Mumbai February 9 : The Securities and Exchange Board of India (SEBI) has put forward a set of regulatory proposals aimed at improving corporate governance in listed companies. The key focus areas include revisions to the Annual Secretarial Compliance Report (ASCR), stricter criteria for appointing auditors, and new approval thresholds for Related Party Transactions (RPTs). The proposed changes are designed to enhance transparency and ensure better compliance.
In a consultation paper, SEBI proposed revising the format of the ASCR to make it more comprehensive and detailed. The new format will help provide clearer verification of a company’s compliance with securities laws. SEBI also suggested making the ASCR a mandatory part of a company’s annual report, which will increase overall accountability.
Regarding the appointment of auditors, SEBI has recommended incorporating key provisions from the Companies (Audit and Auditors) Rules, 2014 into the Listing Obligations and Disclosure Requirements (LODR) Regulations. This change is intended to ensure that statutory auditors have the appropriate qualifications and experience based on a company’s size and complexity. Additionally, audit committees will be required to assess the qualifications of signing partners before their appointment.
To promote transparency in the process of auditor appointments, SEBI has proposed that companies disclose key details related to the selection or reappointment of both statutory and secretarial auditors. These disclosures would be made available to the audit committee, board of directors, and shareholders, with a standard format recommended for uniformity.
SEBI’s proposals also include setting monetary limits for RPTs involving subsidiaries of listed companies. The suggested approval thresholds are:
• For subsidiaries with an established financial track record, the threshold will be the lower of 10 percent of turnover or a monetary limit of Rs 1,000 crore for main-board companies and Rs 50 crore for SMEs.
• For subsidiaries without a financial track record, the threshold will be 10 percent of the subsidiary’s net worth or the same monetary limits. If a subsidiary has a negative net worth, share capital plus securities premium will be used to determine the threshold.
To address potential ambiguities, SEBI has also proposed a clarification regarding the definition of RPTs. The amendments would specify whether exemptions for transactions between a parent company and its wholly-owned subsidiary apply to both listed and unlisted entities.
SEBI is currently seeking public feedback on these proposals, with the deadline for comments set for February 28, 2025. Stakeholders have been encouraged to share their views to help refine the proposed changes before implementation. ( With inputs from IANS)