Clause 49 sets the standards for companies with respect to – the term “clause 49” refers to clause 49 of the listing agreement between a company and the exchanges on which it is listed (the listing agreement is the same for all Indian exchanges, including NSE and BSE). This clause is a recent addition to the Listing Agreement and was not inserted until 2000 following the recommendations of the Kumarmangalam Birla Committee on Corporate Governance, established in 1999 by the Securities Exchange Board of India (SEBI). For existing listed companies that, in the company`s history, must comply with Term 49 (currently revised) until December 31, 2005, i.e. those with paid equity of 3 Crores or more or net assets of 25 Crores or more. These amendments are a mixture of clarifications and relaxations of corporate governance requirements, in accordance with Article 49 of the listing agreements. The communication between SEBI and large companies highlighted the difficulties that prevailed with regard to the interpretation and recognition of problematic areas under the clause. This is a welcome change, taking into account the practicality of implementing corporate governance rules. These amendments bring section 49 of the listing agreement in line with the Companies Act 2013, but do not fully pave the way for smooth implementation. The alignment of a definition of “related parties” and the raising of the threshold for determining the size of transactions with individuals related to 10% of annual consolidated revenue and the approval of bus and coach authorizations were urgent changes. Companies that are required to meet the requirements of the revised Term 49 submit to the exchanges, within 15 days of the end of each quarter, a quarterly compliance report covered by Item VI (ii) of the revised Term 49. The first report of its kind would be submitted for the quarter ending March 31, 2006 until April 15, 2006. The report is signed either by the Compliance Officer or by the Company`s Chief Executive Officer. Corporate governance practices in India have changed several times.
Following the chronology of events related to Article 49 of the Corporate Governance List Agreement, SEBI established a committee at the end of 2002 to assess the relevance of current corporate governance practices and proposed improvements. Based on the committee`s recommendations, SEBI adopted an amended clause 49 (the “revised clause 49”), which came into force on January 1, 2006. Article 49 of the SEBI Corporate Governance Guidelines in the amended version of October 10, 2004 significantly changed the definition of independent directors, strengthened the competence of audit committees, improved the quality of financial information, including transactions with related parties, and the returns on public/rights/preference issues that require boards of directors to adopt a formal code of conduct, require ceo/CFO validation of accounts, and improve shareholder advertising.