2nd May, 2002
Ministry of Law,Justice & Company Affairs


In a meeting convened by the Secretary, Department of Company Affairs (DCA), Shri Vinod Dhall, here yesterday, matters relating to development of a comprehensive framework for ensuring and promoting good corporate governance were discussed. The representatives who took part were from the professional institutes, industry associations and Securities and Exchange Board of India (SEBI). It discussed functioning of audit committee, interface between audit committee and the board of directors, confining the proceedings against directors within the definition of "officers in default", sitting fees of directors and inclusion of insurance premium in calculating remuneration.

Shri Vinod Dhall stated that the importance of good corporate governance could hardly be over emphasized. He said that keeping in view the recent experiences for building up confidence, particularly of the investors and public at large, it was essential that the relative roles of various players and regulating agencies be clearly defined. DCA as the mother body was to play its role in regulating the corporate sector, facilitating and coordinating the other regulating agencies to play their role effectively, he added.

The issues relating to the functioning of the audit committee, need for giving immunity to independent directors in the audit committee on the lines of nominee directors of financial institutions, advisability of enhancing the remuneration package of directors by way of enhanced limits for sitting fee and commission, apart from enhancing the quality of directors responsibility statement were the thrust areas in the discussions.

The interface between audit committee and the board of director, the binding nature of audit committee’s recommendations on the board of directors and the need for maintaining the supremacy of the boards were amongst other issues which engaged the attention of the participants. The need for complying with the requirements of clause 49 of the Listing Agreement in letter and spirit with a view to achieving better standards of corporate governance was also emphasized.

The need for confining the proceedings against directors with reference to the definition of "officers in default" under Section 5 of the Companies Act was also mentioned by a few of the participants. In this respect, difficulties in identifying "independent directors" in the audit committee were also brought out. Apprehensions were also raised by the members in regard to treatment of insurance premium as a perquisite in the hands of the directors concerned both with reference to the applicability of Section 269/Schedule XIII of the Companies Act and the income tax angle.

It was decided that the issues relating to sitting fees of directors and inclusion of insurance premium in calculating remuneration would be looked into by DCA and suitable steps taken in this regard.

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