Sebi listed paragraph 49 of the Equity Listing Agreement (2000), which now serves as the standard for corporate governance in India, as an important measure for codifying corporate governance standards. Section 49 gave rise to the requirement that half of the directors of the board of directors of a publicly traded company be independent directors. In the same clause, SEBI had proposed the powers of the audit committee, which had to have a majority of independent directors. The need for ethical governance has become necessary in the wake of recent events, particularly in the United States. The United States responded to these events by passing the Sarbanes Oxley Act of 2002, which produced fundamental changes in all aspects of corporate governance. The revised clause 49 of the list agreement has broadened the scope of corporate governance in India and provides for a whistleblower policy, a compliance report with the issue of the Certificate of Compliance, an expanded definition of the independent director, advertising obligations, etc.[3] As noted above, this revised clause has broadened the scope of corporate governance in publicly traded companies in India and should provide a framework for good governance. The company is required to obtain a certificate of respect from the corporate government, as stated in this clause, and to attach this certificate to the director`s report which is sent annually to the company`s shareholders. The same certificate must be sent to the exchanges with the activity report. Auditor controllers or practicing business secretaries issue the certificate. Article 49 of the listing agreement applies to companies that wish to be listed on the stock market. This clause contains both binding and non-binding provisions.
The main binding provisions are: under the clause, no person can be an independent director of more than seven publicly traded companies. When a person is a full-time director of a publicly traded company, he or she is not the independent director of more than three listed companies. 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. Some non-binding clauses, such as whistleblower policy and the limitation of the mandate of independent directors, were also included. [1] In 2014, Term 49 was amended to include whistleblower policy as a mandatory provision.