revised cluase 49 - cg

PRESENTATION ON

REVISED CLAUSE 49 OF THE LISTING AGREEMENT

INDIAN OIL CORPORATION LIMITED

of 25

• Amendment to existing Clause 49 made by SEBI and Stock Exchanges.

• Applicable to all Listed Companies.

• To be implemented w.e.f. 1st January 2006.

CORPORATE GOVERNANCE – REVISEDCLAUSE 49

of 25

• Board of Directors• Audit Committee• Subsidiary Companies (Unlisted)• Disclosures • CEO / CFO Certification• Report on Corporate Governance• Compliance

AREAS COVERED

of 25

• Optimum combination of Executive and Non-Executive Directors (NEDs) – Minimum 50% to be Non-Executive.

• 1/2 of the Board to be Independent Directors, in case of Executive Chairman.

• 1/3rd of the Board to be Independent Directors, in case of Non-Executive Chairman.

BOARD OF DIRECTORS - GUIDELINES

of 25

• Independent Director shall mean a Non-Executive Director, who• apart from receiving Directors’

remuneration, does not have material pecuniary relationship or transaction with the Company, its promoters, its senior management or its holding Company, its subsidiaries and associates, which may affect independence of the Director.

• is not related to promoters or Directors or one-level below the Board.

Board of Directors – Guidelines

of 25

• is not an executive of the Company in the immediately preceding three financial years.

• is not a partner or executive of a Audit Firm or Internal Audit Firm or Legal Firm or Consulting Firm during preceding three years.

• is not a material supplier, service provider, customer, lessor or lessee, which may affect the independence of the Director.

• is not a substantial shareholder, i.e., owning two or more percent.


of 25

- Independent Director exhaustively defined in the new clause

- The words “which in the judgement of the Board” have been deleted.

- New parameters introduced to exclude certain category of persons from being Independent Directors.

- Status of Govt. Directors in PSUs (Matter taken up with SEBI and MoF).

- The terms ‘Associate’, ‘Senior Management’, ‘Relative’ introduced and defined.


of 25

• All fees / compensation , if any, paid to NEDs shall be fixed by the Board and shall require previous approval of Shareholders in the General Meeting.

• The maximum time gap between two Board Meetings has been prescribed as three months (presently four months).

• The Board shall periodically review compliance report of all laws applicable to the Company.


of 25

CODE OF CONDUCT :• The Board shall lay down a code of conduct

for all Board Members and Senior Management Personnel, i.e. one level below the Board including all Functional Heads and Core Management team.

• All Directors / Senior Management Personnel shall affirm compliance with the Code.

• The Annual Report shall contain a declaration to this effect signed by CEO.


of 25

A Code for all the Board Members and Senior Management Personnel (SMP) finalised by the Company Secretaries of Energy Sector.

To obtain the approval of the Board for the Code and obtain affirmation from all Directors / SMP regarding compliance .

BOARD OF DIRECTORS

of 25

Minimum three Members. 2/3rd shall be Independent Directors (Previously, majority independent Directors).All Members shall be “financially literate” and at least one Member shall have “accounting or related financial management expertise” (newly introduced and defined).Audit Committee to meet at least four times a year (previously three times) and not more than four months shall lapse between two meetings.

AUDIT COMMITTEE - GUIDELINES

of 25

Powers of the Audit Committee – In addition, the following powers have been included:-

1. Quarterly financial statements to be reviewed before putting up to Board.

2. Review Directors’ Responsibility Statement U/S 217(2AA) of the Companies Act.

3. Review the functioning of whistle blower mechanism, if any.

4. Reviewing, with the Management, performance of Statutory & Internal Auditors, adequacy of internal control systems.


of 25

5. The Audit Committee shall mandatorilyreview the following:• Management Discussion and Analysis of financial

conditions and operational results;• Significant related party transactions;• Letter of Internal Control Weaknesses issued by

Auditors;• Internal Audit Report relating to Internal Control

Weaknesses; and• Appointment, removal and terms of remuneration

of Chief Internal Auditors.


of 25

• At least one Independent Director of the Holding Company shall be a Director on the Board of material non-listed Indian Subsidiary.

• The Audit Committee of Listed Holding Company shall also review the financial statements, particularly the investments of the Unlisted Subsidiary.

• The Minutes of the Board Meeting of Unlisted Subsidiary shall be placed before the Board Meetings of Listed Holding Company.

• All significant transactions and arrangements of Unlisted Subsidiary to be periodically reviewed by the Listed Holding Company.

SUBSIDIARY COMPANIES (UNLISTED)- GUIDELINES

of 25

• A summary statement of transactions with related parties – (a) in the ordinary course of business,(b) not in the normal course of business and (c) not on arms length basis shall be placed before the Audit Committee with Management Justification.

• Any change in the treatment different from that prescribed by Accounting Standard shall be disclosed in the Financial Statements, along with Management’s explanation.

DISCLOSURES - GUIDELINES

of 25

• The Company shall lay down procedures to inform the Board about risk assessment and minimisation procedures, which shall be reviewed periodically.

• In the event of Public Issue, the Company shall disclose to the Audit Committee the uses/application of funds on quarterly basis.

• Further, on an annual basis, the Company shall prepare a statement of funds utilised for purposes other than those mentioned in the prospectus and placed before the Audit Committee.


of 25

REMUNERATION OF DIRECTORS :

• All pecuniary relationships or transactions of the NEDs shall be disclosed in the Annual Report.

• The Company shall publish the criteria of making payment to NEDs in the Annual Report or host it on the website.


of 25

• The Company shall disclose the number of shares held by NEDs in the Annual Report.

• NEDs shall disclose the shareholding prior to appointment. These details shall also be disclosed in the AGM Notice.


of 25

• Senior Management Personnel shall make disclosures to the Board of all material, financial and commercial transactions, where they have personal interest, that may have conflict with the Company’s interest.

• Shareholding of NEDs is required to be disclosed along with the brief resume published in the Annual Report for appointment and re-appointment of Directors.


of 25

• The CEO and CFO shall certify to the Board that :• They have reviewed the financial statement and

cash flow statement and that to the best of their knowledge and belief these statements do not contain any materially untrue statement or omit material fact or contain statements that might be misleading; these statements present a true a fair view of the Company’s affairs and are in compliance with accounting standards, laws and regulations;

• There are no transactions which are fraudulent, illegal or violative of the Company’s Code of Conduct;

CEO/CFO CERTIFICATION - GUIDELINES

of 25

• They accept responsibility for establishing and maintaining internal controls and evaluated their effectiveness and they have disclosed to the Auditors and Audit Committee, deficiencies, if any, and steps taken to rectify the same.

• They have indicated to the Auditors and Audit Committee about significant changes in internal control, accounting policies, fraud, etc.

CEO/CFO CERTIFICATION - GUIDELINES

of 25

• Disclosures of the compliance with mandatory requirements and adoption / non-adoption of non-mandatory requirements shall be incorporated in the Corporate Governance Report.

REPORT ON CORPORATE GOVERNANCE- GUIDELINES

of 25

• To submit a quarterly compliance report to the Stock Exchanges within fifteen days from the close of quarter in the revised format.

• To obtain a certificate either from the Auditors or Practising Company Secretary regarding compliance of conditions of Corporate Governance.

• To send the certificate to the Stock Exchanges, along with the Annual Report.

REPORT ON CORPORATE GOVERNANCE- GUIDELINES

of 25

• Independent Directors tenure may be restricted to 9 years.

• Half yearly financial results may be sent to the shareholders.

• Company may move towards a regime of unqualified financial statements.

• Training for Board members on business model, risk profile and responsibilities.

NON-MANDATORY REQUIREMENTS –New Provisions

of 25

• Peer group comprising of entire Board of Directors may evaluate the performance of NEDs.

• Whistle Blower Policy may be devised. Mechanism may be established for employees to report to the Management on unethical behaviour, fraud, violation of Company’s code etc.

NON-MANDATORY REQUIREMENTS –New Provisions

Thank You

revised cluase 49 - cg

Documents