| Hony.
Editor |
| Dr.
Bindi Mehta
Professor
& Chairperson (Research & Publications)
Narsee Monjee Institute of Management Studies
(Deemed University) |
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National
Events |
| Provisions
under the Companies Act |
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According
to the Companies Act, a public limited
company should have a minimum of three
directors. Hence, the resignations do
not create any problem for meeting the
requirements as far as the number of directors
are concerned. On the other hand, a private
limited company would need to have a minimum
of two directors. All the directors together
are collectively referred to as the board
or the board of directors.
A
director can only be an individual and
not a body corporate, association or firm.
Thus, even when, say, an entity holds
a large percentage of shares in a particular
company and has a seat on the board, the
director still remains an individual.
When describing the position of the particular
director it can be said that the person
is the nominee of a certain entity.
The
resignation of a director from the board
leads to a situation where the office
of the director falls vacant before the
term of the director has expired. This
is called a casual vacancy. The articles
of association, which lay out the details
pertaining to internal functioning of
the company might specifically detail
the filling up on such a casual vacancy.
However, subject to this, the board of
directors at a meeting of the board can
appoint an alternate director. Any person
who has been appointed would hold office
only up to the date on which the original
director would have held office.
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SEBI
clamps off-market deals |
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SEBI has put a question mark over the deals cut by banks in the
opaque, illiquid corporate bond market. In order to soften the
blow from rising yields in the bond market, banks enter into one–to-one
deals at rates which are off-market and often dubious. Such transactions
help banks hide their bond losses or partly offset the hit they
have taken in government securities trading, where the RBI keeps
a vigil.
The
off-market or higher price deals become the new bench marks for
the valuation of the balance stocks that both banks are holding.
While there is a small loss in buying at a higher price, this
is minuscule compared to the gains from a higher valuation of
the remaining unsold stock in the banks’ books. So, both banks
benefit when they mark-to-market the corporate bonds.
Banks
are required to mark-to-market (MTM) the papers and provide for
depreciation, based on the pricing fixed by the Fixed Income Money
Market & Derivatives Association of India (FIMMDA). As few
deals happen in the corporate bond market, FIMMDA assigns a spread
over the government securities for the MTM exercise on corporate
bonds. The MTM on corporate bonds is fixed once in a fortnight.
However, if a bank enters into a deal price for MTM and ignore
the FIMMDA pricing. That is where the catch lies. “Some banks
have been entering into one-to-one deals at prices lower than
that declared by FIMMDA. SEBI has expressed concern on the issue.
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| The
government is set to link the voting rights in private sector
banks to the shareholding norms to be prescribed soon for such
banks by the Reserve Bank of India. While the government is set
to seek Cabinet approval soon for amending the Banking Regulation
Act to lift the cap of 10 % on voting rights, the proposal now
being vetted is to link the voting rights to the shareholding
in private banks.
The RBI will be free to recommend the maximum equity holding in
private banks. The voting rights will automatically be commensurate
with this holding to be prescribed by the regulator shortly, said
a government official. The Banking Regulation Act stipulates that
no person holding shares shall exercise voting rights on poll
in excess of 10 % of the total voting rights of all the shareholders.
Section 12 (2) of the Banking Regulation Act which stipulates
this is now set to be amended to lift this cap. However, there
are indications that the benefits of the removal of this cap may
well be restricted to only well regulated banking entities. There
is a view within the government and the regulator that non-banking
entities and other categories of investors should not be beneficiaries
of this opening up. This is because such investors are not perceived
as long-term players committed to a bank. The government, however,
is in favour of a higher equity holding in private sector banks,
but the proposal now under consideration could signal a half-way
house approach.
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SECURITIES
LAWS (AMENDMENT) ORDINANCE, 2004 AMENDED |
The Union Cabinet
today approved the amendments to Section 13 contained in the
Securities Laws (Amendment) Ordinance, 2004. The Ordinance will
be replaced by a Bill to be introduced in the Winter Session
of Parliament.
In the Budget 2004-05 the Finance Minister had announced the
Government’s intention to create an appropriate trading platform
for small and mid-cap companies. To give effect to this announcement,
additional amendments, of a minor nature, in Section 13 of Securities
Contracts (Regulation) Act, 1956 (SCRA), were suggested by Securities
and Exchange Board of India (SEBI) based on the legal advice
received by them. The amendments made in this section were that
instead of the words “members of a recognized exchange”, the
words “members of a recognized stock exchange or recognized;
stock exchanges” and for the words “State or area” wherever
they occur, the words “State or States or area” have been substituted.
Besides, in order to provide safeguards against possible misuse,
a proviso was added to the effect that where any contract is
entered into between members of two or more stock exchanges
such contract shall be subject to such permission, terms and
conditions as may be stipulated by the respective stock exchange
in this regard with prior approval of SEBI.
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Allow
listed companies to declare quarterly results in 60 days: Assocham |
Industry
Chamber, Assocham has urged the Securities and Exchange Board
of India (SEBI) to allow listed companies to anounce their quarterly
results in 60 days instead of the current stipulation of 30
days.
In a letter to SEBI chariman, Mr G N Bajpai, Assocham president,
Mr M K Sanghi has demanded that the listed companies should
be permitted to announce their quarterly results within two
months of the close of quarter against the current stipulation
of thirty days, prescribed by SEBI under Clause (49) of the
listing agreement as most of them had operating subsidiaries,
besides having multiple manufacturing locations and dispersed
sale and distribution operations.
He said for large corporates with paid up capital of Rs 50 crore
or more and annual turnover of Rs 1,000 crore and above, publication
of consolidated results within 30 days posed serious challenge
and inconveniences.
In addition, there was also a practical difficulty in scheduling
audit committee meetings and board meetings within 30 days of
the close of the quarter for adopting quarterly results, leading
to bunching of audit committee and board meetings of a number
of companies in the third and fourth week of the month following
the close of the quarter.
The chamber, therefore, sought a longer period of 60 days for
complying with (Clause 49) of the listing agreement as prescribed
by SEBI to provide listed companies an opportunity to stagger
these audit committee and board meetings in a manner that will
ensure full participation by directors even when they serve
on boards of a number of public listed companies.
Mr Sanghi has further pointed out that some of the Indian listed
companies were material subsidiaries for their international
holding companies and had to be commented upon as a significant
product or geographic segments in the parent’s global portfolio.
Given the size and scale of the operations of the international
holding companies and the regulatory framework prevalent in
the European Economic Community (eec) countries where they are
listed, the quarterly results were allowed to be published as
per the latest regulation within 60 days of close of the quarter.
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SEBI
Amends Disclosure Guidelines |
At its
board meeting in Delhi today, the Securities and Exchange Board
of India, Sebi, amended disclosure guidelines and has set a
uniform disclosure format.
Bajpai said, "We had made substantial amendments in the
acquisition and takeover regulation. This was in a view to align
it and there was an assurance given to the Parliament that every
company must have atleast 25% equity in public."
The market regulator also amended the pre-issue advertisement
norms to help reduce cost. Sebi has said that pre-issue advertisements
can have minimum details. Sebi also removed curbs on appointment
of co-managers, advisors to issue.
The board was also supposed to discuss the plans for the proposed
headquarter building at Bandra-Kurla complex. The meeting was
the first one after the stock market witnessed a surge in volatility
in the recent past and after the Reserve Bank of India expressed
concern over the nature of Foreign Institutional Investments
in India.
Speaking to media on the issue of investment of Reliance Industries,
Bajpai said that Sebi has asked for some extra information from
Reliance and they have received that extra information.
Bajpai said, "On the buyback, we had already told Reliance
to make additional disclosures that were felt necessary. The
company has done it."
Investors have to take investment decisions on the basis of
financial disclosures. "Whenever, there is any deficiency
in information, we ask the company to provide additional disclosures,"
he said.
He dismissed speculations that Sebi's board had discussed the
Reliance issue following Anil Ambani's allegations that RIL
had flouted corporate governance norms but said, "Whatever
we have to do, we will do."
He also spoke about the changes in the takeover code, saying
that these changes were necessary in order to ensure a non-promoter
equity of 25%.
Sebi had recently made changes in the takeover norms for promoters
and have decided to ask the promoters, who have an equity holding
of over 75% to reduce their stake to 55% in an year's time.
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© 2005 Academy of Corporate Governance |
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