1

Narrow definition

A set of relationships between the

shareholders, directors and management.

Beneficiary of good governance - The Shareholders

Broad definition

Looking to the implicit and explicit relationships of the

company with employees, creditors, consumers, distributors,
Govt. Authorities and local communities

Beneficiary of good governance - Every Stakeholder

company

and

Structuring of Boards e.g. ratio of Independent Directors and

mandating its responsibilities.

Board procedures and constitution of different committees

like the audit committee, shareholders' grievances committee
etc.

Enhancing shareholder participation and protection of

shareholders' interest through mandatory committees.

Disclosure of financial information and institutionalizing Risk

Management and Internal Control Frameworks - CEO and
CFO made responsible for financials.

Escalating legal compliance responsibilities to Board

An optional whistle blowers policy.

3

Independent Directors

Half of Board with executive Chairman to be independent;

third of board with non executive Chairman to be
independent.
Definition of independent director:
Non Executive
No Material pecuniary relationships or transactions with
company, promoters, directors, senior management,
holding company, subsidiaries or associates

 Not related to promoters, to board members or to persons

holding managerial positions one level below board
Has not been an executive in company in preceding 3 yrs
Has not been a partner or executive in statutory audit firm
or internal audit firm in the past 3 yrs
Has not been a partner or executive in law firm or
consulting firm with material association to company in
past 3 years
Is not a material supplier, service provider, customer,
lessor or lessee of company
Does not hold more than 2% shares in the company
5

Company to constitute an Audit Committee with terms of

reference

At least 3 members- two thirds independent

Chairman to be Independent- must attend every AGM

All members financially literate & at least 1 member to be

expert & CS to be the secretary

May meet with or without executives generally CFO &

CEO are invited

Must meet at least 4 times a year

Quorum = greater of 2 members or 2/3rd and at least 2

independent directors
6

Investigate all matters within the terms of reference

Seek information from any employee

Obtain outside legal/ professional advice

To invite outside experts

Oversee financial reporting process

Recommend to Board hiring and firing of statutory auditors

and confirming their remuneration

To review working of whistle blower mechanisms

Discussing significant findings and follow ups with internal

auditors

Approval of payment to statutory auditors for any other

services rendered

Reviewing with management annual/ quarterly financial

statements before they are vetted by board

Reviewing adequacy of structures, staffing and examining

scope of internal audit department
8

Statement of significant
submitted by management

related

party

Internal audit reports relating to internal control weakness

Review of appointment, removal

remuneration of chief internal auditor

Review of Management Discussion and Analysis (MDA)

Report of financial condition and result of operations

and

transactions

terms

of

At least one independent director on Board of Listed

Company shall be a director on Board of non-Listed
Indian Subsidiary Company
Audit Committee of Listed holding company will
review financial statements of unlisted subsidiary
company
Minutes of Board Meetings of unlisted subsidiary
shall be placed at Board Meeting of listed holding
company

10

If financial statements are prepared in a manner other than

that prescribed in an accounting standard, same has to be
disclosed.

Disclose in Annual Report all pecuniary relationship or

transactions of non-executive directors with company;
criteria for making payments to such directors and number
of shares and convertible instruments held by them.

11

Disclose in Annual Report all elements of remuneration

package of independent directors; service contracts, notice
period, severance fee and stock options details

Senior Management shall make disclosures to Board

relating to all material financial and commercial
transactions, where they have a personal interest that may
have a potential to conflict with interests of Company

On appointment of a new director, provide information to

shareholders
regarding
his
expertise,
his
membership/directorship in other companies and his
shareholding in case he is a non-executive director.

Quarterly results and presentations made by Company to

analysts shall be put on companys website.
12

CEO/ MD

CFO/ Whole Time Finance Director or other Person Heading

the Finance Function

CEO and CFO to certify to the board:

that they have reviewed financial statements and to the best
of their knowledge and belief:
No materially untrue statement/ omission of material
fact/ misleading statement
Statements together present true and fair view of
companys state of affairs and its results of operations
and are in compliance with existing accounting standards
and relevant laws and regulations.
13

 No transactions entered into by company during the year

which are fraudulent, illegal or violative of the
companys code of conduct
Accept responsibility for internal control systems, have
evaluated the effectiveness of the systems.
Significant changes in internal control during the year
Significant changes in accounting policies
Instances of significant fraud of which they have become
aware

14

Separate section in annual report on compliance with

corporate governance

Quarterly compliance report to stock exchange signed by

Compliance Officer or CEO

Company to disclose compliance with non-mandatory

requirements in annual reports

15