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11 Nifty-50 companies deviate from Sebi rules

Of the 26 deviations, stock exchanges took penal action against five companies for six lapses.

, ET Bureau|
Jul 15, 2019, 11.15 AM IST
(This story originally appeared in on Jul 15, 2019)
MUMBAI: A total of 26 deviations were committed by close to a fourth of the Nifty-50 companies, 11 to be exact, for the year 2018-19, according to the first ‘secretarial compliance report’ that captures adherence to Sebi regulations, which kicked in this year.

Following recommendations from the Uday Kotak-led committee on corporate governance, Sebi has mandated that all listed companies disclose their ‘secretarial compliance status’, intended to ensure efficient board functioning and an in-depth check specific to the regulator’s norms.

The 11 companies are SBI, Larsen & Toubro, IndianOil, NTPC, IndusInd Bank, Power Grid, GAIL, Adani Ports, Bharat Petroleum, Eicher Motors and ONGC, according to CimplyFive, a tech solution provider for compliance standards, which analysed information filed by Nifty-50 companies with the stock exchanges.

Inadequate representation of independent directors on the board tops the list with six companies, closely followed by five companies that did not conduct an evaluation for their independent directors — both being areas of concern, according to industry experts.

Of the six companies that reported non-compliance with board composition, penal action is reported only in the case of four — IndianOil, NTPC, Power Grid and Adani Ports. A penalty of nearly Rs 19 lakh was imposed on Adani Ports. In the other two companies — Bharat Petroleum and SBI — penal action is either not taken or, if taken, not reported to exchanges.

Further, for the five companies that had not undertaken evaluation of independent directors, no penal action is reported by auditors. In all these companies, penal action is either not taken or, if taken, not been reported, the analysis said.

A questionnaire emailed to Sebi went unanswered till the time of going to press.

Of the 26 deviations, stock exchanges took penal action against five companies for six lapses. The Companies Act, 2013 requires every listed company to have a minimum onethird of their total number of directors as independent and at least one woman director on their board.

Sai Venkateshwaran, partner and head (CFO advisory) at KPMG India, said, “Independent directors have a very significant role to play in ensuring good corporate governance. Similarly, board evaluation is an important step. Therefore, not having the requisite number of independent directors or board evaluation not being done periodically should be areas of concern.”

Shankar Jaganathan, founder and CEO of CimplyFive, said, “Our analysis of the applicable LODR regulations indicates that there are over 150 compliances that an equity listed company needs to undertake every year. Even among the cream of the corporate sector, 26 deviations are reported by 22 per cent of the population. We believe annual secretarial compliance report does not pass the test of cost-benefit analysis. Further, by adding a superfluous reporting requirement, it also could be a deterrent to ease of doing business in India.”

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