itc analysis

8/2/2019 ITC Analysis

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Certificate of compliance from auditors as stipulated under clause

49 of the listing agreement with the stock exchanges in india.

The auditors have examined the compliance of conditions of corporate governance by

ITC Ltd for the year ended on 31st

march 2011, as stipulated in clause 49 of the

listing agreement of the said company with stock exchanges in india.

The compliance of conditions of corporate governance is the responsibility of the

management. There examination was limited to procedures and implementation

thereof, adopted by the company for the ensuring compliance of the conditions of

corporate governance. It is neither an audit nor an expression of opinion on the

financial statements of the company.

In there opinion and to the best of there information and according to the explanations

given to them, They certify that the company has complied with the conditions of

corporate governance as stipulated in the above mentioned listing agreement.

They further state that such compliance is neither as assurance as to the future

viability of the company nor the efficiency or effectiveness with which the

management has conducted the affairs of the company.



Chief Executive Officer(CEO) & Chief Financial Officer (CFO)

Certication

1. They have reviewed the financial statements and cash flow statement for the

years ended 31st

march 2011, and to the best of there knowledge and belief:

These statements do not contain any materially untrue statement or omit any

material fact or contain statements that might be misleading.

These statements together present a true and fair view of the company‟s affairs

and are in compliance with existing accounting standards, applicable law and

regulations.

2. To the best of there knowledge and belief, no transaction entered into by thecompany during the year ended 31

stmarch 2011 are fraudulent, illegal or

violative of the company‟s code of conduct.

3. They accept responsibility for establishing and maintaining internal controls for

financial reporting and we have evaluated the effectiveness of internal control

systems of the company pertaining to financial reporting. Deficiencies in the

design or operations of such internal controls, if any, of which they are aware

have been disclosed to the auditors and the audit committee and steps have been

taken to rectify these deficiencies.

4. There has not been any significant change in internal control over financial

reporting during the year under reference.

5. There has not been any significant change in accounting policies during the

year requiring disclosure in the notes to the financial statements and;

6. They are not aware of any instance during the year of significant fraud with

involvement therein of the management or any employee having a significant

role in the company‟s internal control system over financial reporting.



Auditors Certificate Regarding Compliance of Condition of

Corporate Governance hul

They have examined the compliance of the conditions of Corporate Governance

by Hindustan Unilever Limited for the year ended March 31,2011, as stipulated in

clause 49 of the Listing Agreement of the said Company with the stock exchanges

in India.The compliance of the conditions of Corporate Governance is the

responsibility of the Company‟s management. Their examination was carried out

in accordance with the Guidance Note on Certification of Corporate Governance

(as stipulated in Clause 49 of the Listing Agreement),issued by the Institute of

Chartered Accountants of India and was limited to the procedures and

implementation thereof, adopted by the Company for ensuring the compliance of

the conditions of Corporate Governance. It is neither an audit nor an expression of

an opinion on the financial statements of the Company.In their opinion and to the

best of thier information and according to the explanations given to us, they certify

that the Company has complied with the conditions of Corporate Governance as

stipulated in the above-mentioned Listing Agreement.We state that such

compliance is neither an assurance as to the future viability of the Company nor

the efficiency or effectiveness with which the management has conducted the

affairs of the Company.



Chief Executive Officer(CEO) & Chief Financial Officer (CFO)

Certication hul

They, the undersigned, in their respective capacities as Chief Executive Officer and

Chief Financial Officer of Hindustan Unilever Limited (“the Company”), to the

best of our knowledge and belief certify that:

(a) They have reviewed the financial statements and the cash flow statement for the

financial year ended 31st March, 2011 and based on our knowledge and belief,

They state that :

(i) These statements do not contain any materially untrue statement or omit any

material fact or contain any statements that might be misleading.

(ii) These statements together present a true and fair view of the Company‟s affairs

and are in compliance with the existing accounting standards, applicable laws and

regulations.

(b) They further state that to the best of their knowledge and belief, there are no

transactions entered into by the Company during the year, which are fraudulent,

illegal or violative of the Company‟s code of conduct.

(c) They hereby declare that all the members of the Board of Directors and

Management Committee have confirmed compliance with the Code of Conduct as

adopted by the Company.

(d) They are responsible for establishing and maintaining internal controls and for

evaluating the effectiveness of the same over the financial reporting of the

Company and have disclosed to the Auditors and the Audit Committee,

deficiencies in the design or operation of internal controls, if any, of which we are

aware and the steps we have taken or propose to take to rectify these deficiencies.



(e) They have indicated, based on our most recent evaluation, wherever applicable,

to the Auditors and Audit Committee :

(i) significant changes, if any, in the internal control over financial reporting during

the year;

(ii) significant changes, if any, in the accounting policies made during the year and

that the same has been disclosed in the notes to the financial statements; and

(iii) instances of significant fraud of which we have become aware and the

involvement therein, if any, of the management or an employee having significant

role in the Company‟s internal control system over financial reporting.



Confederation of Indian Industry (CII)

CII drafted some codes of Corporate Governance. CII was set up in mid 1996

under the leadership of Mr. Rahul Bajaj.

Objectives:

1. To develop the Indian industry and help in its growth.

2. To indentify and strengthen industry‟s role in economic development of the

country.

3. To provide updated information and required data to the industry and the

government.

4. To indentify and address the special needs of small sector to make it more

competitive.

5. To create awareness and support industry‟s effort on quality, environment

and consumer protection.

6. To work towards globalization of the Indian industry.

Recommendations:1. The full board should meet a minimum of 6 times a year preferably at an

interval of 2 months and each meeting should have an agenda item that

require at least half a day‟s discussion.

2. Any listed company with a turnover of Rs. 100 crores and above, should

have professionally competent, independent and non executive directors who

should constitute:

30% of the board if the chairman is non executive

At least 50% of the board if the chairman and the managing director isthe same person.

3. No single person should hold directorship in more than 10 listed companies.

4. For non executive directors to play a material role in corporate decision

making and maximizing long term shareholders value they need to:

Become active participants in the board and not passive advisors.



Have clearly defined responsibilities within the board such as the

audit committee, and

Know how to read the balance sheet, P&L A/C, cash flow statement,

financial ratios and have some knowledge of various company laws.

This excludes those who are invited to join the board as experts in

other fields such as science and technology.

5. To secure better efforts from the non executive directors of the company

should:

Pay a commission over and above the sitting fees for the use of

professional inputs.

Consider offering stock option so as to relate rewards to performance.

6. While reappointing members of the board, companies should give the

attendance record of the concerned directors. If a director has not beenpresent for 50% or more meetings then it should be stated in the resolution

that is put to vote. As a general practice one should not re-appoint any

director who has not had the time to attend 50% 0f the meetings.

7. Key information that must be reported and placed before the board should

contain:

Annual operating plans and budgets together with updated long term

plans.

Capital budget, manpower and overhead budgets. Quarterly results for the company as a whole and its operating

divisions or company segments.

Internal audit reports including cases of theft and dishonesty of

material nature.

Show causes, demand and prosecution notices received from revenue

authorities that are considered to be materially important.

Fatal or serious accidents, dangerous occurrences and any pollution

problems. Default in payment of interest or non payment of principle on any

public deposits, creditor or financial institutions.

Defaults such as non payments of inter corporate deposits.

Details of joint ventures or collaboration agreements.



Transactions that involve substantial payments towards good will,

brands etcetera.

Recruitment and remuneration of senior officers just below boards.

Labour problem and their and possible solutions.

Quarterly details of foreign exchange exposure and steps taken by

the management to limit the risk.

Any issue which involves possible public or product liability.

8. Listed company with a turnover of over 100 crores or a paid up capital of 20

crores should set up an audit committee within two years.

Audit committee should consist of 3 non executive directors, who

have adequate knowledge of finance accounts and basic company

law.

Audit committee shall assist the board for accounting and reporting

and provide effective supervision.

They will spend considerable time in company‟s work.

They will periodically interact with the auditors and fulfil their

responsibilities honestly.

9. Listed company should give data on:

High and low monthly averages of share prices in major stock

exchanges where the company is listed.

Details giving shares in sales, revenue analysis of markets and review

of operations and future prospectus.

10. Consolidation of group accounts should be optional and if a company

chooses to voluntarily consolidate it should not be necessary to annex the

accounts of its subsidiary companies. If the company consolidates, then it

should include the parent company and its subsidiaries where the reporting

company owns 50% of voting rights.

11. Major Indian stock exchanges should insist upon a compliance certificate

signed by the CEO and CFO which should clearly state that: The management is responsible for the preparation of the financial

statements.

The accounting policies and principles are followed and if not it

should be disclosed.



The board has overseen the company‟s internal controls either through

director or through its audit committee.

12. For all the companies with paid up capital of 20 crores or more the quality

and quantity of disclosure done in GDR issue should be the norm of any

domestic issue.13. Government must allow greater funding to the corporate sector against the

security of shares and other papers.

14. FIs can eliminate having nominee directors except where there is a serious

default and company is not providing 6 monthly or quarterly data.

15. If any company goes to more than 1 credit rating agency then it should be

mentioned in the prospectus. The rating should be shown in the tabular form

giving the details of the company‟s rating along with all other rating.

Companies which are making foreign debt issue should have the samedisclosure norms for foreign and Indian investors.

16. Companies that defaulted on fixed deposits should not be allowed to accept

further deposits and make inter corporate loans and declare dividends.

17. Reduction in the number of companies where there are nominee directors.

FIs are on the board in a number of companies. FIs should take policy

decision to withdraw from the company‟s where there individual

shareholdings is 5% or less or the total holdings of the FIs is under10%.



Cadbury Committee Report

A committee was set up under the chairmanship of Adrian Cadbury in May 1991

by the financial reporting council, the London Stock Exchange and the

accountancy professional to look into the financial aspects of corporategovernance. The committee first submitted its report on 27

thMay 1992.

The recommendations made by the Cadbury committee are as follows:

1. Decision making power should not be vested in a single person. The roles of

chairman and chief executive officer should be separate.

2. Non-executive directors should act independently while giving their

judgement on performance, strategy, allocation of resources and designing

codes of conduct.3. A majority of directors should be independent/non-executive directors i.e.

they should not have any financial interest in the company.

4. The term of director should not exceed 3 years. This can be extended only

with the prior approval of the shareholders.

5. There should be full transparency in matters relating director‟s emoluments.

6. A remuneration committee should largely consist of non-executive directors.

They should decide the pay of executive directors.

7. The interim company report should give the balance sheet information and

should be reviewed by the auditor.

8. The pension funds should be separately managed.

9. There should be a profession and objective relationship between the board

and the executives.

10. Information regarding the audit fees should be made public and there should

be regular rotation of auditors.

The recommendations made by the Cadbury committee were widely accepted by

corporate in UK and they became a reference point for many other committees,which were set up by various governments all over the world.



Clause 49

Clause 49 of the listing agreement requires a listed enterprise to comply with

certain conditions of corporate governance and to obtain a certificate from

its statutory auditors regarding such compliance.

This certificate is required to be annexed to the director‟s report and is to be

sent to the stock exchange along with the annual return.

The requirements of the clause and the recommendations of the ICAIs

guidance note on certificate on corporate governance are discussed below:

1. BOD composition:

BOD shall consist of executive and non-executive directors and not less than

50% of BOD should be non-executive director.

Non-executive directors are directors who are not involved in day-to-day

management of the company.

A non-executive director may or may not be independent.

The number of independent directors would depend on whether the

chairman is executive or non-executive.

In case of a non-executive chairman at least 1/3rd

of the board should

comprise of independent directors and in case of an executive chairman, at

least ½ of the board should consist of independent directors.

2. Pecuniary relationship:

The company agrees that all pecuniary relationship or transaction of the non-

executive directors with regard to the company should be disclosed in the

annual report.

3. Remuneration of the Directors:

a. The company agrees that the remuneration of the non-executive directors

shall be decided by the BODs.

b. The company further agrees that the following disclosures on the

remuneration of the directors shall be made in the section on the corporate of

the annual report.



i. All the elements of remunerations including salary, bonus, pensions.

ii. Details of performance linked incentive along with the performance

criteria.

iii. Service control notice period.

iv. Stock option details if any.

4. Board procedures:

a. Company agrees that the board meeting shall be held at least 4 times a year

with a minimum gap of 4 months between any 2 meetings.

b. The company agrees that a director shall not be a member in more than 10

committees or act as chairman of more than 5 committees across all

companies in which he is a director.

Furthermore it should be a mandatory annual requirement for every directorto inform the company about the committee positions he occupies in other

companies and notify the changes as and when they place.

All public company whether listed or not shall be included and private

company, foreign company and company of sec 25 of Companies Act shall

be excluded.

The auditor should examine the minute books of BODs. He should examine

the mandatory annual intimation field by each director about the committee

position he occupies in other company and the changes notified by everydirector.

5. Management:

a. Management discussion analysis report:

The company agrees that as part of the director‟s report or as an addition

thereto, a management discussion and analysis report should form part of the

annual report to the shareholders.

It includes:

i. Industry structure and development.

ii. Opportunities and threat.

iii. Segment wise/position wise performance.

iv. Outlook

v. Risks and concerns.



vi. Internal control system and their adequacy.

vii. Discussions on financial performance.

viii. Material development in Human Resource.

b. Disclosures:

Disclosures must be made by the management to the board relating to all

material financial and commercial transactions where they have personal

interest eg. Dealing in company shares, commercial dealings with bodies

which have shareholding of management and their relatives etc.

6. Shareholders:

A. Appointment and reappointment of directors: The company agrees that in case of the appointment of the new director and

reappointment of the director the shareholders must be provided with the

following information:

i. A brief resume of the director.

ii. Nature of his expertise in specific functional areas.

iii. Names of company in which the person also hold the directorship and

the membership of committee of the board.

B. Website:

The company further agrees that the information likely quarterly results,

presentations made by company to analysts shall be put on company‟s

website or shall be sent in such a form so as to enable the Security Exchange

on which the company is listed to put it on its own website.

C. Investors grievances:

The company further agrees that a board committee under the chairmanship

of a non-executive director shall be formed to specifically look into the

redressing of shareholders, non receipt of balance sheet, non receipt of

declared dividends etc.



D. Share transfer:

The company further agrees that to expedite the process of share transfer the

board of the company shall delegate the power of share transfer to an officer

or a committee or to the registrar and the share transfer agents. The

delegated authority shall attend to share transfer formalities at least once in afortnight.

7. Report on corporate governance:

The company agrees that there shall be a separate section on corporate

governance in the annual report of the company with a detailed compliance

report on corporate governance. Non compliance of any mandatory requirement i.e. which is part of the

listing agreement with reasons thereof and the extent to which the non

mandatory requirements have been adopted should be specifically

highlighted.



Kumar Mangalam Birla Committee Report

Kumar Mangalam Birla headed the committee appointed by the SEBI on 7th

May

1999. The committee was formed to promote and raise the standard of corporate

governance.

Recommendations of Birla Committee report are as follows:

Composition of Board of Directors:

The board should consist of executive as well as non executive

directors. At least 50% of the board should consist of non executive

directors.

At least 50% of the executive chairman should be an independent

director and 1/3rd

of the non executive chairman should be an

independent director.

Audit committee:

A qualified and an independent „audit committee‟ should be set up by

the board of the company. This will help in increasing the importance

of the financial disclosures of a company and promote transparency.

Remuneration committee:

The board should set up a „remuneration committee‟ to determine on

their behalf and on behalf of the shareholders, the company‟s policy

on remuneration packages of executive director.

Shareholder issues:

The board should set up a committee under the chairmanship of non

executive/independent director to specifically look into shareholdersissues including share transfer and redressing shareholders

complaints.



Share transfer:

To expedite the process of share transfer, the board should delegate

the power of share transfer to an officer or a committee or the registrarand share transfer agents.

The delegated authority should attend the share transfer formalities at

least once in fortnight.

Annual report:

The corporate governance section of annual report should make

disclosures on remunerations paid to director in all form including

salary, bonuses, benefits, stock options, pensions etc.

Board meetings:

The board meeting should be held at least 4 times in a year with a

maximum of time gap of 4 months between any 2 meetings and all

information recommended by the SEBI committee should be placed

before the board.

Management discussion analysis report:

As a part of the disclosure related to management in additions to the

director‟s report, management discussion and analysis report should

form part of the annual report to the shareholders.

Website:

All company related information like quarterly results, presentations

made by company to analysts may be put on company‟s website or

may be sent in such a form so as to enable the stock exchange on

which the company is listed to put it on its own website.

Compliance:

There should a separate section on corporate governance in the annual

report with the details on the level of compliance by the company.



If nay mandatory recommendations are not complied with, then

reason should be specified.

Committees position:

No director should be a member in more than 10 committees or act as

a chairman in more than 5 committees across all the companies in

which he is a director.

Every director should inform the company about the committee‟s

position he occupies.

Brief resume:

The company should provide a brief resume, the expertise in

functional areas, names of companies in which they are the directorsand members of the committee.

Disclosures:

Disclosures should be made to the board by the management

regarding all material, financial and commercial transactions where

they have personal interest.

Declarations: The half yearly declarations of financial performance including

summary of the significant events in last 6 months should be sent to

each shareholder.

Financial Institutions:

The financial institutions should have no direct role in the decision

making of the board of the company.

Recommendations:

A separate section on compliance with the mandatory

recommendations of clause 49 should form part of the report and

details of non compliance should be highlighted.



Certificate from auditors:

A certificate from the auditors on compliance should form part of the

annual report; an annual report and annual return copy has to be sent

to the stock exchange.



Project on Corporate Governance of ITC & HUL

Submitted To : Prof Mrs.Shantilaxmi

Made By :

Roll No Student Name

13225 Neelam Khilani

13226 Hitesh Kothari

13227 Ranjit Kurup

13228 Hitesh Kinelekar

13229 Ashish Lakhwani

13230 Nikita Lapasiya

13231 Akshata Mandale

13232 Urmi Maru

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