SEBI, in its board meeting on 28 March 2018 considered the Kotak Committee report (Report) on corporate governance. The Kotak Committee (Committee) had submitted the Report proposing amendments to the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (LODR) with the objective of enhancing fairness and transparency in the corporate governance landscape in India.
Our earlier update on the Report can be accessed here.
SEBI’s views on the Report
SEBI has accepted several reforms suggested by the Committee both with and without modifications. Certain recommendations (such as internal financial controls, roles of ICAI, adoption of IND-AS etc.) of the Committee have been referred to various governmental agencies/professional bodies for further deliberations.
The press release issued by SEBI only sets out an indicative list; one should wait for the fine print for a complete picture of changes to the LODR.
Recommendations without any modifications
Greater awareness and training of the promoters and directors about the benefits of governance to all the stakeholders is critical to the success of these measures.The change of mindset is key to the success of corporate governance than some of the optical measures accepted by SEBI.
Recommendations with Modifications
Comment: The stricter approach by SEBI will be welcomed by shareholder activist groups. Interestingly, this has been limited only to “royalty and brand” payments and not to other payments to related parties.
SEBI, by accepting most of the Kotak Committee recommendations has shown its willingness to undertake strong and bold measures to improve the corporate governance environment in India. India Inc needs to be well prepared to embrace the overhaul changes in corporate governance regime – soon this may be a reality! As mentioned, one will have to wait for the details, which are expected in the coming weeks.