure requirements for subsidiaries and by CEOs/CFOs, and the need for an annual corporate governance compliance report.

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    Presented By: Seema Sharma Prashant Tomar Pankaj Kumar: Corporate Governance: Narayan Murthy Committee

    Uploaded by

    ramakantasahoo86
    519 views20 pages
    The document discusses the Narayan Murthy Committee on corporate governance in India and key provisions of Clause 49 of the Listing Agreement. The committee was set up in 2002 to review existing corporate governance codes following the establishment of the Kumar Mangalam Birla Committee in 1999 and the passing of the Sarbanes-Oxley Act in the US. Key provisions established by Clause 49 include requirements for board composition and meetings, the role and composition of the audit committee, disclosure requirements for subsidiaries and by CEOs/CFOs, and the need for an annual corporate governance compliance report.

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    Narayan Murthi Committee

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    The document discusses the Narayan Murthy Committee on corporate governance in India and key provisions of Clause 49 of the Listing Agreement. The committee was set up in 2002 to review existing corporate governance codes following the establishment of the Kumar Mangalam Birla Committee in 1999 and the passing of the Sarbanes-Oxley Act in the US. Key provisions established by Clause 49 include requirements for board composition and meetings, the role and composition of the audit committee, disclosure requirements for subsidiaries and by CEOs/CFOs, and the need for an annual corporate governance compliance report.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    519 views20 pages

    Presented By: Seema Sharma Prashant Tomar Pankaj Kumar: Corporate Governance: Narayan Murthy Committee

    Uploaded by

    ramakantasahoo86
    The document discusses the Narayan Murthy Committee on corporate governance in India and key provisions of Clause 49 of the Listing Agreement. The committee was set up in 2002 to review existing corporate governance codes following the establishment of the Kumar Mangalam Birla Committee in 1999 and the passing of the Sarbanes-Oxley Act in the US. Key provisions established by Clause 49 include requirements for board composition and meetings, the role and composition of the audit committee, disclosure requirements for subsidiaries and by CEOs/CFOs, and the need for an annual corporate governance compliance report.

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    CORPORATE GOVERNANCE:

    Narayan Murthy Committee

    Presented By:
    Seema Sharma
    Prashant Tomar
    Pankaj Kumar
    GENESIS of Clause 49 of
    the Listing Agreement

    • Prevent financial crisis in emerging markets.

    • Prevent financial reporting failures.

    • Control business failures.


    BACKGROUND

    • Setting up of the Kumar Mangalam Birla


    Committee by SEBI in May 1999.

    • Narayana Murthy Committee set up in 2002 to


    review existing code on Corporate
    Governance.

    • Passing of the SOX ( Sarbanes Oxley Act) in


    July 2002 by US.
    CORPORATE GOVERNANCE: MISSION

    • Align Corporate interests with Society.


    • Management to act as trustees of Business.
    • Protect interests of investors through good
    governance practices and disclosures.
    MAIN PROVISIONS OF CLAUSE 49  

    1. Board of Directors
    2. Audit Committee
    3. Subsidiary Companies
    4. Role of CEO/ CFO
    5. Disclosure
    6. Corporate Governance/ Compliance Report
    1. BOARD OF DIRECTORS

    a) Composition
    • Optimum combination with not less than 50% independent
    Directors.
    • If Board headed by non-executive Chairman, at least 1/3rd of Board
    should be independent Directors.

    b) Non-Executive Directors Compensation and Disclosures


    • Non-executive Directors (including Independent Directors)
    compensation to be fixed by Board and approved by shareholders.
    • If Sitting fee within limits of the Companies Act, then shareholders
    approval not required.
    • Shareholding disclosure to be made in Annual Report.
    1. BOARD OF DIRECTORS

    c) Board Meetings / Membership in Committees


    • At least four meetings in a year.
    • Maximum gap between two meetings not over four months.
    • Across all Companies, Directors shall not be member of :
    – more than 10 Committees or
    – act as Chairman of more than 5 Committees

    d) Code of Conduct
    • To be laid down by the Board : -
    • For Board members & Senior Management. Annual Compliance to
    be affirmed.
    • CEO to sign compliance to Code by all in Annual Report.
    2 a) AUDIT COMMITTEE - Composition / Meetings
    • Minimum three financially literate members.
    • 2/3rd to be independent Directors.
    • Chairman shall be independent Director & be present in the
    AGM.
    • Atleast one member to have knowledge of accounting /
    financial management expertise.
    • To meet atleast four times a year with a maximum gap of 4
    months between two meetings.
    • Quorum
    – Greater of 2 members or 1/3rd Members.
    – Minimum 2 independent Directors .
    2 b) AUDIT COMMITTEE - Powers

    • Investigate any activity within its terms of reference.


    • Seek information from any employee.
    • Obtain outside legal / professional advice.
    2 c) AUDIT COMMITTEE- Role includes review of :

    i. Accounting policies, Quarterly & Annual accounts before submission to Board.


    ii. Adequacy of Internal Control Systems.
    iii. Recommendation on appointment/ removal/ fixation of audit fee and fee for
    other services rendered by Statutory auditors.
    iv. Performance of Internal and Statutory Auditors & treatment of their findings /
    recommendations.
    v. Quality & adequacy of Internal audit Personnel.
    vi. Whistle Blower Policy, if in existence.
    vii. Oversee correct financial reporting.
    viii.Substantial defaults in payments to Depositors/ debenture holders/
    shareholders / creditors.
    3. SUBSIDIARY COMPANIES

    a) At least one independent Director of Holding Company to be


    on the Board of material non-listed Subsidiary Company.

    b) Audit Committee to review financial investments and


    statements of unlisted companies.

    c) Board Minutes & significant transactions of unlisted company


    to be placed in the Board meeting of the listed Holding
    company.
    4. ROLE OF CEO/CFO:

    (i) CEO/CFO CERTIFICATION TO BOARD

    a) No material untrue fact in the financial statements.


    b) No transaction which violates Company’s Code of Conduct.
    c) Accept responsibility for establishing and maintaining internal
    controls for financial reporting.
    (ii) DISCLOSURE BY CEO / CFO

    a) To Audit Committee:

    • all significant changes in internal control


    • All cases of fraud that they are aware of
    • Significant changes in accounting policies
    during the year.
    b) In Financial Statements:

    • Deviations from prescribed Accounting Standards.


    • Comprehensive Management discussion & analysis on:
    - Industry development;
    - Opportunity & threats;
    - Business Outlook;
    - Risks & Concerns;
    - Adequacy of Internal Control system;
    - Developments in Industrial relations / Human
    resources.
    c) To Board :
    • Risk assessment & minimization procedures.

    d) For Shareholders:
    • Grievance Committee under chairmanship of a non-
    executive Director to be formed for redressal of
    complaints.
    6. CORPORATE GOVERNANCE / COMPLIANCE REPORT

    Annual Report to contain:


    a) A separate Corporate Governance Report.

    b) Details of non-compliance of mandatory requirements as


    well as compliance of non-mandatory requirements.

    c) Sign off certificate from the CEO/ Practicing Company


    Secretary or Statutory auditors.
    Comparison between Sarbanes-Oxley Act
    and CG in India

    Sarbanes-Oxley Indian situation

    Certification of annual accounts by At least two directors must sign, of whom one
    CEO, CFO must be the Managing Director

    Fully independent audit committees Fully non-executive, majority independent


    audit committees

    Prohibition of insider trading Prohibits insider trading

    Prohibition of insider loans to directors Strict cap on insider loans to directors;


    requires prior government approval

    17
    Sarbanes-Oxley Act and CG Status in India

    Sarbanes-Oxley Indian situation

    Mandatory periodic review of company’s No such provision


    filings once every three years

    Auditors to report to Audit Committee on Mandated by the listing


    critical accounting policies agreement and the Companies
    Act amendments

    Rotation of audit partners every five No such provision exists


    years

    Up to 20 years in prison for fraud and No such provision


    destruction of records

    18
    Conclusion
    “Government or SEBI can at the most
    ensure that formalities of Corporate
    Governance are complied with.
    Corporate Governance has to come
    through conviction and self-discipline of
    top management. Otherwise, it remains
    an empty promise.”
    THANK YOU

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