Tag: Financial Statements

Some evidence demonstrates that governance codes can be viewed as mechanisms facilitating governance convergence across countries. Such convergence is the result of several external forces among which the most powerful are globalization, market liberalization and influential foreign investors. Namely, globalization, the internalization of markets and deregulation has led to rapid changes in traditionally grounded models of corporate governance. These external forces ‘lead to pressure on national governments, institutions and companies, to conform to internationally accepted best practices of corporate governance at the international level’, thereby influencing the attractiveness of countries and companies for foreign investors. Countries that are more exposed to other national economic systems experience greater pressure to change governance practice not only to improve efficiency of domestic companies but also ‘to harmonize the national corporate governance system with international best practices’.

Transparency

A principle of good governance is that stakeholders should be informed about the company’s activities regarding its plans in the future and any risks involved in its business strategies.

Transparency means openness by the company willing to provide clear information to shareholders and other stakeholders. For example, it refers to the openness to disclose financial performance figures which are truthful and accurate.

Disclosing materials concerning the organization’s performances and activities should be will timed and accurate to ensure that all investors have access to clear, factual information which reflects the financial, social and environmental position of the organization. A company should clarify the roles and responsibilities of the board and management to provide a level of accountability.

Transparency ensures that stakeholders can have confidence in the decision-making and management processes of a company.

Accountability

Corporate accountability refers to the obligation and responsibility to provide an explanation or reason for the company’s actions and conduct such as:

• The board should present a balanced and understandable assessment of the company’s position and prospects.
• The board is responsible for determining the nature and extent of the significant risks the company is willing to take.
• The board should maintain sound risk management and internal control systems.
• The board should establish formal and transparent arrangements for corporate reporting and risk management and for maintaining an appropriate relationship with the company’s auditors.

The board should communicate with stakeholders at regular intervals giving a fair, balanced and explicit analysis of how the company is achieving its business purpose.

Responsibility

The Board of Directors are given authority to act on behalf of the company. They should therefore accept full responsibility for the powers that it is given and the authority that it exercises. The Board of Directors are responsible for overseeing the management of the business, affairs of the company, appointing the chief executive and monitoring the performance of the company. In doing so, it is required to act in the best interests of the company.

Accountability goes hand in hand with responsibility. The Board of Directors should be made accountable to the stakeholders for the way in which the company has carried out its responsibilities.

Eight Codes of Corporate Governance

Governance Structure:

All organizations should be headed by an effective board and all the responsibilities and accountabilities within the organisation should be clearly distinguished.

Structure of the Board and its Committees:

The board should consist of appropriate combination of executive directors, independent directors and non-independent non-executive directors to prevent one individual or a small group of individuals from dominating the board’s decision. The board’s size and scale should be in proportion with the level of diversity of the organisation. Appropriate board committees may be formed to assist the board in effective performances to fulfil the duties.

Director’s Appointment Procedure:

There should be a formal, rigorous and transparent process for various activities like appointments, election, re-election of directors etc. Members for the board should be appointment on merit basis fulfilling objective criteria which should include skills, knowledge, experience, and independence for the benefits of the company. The board should ensure that a formal, rigorous and transparent procedure be in place for planning the succession of all key officeholders.

Directors’ duties, remuneration and performance:

Directors should be aware of their legal duties. They must observe and foster high ethical standards and a strong ethical culture in their organisation. Each director must be able to give sufficient time to discharge his or her duties effectively. Conflicts of interest should be disclosed and managed.

The board of members is responsible for the governance of the organisation’s information, information technology and information security. The board, committees and individual directors should be supplied with informations in a timely manner and in an appropriate form and quality. The performances of board members should be evaluated and be held accountable to appropriate stakeholders. The board should be transparent, fair and consistent in determining the remuneration policy for directors and senior executives.

Risk Governance and Internal Control:

The board will be held responsible for risk governance. It must check the development and execution of a comprehensive and powerful system of risk management and also ensures the maintenance of a sound internal control system.

Reporting with Integrity:

The board must present a fair, balanced and understandable assessment of the performances and outlook of organization’s financial, environmental, social and governance position in its annual report and on its website.

Audit:

All the organizations should consider having an effective and independent internal audit function that has the respect, confidence and cooperation of both the board and the management. The board should establish formal and transparent arrangements to appoint organisation’s auditors and maintain an appropriate relationship with them.

Relations with Shareholders and other key Stakeholders:

The board should be responsible for ensuring that an appropriate interchange and disclosure takes place between the organisation, its shareholders and other key stakeholders. The board should respect the interests of its shareholders and other key stakeholders within the context of its fundamental purpose.

Five Pillars of Good Corporate Governance Make Up the Corporate Governance Code

Much like the pillars of good corporate governance in the United States, the Corporate Governance Code in the United Kingdom comprises the pillars of leadership, effectiveness, accountability, remuneration and shareholder relationships.

Leadership

The code requires companies to ensure to shareholders that they have an effective board of directors that’s capable of providing excellence in board leadership. Boards of directors are collectively responsible for the short- and long-term success of the corporations they serve.

Strong leadership requires corporations to have a clear division of the responsibilities between board directors and executives. Boards are responsible for strategic planning and oversight, and the executives are responsible for the day-to-day responsibilities of running the company. The board chair is responsible for the board’s leadership and the chair must ensure that the board operates as efficiently as possible in relation to all of their board duties and responsibilities.

Non-executive board directors should constructively challenge the board and help to develop successful proposals for strategy. The code expressly states that no single person should have total decision-making power on a board.

Effectiveness

The code requires corporate boards to ensure that they have a composition that encompasses the appropriate balance of skills, experience, independence and knowledge of the company so that they’re able to perform their duties and responsibilities effectively:

• Boards are required to develop a formal, rigorous and transparent process for appointing new board directors.
• Before accepting a position on a board of directors, nominees should ensure that they have sufficient time to fulfill their board duties and responsibilities.
• Boards should avail their board directors of a comprehensive board orientation and onboarding process. In addition, boards should provide regular opportunities for board director training and education.
• Management should provide accurate information to the board that has the appropriate form and quality so that the board can fulfill its duties in a timely manner.
• Boards should also conduct rigorous annual self-evaluations for the board, individual directors and significant committees, with the goal of improving their performance. All board directors should be subject to regular elections as long as they continue to perform satisfactorily.

Accountability

The board is wholly accountable for the actions and decisions of the company. The board should make annual disclosures to shareholders that represent a fair, accurate and comprehensive assessment of the corporation’s positions and corporate outlook.

The board is additionally responsible for assessing the nature and extent of risks it is willing to take to achieve its strategic plans. Boards should participate in sound risk management and internal control systems.

Boards should also establish formal procedures for corporate reporting, risk management reporting and internal control principles. Procedures should include details of relationships between the company and the internal and external auditors.

Remuneration

The United Kingdom favors remuneration packages that are designed to promote the long-term success of the company and that are directly aligned with performance. Remuneration should sufficiently challenge executives, be transparent and be rigorously applied.

The company should have a formal, transparent process for developing remuneration policies and setting remuneration packages. Directors shouldn’t be involved in setting their own pay.

Shareholder Relationships

Boards should utilize their annual general meetings to communicate and engage with investors on their objectives and strategic planning. The board should ensure that communications with shareholders are satisfactory.

These pillars are considered the minimum for the basics of good governance. Corporations are encouraged to add their own best practices as they develop them and learn from other corporations around the world.

While it is essential for directors to have an indication as to the level of commitment required of them, it is impossible to state with certainty how many man hours would be required of them at the time of taking on such commitments. The level of commitment required of a Director would vary from one company to the other but the average time commitment by global standards is that a Director should be prepared to spend at least four (4) days every quarter of the financial year on the company’s business after the induction phase. This includes time required to prepare for and attend scheduled Board meetings, Annual Board strategy away-day(s), the Annual General Meeting, site visits, committee meetings, meetings with shareholders, trainings and sessions as part of the Board evaluation process. There is always a likelihood of additional time commitment in respect of preparation time and ad hoc matters which may arise from time to time, and particularly when the Company is undergoing a period of increased activity.

In addition to the time commitment, particularly with respect to preparation for and attendance at Board meetings, a Director is required to actively participate at such meetings by bringing his independent judgment, objectivity as well as his expertise and experience to bear on Board deliberations. To be able to participate actively, a Non-Executive Director particularly, who is not involved in the day to day running of the company, will need to spend sufficient time studying Board papers to have a good understanding of the agenda items and be able to ask the right questions and make informed contributions at Board meetings. To facilitate this, it is imperative that Board papers are circulated in good time and in appropriate format. It is good practice to provide executive summaries with respect to lengthy reports and presentations and provide appropriate references and supporting documents. Board papers should also be made available electronically to allow for on-the-go access.

The Chairman of the Board has a key role to play in encouraging Directors’ attendance and participation at Board meetings by ensuring that all the Directors receive accurate, timely and clear information. A proficient and experienced Chairman is able to ensure that Board meetings are properly conducted in a cohesive manner, is able to effectively stimulate participation from all Directors and keep in check a potentially dominant Director. The Chairman is responsible for ensuring that the Board is an effective working group by promoting a culture of openness and debate which encourages Directors with dissenting views to air such views.

To Increase Attendance and/or Participation in Committees

• Ensure committee chairs understand and can convey the role of the committee to members, and that the chair and members have up-to-date job descriptions.
• Ensure adequate orientation that describes the organization and its unique services, and how the committee contributes to this mission.
• Remember that the organization and its committees deserve strong attendance and participation. Don’t fall prey to the perspective that “we’re lucky just get anyone.” Set a standard for the best.
• Have ground rules that support participation and attendance. Revisit the ground rules every other meeting and post them on the bottom of agendas.
• Let go of “dead wood.” It often help to decrease the number of committee members rather than increase them.
• Consider using subcommittees to increase individual responsibilities and focus on goals.
• Conduct yearly committee evaluations that includes a clear evaluation process and where each committee member evaluates the other members, and each member receives a written report about their strengths and how they can improve their contributions.
• Attempt to provide individual assignments to the committee members.
• Have at least one staff member participate in each committee to help with administrative support and providing information.
• Monitor quorum requirements for the entire board (as set forth usually in ByLaws), or the minimum number of board members who must be present for the board to officially enact business. This quorum, when not met, will serve as a clear indicator, or signal, that the board is in trouble.
• Develop a committee attendance policy that specifies the number of times a member can be absent in consecutive meetings and in total meetings per time period.
• Generate minutes for each committee meeting to get closure on items and help members comprehend the progress made by the committee.
• In committee meeting reports, include noting who is present and who is absent.
• Consider having low-attendance members involved in some other form of service to the organization, e.g., a “friends of the organization,” or something like that, who attends to special events rather than ongoing activities.
• Have a “summit meeting” with committee members to discuss the low attendance problem, and use a round-table approach so each person must speak up with their opinions.

MCA has permitted use of video conference facility for Board / Committee meetings subject to following conditions:

1. The facility shall be capable of allowing all participants to communicate concurrently with each other without any intermediary; Every director must attend at least one Board / Committee meeting personally in each financial year;
2. Notice of Meeting should provide for the availability of the facility and necessary information to access the same;
3. The Notice should seek confirmation of director that he would participate through video conference; in the absence of confirmation, it is to be presumed that he would physically participate;
4. Chairman and Secretary are responsible for integrity, proper functioning of the meeting and ensure participation by director himself / authorized person;
5. Roll call should be taken of directors participating physically a well as through video conference at the commencement and at conclusion of meeting;
6. Participation by Director through video conference would be counted for the purpose of quorum;
7. At the end of meeting the chairman to read out summary of decisions taken against each agenda and details of voting by each director; That part of proceedings shall be recorded and preserved;
8. In minutes the Chairman shall record the presence of director during last three meetings whether personally or through conference; The Place where Chairman and Secretary are present shall be the place of Board Meeting.
9. Soft copy of the ‘Draft minutes’ to be circulated within 7 days of the meeting;
10. This facility is purely optional.

The board can appoint committees based on its objectives for the year, and these committees can help review and advise on the achievement of those objectives. The committee structure should be reviewed regularly to make sure there are no overlapping responsibilities.

There can also be standing committees, which operate on a more permanent basis, and ad-hoc committees, which are in place for a particular time frame and can then be disbanded once an objective has been achieved. Ad-hoc committees could also be termed task forces. Committee chairs can provide leadership to the committee and help translate the board’s goals into an agenda for committee meetings.

The board can accomplish much of the work through committees, which is an effective way to delegate work. They can focus specifically on areas such as governance, internal affairs, or external affairs.

Committee size will depend on the board’s needs, and it is helpful to recognise that the more committees you set up, the more meetings will need to take place.

Committee members should be selected based on their experience and skills. Each board member should serve on at least one committee, but preferably no more than two.

Essentially, a committee provides expert advice and counselling to the board. However, the committee’s suggestions still need to be approved by the board, and they are not obligated to go with this advice.

Remuneration Committee

The role of a Remuneration Committee is:

• To decide and approve the terms and conditions for appointment of executive directors and/ or whole time Directors and Remuneration payable to other Directors and matters related thereto.
• To recommend to the Board, the remuneration packages of the Company’s Managing/Joint Managing/ Deputy Managing/Whole time / Executive Directors, including all elements of remuneration package (i.e. salary, benefits, bonuses, perquisites, commission, incentives, stock options, pension, retirement benefits, details of fixed component and performance linked incentives along with the performance criteria, service contracts, notice period, severance fees etc.);
• To be authorized at its duly constituted meeting to determine on behalf of the Board of Directors and on behalf of the shareholders with agreed terms of reference, the Company’s policy on specific remuneration packages for Company’s Managing/Joint Managing/ Deputy Managing/ Whole-time/ Executive Directors, including pension rights and any compensation payment;
• To implement, supervise and administer any share or stock option scheme of the Company.
• to review the overall compensation policy, service agreements and other employment conditions to Executive Directors and senior executives just below the Board of Directors and make appropriate recommendations to the Board of Directors;
• to review the overall compensation policy for Non-Executive Directors and Independent Directors and make appropriate recommendations to the Board of Directors;
• to make recommendations to the Board of Directors on the increments in the remuneration of the Directors;
• to assist the Board in developing and evaluating potential candidates for senior executive positions and to oversee the development of executive succession plans;
• to review and approve on annual basis the corporate goals and objectives with respect to compensation for the senior executives and make appropriate recommendations to the Board of Directors;
• to review and make appropriate recommendations to the Board of Directors on an annual basis the evaluation process and compensation structure for our Company’s officers just below the level of the Board of Directors;
• to provide oversight of the management’s decisions concerning the performance and compensation of other officers of our Company;

Shareholders’ Grievance Committee

In terms of Clause 49-IV(G)(iii) of the Listing Agreement, a board committee under the chairmanship of a non-executive director shall be formed to specifically look into the redressal of shareholder and investors complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc. This committee shall be designated as “Shareholders/ Investors Grievance Committee”.

• Efficient transfer of shares; including review of cases for refusal of transfer transmission of shares and debentures;
• Redressal of shareholder and investor complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc;
• Issue of duplicate / split / consolidated share certificates;
• Allotment and listing of shares;
• Review of cases for refusal of transfer / transmission of shares and debentures;
• Reference to statutory and regulatory authorities regarding investor grievances; and to otherwise ensure proper and timely attendance and redressal of investor queries and grievances.”

Other committees

Risk Committee

The committee comprises a minimum of three independent non-executive directors, as well as the chief executive and financial director. The chair of the board may not serve as chair of this committee. Members of the committee are individuals with risk management skills and experience. The committee’s responsibilities include:

• Review and approve for recommendation to the board a risk management policy and plan developed by management. The risk policy and plan are reviewed annually.
• Monitor implementation of the risk policy and plan, ensuring an appropriate enterprise- wide risk management system is in place with adequate and effective processes that include strategy, ethics, operations, reporting, compliance, IT and sustainability.
• Make recommendations to the board on risk indicators, levels of risk tolerance and appetite.
• Monitor that risks are reviewed by management, and that management’s responses to identified risks are within board-approved levels of risk tolerance.
• Ensure risk management assessments are performed regularly by management.
• Issue a formal opinion to the board on the effectiveness of the system and process of risk management.
• Review reporting on risk management that is to be included in the integrated annual report.
• Review annually the charters of the group’s significant subsidiary companies’ risk committees, and their annual assessment of compliance with these charters to establish if the Naspers committee can rely on the work of these risk committees.
• Perform an annual self-assessment of the effectiveness of the committee, reporting these indings to the board.

Nomination Committee

The primary role of the Nomination Committee of the board is to assist the board by identifying prospective directors and make recommendations on appointments to the board and the senior most level of executive management below the board. The committee also clears succession plans for these levels. The Nomination Committee is responsible for making recommendations on board appointments and on maintaining a balance of skills and experience on the board and its committees.

Succession planning for the board is a matter which is devolved primarily to the Nomination Committee, although the committee’s deliberations are reported to and debated by the full board. The board itself also regularly reviews more general succession planning for the senior management of the group.

Corporate Governance Committee

Together with the audit and compensation committees, the nominating/corporate governance committee rounds out the three standing committees of a public company’s board of directors. It plays a critical role in overseeing matters of corporate governance for the board, including formulating and recommending governance principles and policies. As its name implies, this committee is charged with enhancing the quality of nominees to the board and ensuring the integrity of the nominating process. Given the recent focus on board composition and diversity, director elections, and proxy access, the role of nominating/corporate governance committee is in the spotlight.

Corporate Compliance Committee

The primary Objective of the Compliance Committee is to review, oversee and monitor:

• The company’s compliance with applicable legal and regulatory requirements.
• The company’s policies, programs, and procedures to ensure compliance with relevant laws, the company’s code of conduct, and other relevant standards
• The company’s efforts to implement legal obligations arising from settlement agreements and other similar documents
• Perform any other duties as are directed by the board of directors of the company.

An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. The front part of the report often contains an impressive combination of graphics, photos, and an accompanying narrative, all of which chronicle the company’s activities over the past year and may also make forecasts about the future of the company. The back part of the report contains detailed financial and operational information.

Annual reports became a regulatory requirement for public companies following the stock market crash of 1929 when lawmakers mandated standardized corporate financial reporting.

The intent of the required annual report is to provide public disclosure of a company’s operating and financial activities over the past year. The report is typically issued to shareholders and other stakeholders who use it to evaluate the firm’s financial performance and to make investment decisions.

Typically, an annual report will contain the following sections:

• General corporate information
• Operating and financial highlights
• Letter to the shareholders from the CEO
• Narrative text, graphics, and photos
• Management’s discussion and analysis (MD&A)
• Financial statements, including the balance sheet, income statement, and cash flow statement
• Notes to the financial statements
• Auditor’s report
• Summary of financial data
• Accounting policies

State of Company’s Affairs [Section 134(3)(i)]:

Board briefing about the Company business operation ,highlights, growth, services of the Company, operating profits, performance growths, overview of the business, new projects introduced during the year or any new services undertaken by the company.

Details of status of acquisition, mergers, expansion, modernization and diversification, and key business developments.

Besides, it points out the problems faced by the company which has affected the Profits and measures that have been taken to improve the working and reduces the costs.

Dividends [Section 134(3)(k):

The amount of Dividend if any, recommended by the board should be paid by way of Dividend, as to the rate under review for the approval of members at the  Annual General Meeting AGM

Details of Subsidiary, Joint Venture and Associate Companies (Rule 8(5)(iv):

Details of company that is ceased to its subsidiaries, Joint Venture or associate company.

Particulars of Loan and Investments Section 134(3)(g):

Disclosure of all particulars of Loans, guarantees or investments under Section 186.

Change in nature of Business, if any:

Details pertaining to change of business of the Company or in the subsidiaries business or in the nature of business carried on by them.

Amounts Transferred to reserves, if any:

The board shall states the amount which it proposes to any reserve in the Balance Sheet like debenture redemption reserve in terms of Section 71(13)etc.

Changes in share Capital, if any:

Change in total Share capital of the company and any increase during the year under review, pursuant to allotment of equity/preference shares /Right issue/ Private Placement/ preferential allotment/ Employee Stock Option scheme of the Company. 10. Web Link of annual return Section 134(3)(a): Web address link where annual return of company shall be published.

Number of Board Meeting Section 134(3)(b):

The number of Board Meetings held during the year and Committee meeting and details of Board meetings attended by each of the Director should be mentioned.

Particulars of Contract and Arrangement with Related Parties Section 188:

Details of all transactions entered along with the justification for entering into such a contract and arrangement by the company during the financial year. 13. Statutory Auditors:

Details about the statutory auditors of the company, any change made during the year, whether existing auditor(s) is/are eligible for reappointment etc. Compliance certificate from either the auditor(s) or practicing company secretaries regarding compliance of conditions of corporate governance shall be annexed with the director’s report.(Para C of Schedule V of Listing Regulations).

Explanation to Auditor’s Remarks Section 134(3)(f): Explanation or comment by the board on every qualification reservation, adverse or disclaimer made by the statutory auditor in his report and /or by the secretarial auditor in the Secretarial Audit Report.

Material changes affecting the Financial position of the company Section 134(3)(l):

Details of any material changes / events, if any occurring after balance sheet date till the date of report to be stated.

Conservation of energy, technology, absorption, foreign exchange earnings and outgo section 134(3)(m):

The board report shall contain the following details:

Conservation of energy:

Impact on the conservation of energy, Company utilization of alternative source, the capital investment on energy conservation types of equipment.

Technology absorption:

Research and development expenditure, Advantages of product improvement, cost reduction, product development or impact substitution.

Foreign Exchange earnings and outgo:

Terms of actual inflows during the year and the Foreign exchange outgo during the year in terms of actual outflows.

Risk Management Policy Section 134(3)(n):

Details of the development and implementation of the risk management policy of the company.

Details of Directors and Key Managerial Personnel Rule 8(5)(iii):

Details of Directors and KMP appointed or resigned during the year.

The Government has established an Investor Education and Protection Fund (IEPF) under Sec. 205 C of the Companies Act, 1956 under which unclaimed funds on account of dividends, matured deposits, matured debentures, share application money etc. are transferred through the IEPF to the Government by the company on completion of seven years. The Government is required to utilize this amount through an Investor Education and Protection Fund. For this purpose, the proceeds from the companies are credited to the Consolidated Fund of India through this fund. The Fund may then be entrusted with full-fledged responsibility to carry out activities for education of investors and protection of their rights.

BSE is the first Exchange to have set up the ‘Stock Exchange Investors Protection Fund (IPF) in the interest of the customers of the defaulter members of the Exchange. This fund was set up on 10th July, 1986 and has been registered with the Charity Commissioner, Government of Maharashtra as a Charitable Fund. The maximum amount of Rs. 10,00,000 payable to an investor from Investor Protection Fund in the event of a default by a Trading Member has been revised to Rs. 15,00,000; which shall be applicable to the clients of the Trading Member of the Exchange, who will be declared Defaulter after 5th December, 2009. (This has been progressively raised by BSE from Rs.10,000 in 1988 to the present level).

BSE is the only Exchange in India, which offers the highest compensation of Rs.15lacs in respect of the approved claims of any Investor against the defaulter Trading Members of the Exchange.

The Trading members at present contribute 1 paisa per 1lakh of gross turnover. The Stock Exchange contributes 2.5% of the listing fees collected by it. Also the entire interest earned by the Exchange on 1% security deposit kept by with it by the companies making public / rights issues is credited to the Fund.

Investor Awareness Program

Launching the Securities Market Awareness Campaign organized by SEBI (January 2003), the Prime Minister said the prolonged quietness in the stock markets had tested the confidence of the small investor who was the backbone of the securities market. If investors are not attracted, then companies will not be able to raise money through the capital market. The Indian household investor, off late, has been putting much of his savings in non-financial assets. Even with financial assets, most of the savings are going to the banking system. This is not the best or the most productive use of our savings, he said. In recent years, there had been many instances of companies raising money from the market by creating hype and then defrauding the investor. Many of them issued shares at hefty premiums; most of their scrip are now trading well below their face value. Stock market scams brought a bad name to the Indian business community. This is how boom went bust and hopes turned to dust for many gullible investors. And that is how the investor community lost confidence in the market, leading to prolonged stagnation. The Prime Minister, therefore, called upon the market regulator and the intermediaries to learn the right lessons from our experience of the past few years. He said we need markets that are known for their safety and integrity.

Investor Awareness programs are being regularly conducted by stock exchanges to educate the investors and to create awareness among the Investors regarding the working of the capital market and in particular the working of the Stock Exchanges. These programs have been conducted in almost all over the country.

The Investor Awareness program covers extensive topics like Instruments of Investment, Portfolio approach, Mutual funds, Tax provisions, Trading, Clearing and Settlement, Rolling Settlement, Investors’ Protection Fund, Trade Guarantee Fund, Dematerialization of shares, information on Debt Market, Investors’ Grievance Redressal system available with SEBI, BSE & Company Law Board, information on Sensex and other Indices, workshops and Information on Derivatives, Futures and Options etc.

Further, for the benefit of the Investors’ the Bombay Stock Exchange has:

BSE Training Institute which organizes Training programs periodically on various subjects like comprehensive programs on Capital Markets, Fundamental Analysis, Technical Analysis, Derivatives, Index Futures and Options, Debt Market, etc. Further, for the Derivatives market BSE also conducts the compulsory BSE’s Certification on Derivatives Exchange (BCDE) certification for Trading Members and their dealers to impart basic minimum knowledge of the derivatives markets.

Compensation to the Investors

Capital market includes investment into risk bearing instruments. In such cases, the investor is required to make his own assessment of risk and reward. No compensation could be visualized for such investors whose investments were in risk bearing instruments. Similarly, investment in a fixed return instrument necessitated a careful review of the borrowing entity. Such actions would also be subjected to known or declared risks. Besides, the capital market also provides an opportunity for an investor to exit. The need therefore, is to ensure proper and healthy market operation so that investors could exercise their exit options in a reasonable and equitable environment. However, there may be situations where such a frame work is distorted through frauds. There may be provisions for compensation in the event of fraud by companies being established in securing funds from investors. For this purpose lifting of corporate veil may be enabled by the law.

The Companies Act, 2013 is enacted with the main aim to assure maximum protection to every section of investors irrespective of their classes. The Companies Act, 2013 has been embedded with several new provisions in regards to the protection of investor’s interest. Some of the provisions to protect investor’s interest under the Companies Act, 2013 are discussed hereunder.

Acceptance of Deposits: The acceptance of deposit from the general public is not permitted under the Act, and violation of any of the provision is a punishable offense. Section 73 of the Act provides that no company shall accept or review deposit under this Act from the public except in a manner recognized under Chapter V of the Act and Companies (Acceptance of Deposit) Rule 2014.

Misstatement in Prospectus: The prospectus is a written statement issued by the company to the general public containing brief information regarding companies profile and their investment proposals. Section 34 of the Act deals with the criminal liability for miss statement in the prospectus issued by a company. The prospectus issued, circulated or distributed, include any statement, which is untrue or misleading in form or context to induce people to make an investment, shall be liable for action u/S 447.

Fraudulently Inducing Person to Invest Money: Section 36 of the Act deals with the punishment of the person who intentionally or recklessly induces the investor to make the investment through any agreement for the purpose or the pretended purpose of which to secure a profit. This kind of deliberate concealment of fact shall be liable for punishment u/s 447.

Non-Payment Of Dividend: Declaration of the dividend is usually one of the items of agenda of every AGM. The dividend is nothing but profits earned by the company and divided among shareholders in proportion to the amount paid-up shares held by them, i.e., return on the investment made by shareholders. The Section 125 of the Act provides for the establishment of investors education and protection fund by the central government. This fund is credited with the unpaid/unclaimed amount of application money/matured money or mature deposits. Such accumulations of the fund are to be utilized for promotion of investor’s awareness and protection of investor interest. Section 123 of the Act state that the dividend should be credited in investors account within in five days after the declaration.

Right to Demand Financial Statements: Section 136 of the Act provides for the right of a member to obtain copies of Balance-Sheet and Auditors Reports. In the case of default complying with this requirement, the company shall be liable for a penalty of twenty-five rupees and the authorized officer who is in default shall be liable for a penalty of five thousand rupees. Besides, this investor has the option to proceed against the company or its authorities in a court of law under the guidelines determined under Section 436 of the Act.

The relationship between the board of directors and the management cannot be described as just being that of a relationship between an employee and his or her manager. Though the board oversees the decisions taken by the management and ratifies them along with acting as the final arbiters of the strategic direction and focus that the company is heading into, the relationship goes beyond that. For instance, the board of directors is responsible for the actions of the management and hence not only does the board need to monitor the management, the management needs to take the board into confidence about its decisions. Hence, the relationship can be described as being symbiotic with each with each serving in an ecosystem called the organization. The point here is that neither the management nor the board can exist without each other and hence both need each other to survive and flourish.

The role of boards

• Approve new digital strategies
• Assess the balance of short term wins with long term impacts
• Understand the impact on employees
• Assess corporate risk
• Communicate value to shareholders

Another aspect to the relationship between the board and the management is that more often than not, there is a significant representation of the management in the board. This means that the other board members have to study the decisions taken by these members carefully so that there are no agency problems, conflicts of interest and asymmetries of information.

Only when the board and the management coexist together in a harmonious manner can there be true progress for the organization. For this to happen, there must be a provision for having independent directors and those directors that are not affiliated to the management. The point here is that unless there is objectivity and separation of the directors belonging to the management and those from outside can there is a semblance of avoidance of conflict of interest.

The third aspect of the relationship between the board and the management is the role played by institutional investors or directors from large equity houses and mutual fund companies. These directors bring to the table rich and varied expertise and experience in running companies and hence their input is crucial to the working of the company. It is for this reason that many regulators insist on having a certain percentage of the board as independent directors and another percentage from institutional shareholders. The reason for this is the fact that unless there is a process of due diligence and oversight over the actions of the management, the management can take unilateral decisions that are not always in the best interests of the company.

The role of CEOs

For their part, CEOs that lead businesses adopting digital ways of working need to be many things. They must be agile in their approach, have experience of change management, be open to partnerships, and have empathy with employees that are experiencing significant changes to the way they work.

CEOs must also work closely with boards to ensure that the pace of digital change doesn’t run out of control. Partly this means they need to be fully transparent with their boards on all potential risks particularly with regard to cybersecurity issues related to digital systems that 88% of boards now view as a serious risk.

On top of this, CEOs need to be aware of the boards’ thirst for data. This was highlighted in a recent survey that found that 70% of boards want their businesses to increase investment in technology for risk management to give them up to date data on both emerging and atypical threats.

At the same time CEOs should be tapping into the knowledge with their boards of adjacent markets and potential new opportunities. The successful Board/CEO partnership of the future will use every available insight to make sure that organisations can operate safely, confidently and with a 360° view of what’s coming next.

Bringing it all together

On a more practical level, boards and CEOs also need to find ways to collaborate via digital channels to make communication more frequent and to speed up decision making for example, by using specialist board portal technology.

With a board portal, directors can get easy access to both current and historical data from wherever they are located. CEOs can also use portals to share information securely with the board at any time and accelerate approval and sign off for new initiatives.

Along with the other requirements we’ve covered in this article, this kind of digital flow will be ultimately key to facilitating long-term partnerships between boards and CEOs and making their collective work on digital issues the success that it needs to be.

Finally, the relationship between the board and management is somewhat strained whenever the company is not doing well. This happens because the board has a top view of the organization and the management has a deeper insight. Hence, to be fair to the management, they are the ones who have to run the organization and so they cannot be constrained by what the board dictates sitting on its perch. This is the classic problem that many companies face especially when they are not doing well and the remedy for this is to take the board into confidence about the complexities of the day to day operations and apprise them of the nuances and subtleties of running the organization.

Need:

As a business director or owner it’s essential you can identify and meet the core skills your business needs to be successful.

These skills will be the same whatever business you run – whether you’re a self-employed graphic designer or you head a manufacturing company employing dozens of people.

There are intangible skills you will need, such as leadership skills, the ability to cope with long hours and hard work, and the inner resources to deal with stress and risk-taking. They also include strategy-setting and the ability to build and manage a team.

There are also functional skills that all businesses need. The smaller your business, the more of these skills you will need personally:

• Finance: Including cash flow planning, credit-management and managing relationships with your bank and accountant
• Marketing: including advertising, promotion and PR.
• Sales: including pricing, negotiating, customer service and tracking competitors
• Procurement and buying: including tendering, managing contracts, stock control and inventory planning
• Administration: including bookkeeping, billing, accounts preparation and payroll handling
• Personnel: including recruitment, dispute resolution, motivating staff and managing training
• Personal business skills: including computer, written and oral communication, and organisational skills

Objectives:

Leadership Supervisory Role: The Director of Training and Development’s first and most prominent role is his leadership role over the training and development department. In this position, the Director of Training and Development oversees all activities of the department and identifies the business’s developmental needs ensuring that there is consistency with core competencies and goals.

The Director of Training and Development also plans, organizes, and leads training programs, ensuring proper execution at all levels of the department. The Director of Training and Development also ensures consistency in the delivery and application of training standards across the business and oversees the planning, prioritization, and development of new training programs and initiatives, ensuring that these programs and initiatives are consistent with the business overall strategies, objectives, and needs.

He is also responsible for following up with the leadership and management of all departments in order to ensure that the parties involved in each training program complete their training. In this capacity, the Director of Training and Development also monitors and ensures the achievement of results within the approved training department budget. The Director of Training and Development also plays mentorship role to key personnel in the training and development department, ensuring constant development in their professional skills, and readying them for the occupation of his position in the event of his absence or retirement.

Strategy: The Director of Training and Development plays a strategic role where he is in charge of approving and developing effective training programs and materials, making regular modifications to programs where necessary. The Director of Training and Development also plays a leading role in the development and documentation of the training path for key positions within the business and communicating this information as needed.

For example, he is directly in charge of implementing AGM training programs as well as subsequent field leadership training programs that ensure optimal leadership within the business. It is also the director’s responsibility to lead the creation of training material and content for training programs, and identifying tools for relaying that content to relevant personnel.

Analytics: The Director of Training and Development is tasked with an analytical role where he conducts research, approves, and makes further recommendations for appropriate learning management systems and databases. The Director of Training and Development additionally develops, implements, monitors, and maintains both initial and ongoing training programs across the business.

He keeps track of departmental training records and develops opportunities in addition to developing dashboard reporting for all levels in the business. In this capacity, the Director of Training and Development also conducts analyses in order to identify and define present and future training needs. The Director of Training and Development also conducts follow-up studies on all completed training programs in order to evaluate and measure results and draw reports for senior HR management and key stakeholders.

Collaboration: The role of the Director of Training and Development is a collaborative role where he collaborates with other human resources departmental directors in defining strategies and ensuring their alignment in order to avoid conflicts of interest. In this collaboration, the Director of Training and Development also assists other HR professionals in their training needs specific to their areas of specialty.

He also liaises with various other departmental heads and managers ensuring proper execution of ongoing departmental training programs in order to achieve the desired results and ultimately improve the overall performance of the business. The Director of Training and Development also collaborates with these departmental heads and managers in order to establish and maintain training metrics and to evaluate the effectiveness of training. In his collaborative capacity, the Director of Training and Development also partners with key stakeholders ensuring adherence to the latest industry trends and practices.

Knowledge: The Director of Training and Development is tasked with the maintenance of knowledge in the training and development department. In this position, the Director stays up to date with the latest instructional technologies through the establishment of personal networks, attendance of workshops, reviewing of professional publications, and participation in professional industry associations. This way, the Director is able to introduce the latest and most applicable trends in training and development for inclusion in the overall strategy, constantly maintaining and updating training programs within the business.

Other Duties: The Director of Training and Development also performs similar duties as he deems necessary for the proper execution of his duties or other duties as delegated by the Chief Human Resources Officer.

Promoter

“Promoter” means a person:(

(a) Who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92;

(b) Who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise;

(c) In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

Nominee

Nominee directors could be appointed by a specific class of shareholders, banks or lending financial institutions, third parties through contracts, or by the Union Government in case of oppression or mismanagement.

Shareholder

A small shareholder is a person who is holding shares of nominal value amounting to a maximum of Rs 20,000 in a public company. Small shareholders are entitled to elect a director in a listed company. The directors elected by these shareholders will be known as a ‘Small Shareholders Director’.

• There is no mandate to appoint a small shareholders director under s.151, left up to the company’s discretion
• Companies must fulfil two criteria to be eligible to appoint a small shareholders director
• Must be a public company
• Must have at least 1000 or more small shareholders.

Tenure of Appointment

Small shareholders director can be appointed for a maximum period of three years. He/she may not necessarily retire by rotation. He/she cannot be reappointed after the cessation of services.

Moreover, small shareholders director cannot be associated with the company in any manner for a period of three years from the cessation of services.

Independent

A person becoming the independent director of the company must fulfil certain criteria given under section 149(6) of the Companies Act, 2013, which states that an independent director is a person other than managing director, whole-time director, or nominee director, and:

• He must have relevant experience and should be a person of integrity as per the board.
• A person appointed as an independent director shall not be a promoter of the same company or any other company which is the holding, subsidiary, or associate company of the same company in which he has been appointed.
• The person shall not be related to the promoters or directors of the company or its holding, subsidiary, or associate company.
• The person must not have any money-related relationship with the company or its holding, subsidiary, or associated company other than his salary.
• None of his relatives or he himself shall not have any kind of interest in the company. Provided, the relative can hold shares of face value up to Rs. 50 Lakhs or 2% of the paid-up capital.

Section 149(4) of the Companies Act, 2013, states that every listed public company must have 1/3rd of its total directors as independent directors.