Corp Governance

Articles
Ready Reckoner on Compliance with various
Clauses/Provisions of the Stock Exchange
Listing Agreement and SEBI Regulations
Kailash K. Dagar, FCS, Hindustan Aeronautics Ltd., Bangalore.
Various regulatory
authorities have great
confidence in Company
Secretaries and hence
entrusted various
responsibilities on
Company Secretary as
Compliance Officer of the
Company. Compliance
with the listing agreement
is one such responsibility
of the Company Secretary
in listed company. This
article provides a calendar
of compliance with the
provisions/clauses of the
listing agreement.
e-mail :
kkdagar@rediffmail.com
NEED FOR READY RECKONER
There are various statutes, bylaws, guidelines, rules, regulations and norms prescribed by the
various Regulating Authorities like Ministry of Corporate Affairs, Securities and Exchange Board
of India and Reserve Bank of India etc. which are required to be complied with in true spirit and
purport so that all stakeholder derives the benefit due to them and also to avoid the unwarranted
legal actions from regulating authorities. In the present corporate scenario, legal ethos and
regulatory expectations change very fast. Every day one or other regulating authorities come out
with a circular, notification, clarification or amendment concerning corporate affairs. Since laws
are ever changing, one cannot escape responsibility by stating that non-compliance was the result
of ignorance. Daily updates is the necessity of a Company Secretary to prove himself as a ready
reckoner. The profession of Company Secretary requires a continuous learning process and it is
the capacity to learn, unlearn and relearn that helps professional to steer ahead towards professional
prosperity.
Listing Agreement has fastened great responsibility on Company Secretary by designating him as
Compliance Officer. Clause 47 of the Listing Agreement provides for appointment of Company
Secretary to act as Compliance Officer to be responsible for monitoring share transfer process,
report to the Company’s Board in each meeting, liaise directly with the authorities such as SEBI,
Stock Exchanges, Registrar of Companies, Ministry of Corporate Affairs, Registrar and Transfer
Agents, Credit Rating Agencies etc. and investors for resolving their grievances. Company Secretary
also has to provide an e-mail ID of the grievance redressel division/Compliance Officer for the
purpose of registering complaints by investors. Similarly clause 51 also casts responsibility on
Compliance Officer for filing online the Annual Report and various information/data in the
EDIFAR System.
Though a Company Secretary has to play many vital roles in the corporate world, the role of
“Compliance Officer” is like the fulcrum of the profession and timely compliance with various
provisions/clauses of the Listing Agreement (LA) executed with the Stock Exchange (SE) are the main
thrust of a Company Secretary profession in a listed company, in order to remain continuously listed,
create better brand image, enhance creditworthiness and avoid punitive action.
MEANING AND PURPOSE OF LISTING
Listing means admission of the securities to dealings on a recognized stock exchange. The securities
may be of any public limited company, Central or State Government, quasi-governmental and
other financial institutions/corporations, municipalities, etc. The objectives of listing are mainly
to provide liquidity to securities; mobilize savings for economic development and protect interest
of investors by ensuring full disclosures.
The companies desirous of getting their securities listed initially are required to enter into an
agreement with the Stock Exchange called the Listing Agreement and they are required to make
certain disclosures and perform certain acts. Under the Listing Agreement, a company undertakes,
amongst other things, to provide facilities for prompt transfer, registration, sub-division and
consolidation of securities; to give proper notice of closure of transfer books and record dates, to
forward copies of unabridged Annual Reports and Balance Sheets to the shareholders, to furnish
financial results on a quarterly basis; intimate promptly to the Exchange the happenings which are
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likely to affect materially the financial performance of the
Company and its stock prices, to comply with the conditions of
Corporate Governance, etc.
To remain continuously listed, the Companies are required to
comply with various clauses/provisions of the Listing Agreement
executed initially. The very purpose of continued listing is to
ensure free transferability of securities, liquidity in trading, clear
transparency and open disclosure of information relating to the
affairs of the company. Hence listing is a step towards protection
of interest of public in which present and prospective investors
are largely involved.
The process of listing involves the following four steps : -
(1) Initial listing before offer of securities to the public and
registration of prospectus with Registrar of Companies by
making listing application and paying prescribed initial
listing fee.
(2) Final listing of securities that has been offered to the public
by execution of Listing Agreement with Stock Exchange/s.
(3) Enlist the securities openly for the trading.
(4) To list further issue of securities and to remain continuously
listed until it is de-listed either by Stock Exchange or at the
option of the Company.
Stock Exchange provides the market place for dealing in the listed
securities by the registered member/broker on the Stock
Exchanges. Section 11 of the SEBI Act, empowers SEBI for
regulating the business in the Stock Exchanges, registering and
regulating the Stock Brokers, Depositories, prohibiting
fraudulent and unfair trade practices relating to securities market
and protecting the interest of investors in securities.
Section 11B of the SEBI Act provides that SEBI has power to issue
direction to any intermediaries associated with securities market
(including Stock Exchanges) for protection of interest of investors
and orderly development of securities market. Sections 11 and
11B of the SEBI Act vests vast power on SEBI, which include the
enforcement and regulation of listing of securities.
The Listing Department of the Exchange monitors the compliance
of the companies with the provisions of the Listing Agreement
and takes penal action against the defaulting companies.
NATURE OF COMPLIANCES
For preparing the ready reckoner, compliances have been divided
into two categories i.e Periodical compliances and Event based
compliances.
Periodical Compliances
The periodical compliances are further divided into quarterly,
half early and yearly compliances as under : -
[ 1 ] Quarterly Compliances – June, September, December, March
Quarters
Clause 35 – Shareholding Pattern within 21 days of the end of
each Quarter
Clause 41 – Holding Board Meeting to approve Un-audited
Quarterly Financial Results
Clause 49 – Corporate Governance Report by Compliance
Officer of the Company to SE within 15 days of the
close of each quarter.
Regu 55A - Regulation 55A of the SEBI ( Depositories and
Participants) Regulations, 1996 requires submission
of Quarterly Secretarial Audit Report to Stock
Exchanges where company’s shares are listed, from
Practising Company Secretary /Chartered
Accountant within 30 days of the end of each
quarter w.e.f. 31.03.2003 vide SEBI Circular No.
D&CC/FITTC/CIR/16-2002 dated 31st December,
2002.
[ 2 ] Half Yearly Compliances – Half year ended 30th September &
31st March
Clause 47(c) – Half Yearly Certificate about transfer of shares
from practising Company Secretary within 1
month of end of each half year.
[ 3 ] Yearly Compliance
Clause 16 - Notice about closure of Transfer Book/Record
date before 21 clear days of Annual General
Meeting (AGM).
Rule 8(3) – In terms of Regulation 8(3) of the SEBI(Substantial
Acquisition of Shares & Takeovers ) Regulations
1997, every listed company shall within 30
days from the financial year ending March 31,
make yearly disclosure to SE giving details of
persons holding more than 15% shares/voting
rights.
Clause 31 – Submit 6 Copies of Annual Report to SE before
*21 clear days of AGM.
* There is no specific time limit prescribed in Clause 31 to forward copies
of Annual Report as it simply says ‘forward promptly’. However, Section
171(1) of the Companies Act, 1956 requires that at least 21 days’ notice
(exclusive of the day of service and the day of meeting) should be given to
members to call a General Meeting (AGM/EGM). Hence 21 clear days
period taken into consideration.
ASSUMPTIONS FOR PERIODICAL
COMPLIANCE CALENDAR
Board Meeting (BM) for the 1st Quarter from 1st April to 30th June
– on 30th July
Board Meeting for the 2nd Quarter from 1st July to 30th September
– on 30th October
Board Meeting for the 3rd Quarter from 1st Oct to 31st December –
on 30th January
Board Meeting for the 4th Quarter from 1st Jan to 31st March – on
30th April
Annual General Meeting – on 30th September
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Compliance Calendar
Sl. No. Particulars of Compliance Clause of LA Due Date
1. Corporate Governance Report by Compliance Officer of the Company to SE within 49 15th April
15 days of close of 4th Quarter
2. File Shareholding Pattern in the prescribed format 35 21st April
3. Notice to Stock Exchange(SE) for holding Board Meeting (BM) to approve Un-audited
Financial Results(UAFR), subject to Limited Review Report (LRR) by Statutory
Auditors, for the quarter ended on 31st March/for approval of Audited results for
the year ended 31st March. Give press release for the same. 41 22nd April
4. Advance intimation to SE if it intends to hold BM for approval of Audited Results 41 22nd April
5. Publication of Notice in 2 Newspapers (one English language circulating in
substantially whole of India and in one Regional Language newspaper of the
State in which Registered Office of the Company is situated ) 41 22nd April
6. Secretarial Audit Report from Practising Company Secretary to SE for the 4th SEBI
Quarter end Regulation 55A 30th April
7. Payment of Annual Listing Fee 38 30th April
8. To hold Board Meeting for approval of UAFR 41 30th April
9. Approved UAFR to be submitted to SE within 15 minutes of conclusion of the BM 41 30th April
10. Submit Certificate obtained from Practising Company Secretary certifying that
all certificates have been issued within one month of lodgement for transfer,
sub-division etc. for the half year ended 31st March. 47 (c ) 30th April
11. Yearly disclosure by the Company regarding persons who hold more than 15%
shares/voting rights and also holding of promoters or persons having control over
the company as on financial ending 31st March. – Rule 8(3) of SEBI(SAST) Regulations Rule 8(3) of
1997. SEBI (SAST) 30th April
12. Publish approved UAFR within 48 hours of BM. 41 1st May
13. Copy of Limited Review Report(LRR) by the Statutory Auditors for the 4th Quarter
to be submitted to SE within 2 months of Quarter end 41 30th May
For 1st Quarter ended 30th June
14 Corporate Governance Report by Compliance Officer of the Company to SE within
15 days of close of 1st Quarter 49 15th July
15. File Shareholding Pattern in the prescribed format 35 21st July
16. Notice to SE for holding BM to approve UAFR (Un-audited Financial Results) for
the 1st Quarter 41 22nd July
17. Publication of Notice in 2 Newspapers 41 22nd July
18. Secretarial Audit Report from Practising Company Secretary to SE for the 1st Quarter SEBI Regu. 55A 30th July
19. To hold Board Meeting for approval of UAFR 41 30th July
20. Approved UAFR submitted to SE within 15 minutes of conclusion of the BM 41 30th July
21. Publish approved UAFR within 48 hours of BM 41 1st August
22. Submit copy of Limited Review Report(LRR) by the Statutory Auditors for the 1st
Quarter to SE within 2 months of Quarter end 41 30th August
For 2nd Quarter ended 30th Sept & AGM
23. Notice of Closure of Transfer Book/Record date before 21 days of AGM 16 7 Sept.
24. 6 Copies of Annual Report to SE * 31 7 Sept.
25. Supply copy of Annual Report/ **, statement containing salient features of the balance
sheet, profit and loss account and auditors report to each Shareholders/members 32 7 Sept.
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26. Hold the Annual General Meeting - 30 Sept.
27. Corporate Governance Report by Compliance Officer of the Company to SE within 15
days of close of second Quarter 49 15th Oct.
28. File Shareholding Pattern in the prescribed format 35 21st Oct .
29. Notice to SE for holding BM to approve UAFR (Un-audited Financial Results) for the
2nd Quarter 41 22nd Oct.
30. Publication of Notice in 2 Newspapers 41 22nd Oct.
31. To hold Board Meeting for approval of UAFR 41 30th Oct.
32. Approved UAFR submitted to SE within 15 minutes of conclusion of the BM 41 30th Oct.
33. Submit Certificate obtained from Practising Company Secretary certifying that all
certificates have been issued within one month of lodgement for transfer, sub-division
etc. for the half year ended 30th September. 47(c) 30th Oct.
34. Secretarial Audit Report from Practising Company Secretary to SE for the 2nd Quarter SEBI
Regu. 55A 30th Oct.
35. Publish approved UAFR within 48 hours of BM held. 41 1st Nov.
36. Submit copy of Limited Review Report(LRR) by the Statutory Auditors for the 2nd
Quarter to SE within 2 months of Quarter end 41 30th Nov.
For 3rd Quarter ended 30th December
37. Corporate Governance Report by Compliance Officer of the Company to SE within 15
days of close of 3rd Quarter 49 15th Jan.
38. File Shareholding Pattern in the prescribed format 35 21st Jan.
39. Notice to SE for holding BM to approve UAFR (Un-audited Financial Results) for the
3rd Quarter 41 22nd Jan.
40. Publication of Notice in 2 Newspapers 41 22nd Jan.
41. To hold Board Meeting for approval of UAFR 41 30th Jan.
42. Secretarial Audit Report from Practicing Company Secretary to SE for the 3rd Quarter SEBI
Regu. 55A 30th Jan.
43. Approved UAFR submitted to SE within 15 minutes of conclusion of the BM 41 30th Jan.
44. Publish approved UAFR within 48 hours of BM held. 41 1st Feb.
45. Submit copy of Limited Review Report(LRR) by the Statutory Auditors for the 3rd
Quarter to SE within 2 months of Quarter end 41 28th Feb.
** There is no specific time limit prescribed in Clause 32 to forward copies of Annual Report to each shareholder as it simply says ‘The Company will
supply a copy of complete and full Annual Report to each shareholder. However, Section 219 of the Companies Act, 1956 provides that every company
is required to send to its members, copies of Annual Report not less than 21 days before the date of meeting at which the same would be laid for
adoption. Hence 21 clear days period taken into consideration.
Moreover, SEBI vide its Circular dated 26th April, 2007 has amended Clause 32 of the Listing Agreement permitting Companies to send “a
statement containing salient features of the balance sheet, profit and loss account and auditors report” in prescribed Form 23AB to each shareholder
(instead of Full Annual Report), Provided that the Company, on receipt of written request from a shareholder, shall send the complete and full balance
sheet, profit and loss account and auditors’ report to the said shareholder. Hence 2nd option also added in the particulars of compliance.
[B] Event Based Compliances
Sl. No. Clause Particulars of Compliance Advance Notice /
No. of LA Intimation
1. 19 Prior intimation to SE about BM having agenda of Buy Back, Dividend, Right 7 Days
Issue, Bonus Shares etc
2. 20 Intimation by fax details of Dividend, Buyback etc. Immediately after
conclusion of BM
3. 22 Intimate by fax details of alteration in capital, increase in share capital, issue of Immediately after
forfeited shares etc. conclusion of BM
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4. 24 File copy of Scheme/Petition proposed to be filed before any Court under section 1 month before it is
391/394 & 101 of Companies Act, 1956. presented to the Court.
5. 29 Notify promptly SE about any proposed change in the general character or nature Notify promptly
of its business.
6. 30 Notify change in Board of Directors, MD, Auditors etc. Immediately after
change
7. 31 Copy of proceedings of AGM/EGM As early as possible
after AGM/EGM
8. 33 File 6 copies of amended AOA & MOA As soon as Changes in
MOA & AOA approved
at the GM
9. 36 Intimation of events/happenings having important bearings and which are Immediately on
likely to materially affect the financial performance of the Company and its occurrence and after
stock prices like strikes, lock-outs, closure of units for any reason, disruption such events
of operations due to natural calamity, litigation/dispute having material
impact. Any price sensitive information like acquisition, merger, amalgamation,
delisting, share forfeiture etc;
10. 47 Submit copy of MOU executed with RTA Within 48 hours of
execution of MOU
11. 51 EDIFAR Filing :-
- Full version of Annual Report
- Corporate Governance Report
- Shareholding Pattern Statement
- Statement of action taken against the company by any regulatory authorities Immediately after AGM
& occurrence of event.
CONCLUSION
The above calendar has been prepared cautiously based on certain
assumptions and latest provisions/clauses of stock exchange
listing agreement and provisions of SEBI, which are subject to
changes/amendment from time-to-time. However, it is suggested
that before acting on the basis of the above calendar the relevant
clause may please be analysed in detail and referance be made
for updation on website “www.bseindia.com” 􀂉
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