© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Governance & disclosure in the new regime Vijaya Sampath, Senior Partner

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN 2 © COPYRIGHT 2013 LAKSHMI KUMARAN & SRIDHARAN 2 Regulations, regulators & laws Companies Act 2013 and rules For the Company depending on its classification Filings with statutory authorities KMP and management Board, committees including independent directors’ Auditors: statutory, internal, secretarial Listing and disclosure obligations Prospectus for IPO Private placement Rights issue Listed entity Company website Need to have Vs nice to have Audit report: CARO 2013 General reporting that all is well Exception reports on frauds and breach

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Companies Act 2013 Directors Report- inter alia Extract of Annual return Dividend, loans, RTP, fixed deposits, Declaration of independence of directors Nomination committee’s criteria for qualification, experience, skills, independence, policy & dissertation on remuneration Explanation of adverse remarks of statutory & secretarial audit Material changes between financial year end and date of report Any adverse order of a quasi judicial/judicial authority Implementation of risk management policy and key risks CSR initiatives and policy, risk management policy For listed companies, evaluation of Board and directors performance Directors Responsibility Statement policies for efficient conduct of business, safeguarding assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, timely preparation of reliable financial information, internal financial controls, systems to ensure compliance of all laws

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Other disclosures Financial statements Accounts of company+ consolidated + subsidiary accounts Summary of financial statements of subsidiary including associate and joint venture companies: standards same for all companies All deviations from accounting standards to be explained, failure attracts penal provisions, whether deliberate or ignorance Cash flow, explanations and schedules Related party transactions Annual return Indebtedness, borrowing limits, Information on directors, promoters, KMP, changes FII’s holding shares including all their details RTP, intercorporate loans Material changes during the year Filing with statutory authorities Board resolutions( cannot be viewed by public) Special resolutions, directors appointment/resignations General meeting, postal ballot, evoting resolutions Shareholding of top 10 with changes within 15 days

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Website & newspapers Website: information for 5 years Changing objects of a company that has raised money from public Unpaid dividend account details, press releases, notices to SE CSR, material events and other policies Financial statements of company, consolidated, subsidiary Establishment of vigil mechanism Code for independent directors, terms of appointment, evaluation Closure of register of members, notice of general meeting Postal ballot, e voting, results and resolution Newspapers Notice of meeting, bonus payment, dividend Compromise, arrangement, merger Members All meetings, explanatory statement, directors terms Right of inspection and copies of registers, records

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN LoDR Timing for filing with Stock exchanges: ranges from 30 min, 24 hours, 5 – 7 days, quarterly ( 21 days from end of quarter)- annual ( 7 days) Compliance and disclosure requirements for specified & general securities Sample of disclosure requirements Compliance report on corporate governance Material events policy and deemed material events Shareholding pattern, changes, promoter holdings Agreements with media Utilization of funds obtained through issue Financial results: quarterly, half yearly, annual Share transfer agent certification on compliance Voting, results, ballot, meeting etc Record date for corporate actions Outcome of Board meetings Impact agreements( family arrangements, JV, voting, sale, purchase) Change in directors

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Auditor CARO 2013  security on loans & advances, whether in company’s interest  Non banking/investment: sale of securities at a loss  personal expenses charged to revenue  Cash properly received on allotment  Mere book entries transactions whether prejudicial to company interest  Adequacy of internal audit systems Reporting requirements to members Adequacy of the internal financial controls system Any qualification, reservation or adverse remark on accounts Listed companies to explain qualification in director’s report Compliance with auditing standards and others as CG may prescribe Reporting requirements to government Offence involving fraud being/committed by officers/employees

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Keeping an eye or losing it for blinking CFO Key managerial personnel “Related party” to the company Jointly responsible for effective internal control systems Signatory to the FS and CFS Internal auditor CA, cost accountant or other professional at discretion of Board Draft rules recommend : Share capital of > INR 10 crores, outstanding loan or accept deposits of > INR 25 crores CG may prescribe manner and intervals for internal audit Secretarial auditor CS with certificate of practice Audit compliance with secretarial standards Report to Board on deviations, Board to explain in report Cost auditor regulated, specified, strategic sectors: manufacturing Proposal to increase minimum threshold size

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN External and internal authorities Sector regulators: Registrar of companies, SEBI, MCA, RBI National Company Law Tribunal (NCLT/NCALT) National Financial Reporting Authority Statutory and secretarial auditors Serious Fraud Investigation Office( SFIO) Key Managerial Personnel Internal auditor Directors: independent, executive, non executive Promoters Chief compliance officer

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Enhanced governance Lessons of Satyam, Sahara incorporated in Act Duties of directors: accountability Scope and composition of Board committees Code for independent directors: stringent qualifications Act in all stakeholder, community interests, environment Related party transactions: transparent and objective Interested director cannot vote at general meetings Auditor & partner rotation; no non-audit assignment Class action suits: protection for shareholders, depositors Personal liability for fraud: company, directors, auditors, audit firm, consultants, experts, advisors Dissemination of information to all at the same time Extensive disclosures and public filings

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Consequences of increasing compliances Keeping up to date with frequent changes May become risk averse, need for balance Training and awareness: KMP, directors, function managers, compliance officers, company secretaries, legal heads IT driven compliance management system, easy to use and up date Vicarious liability: may attach at times, depends on level of involvement and diligence Fighting the wrong battle if procedure rules tightened and human elements ignoredFighting the wrong battle if procedure rules tightened and human elements ignored Dealing with market and information asymmetryDealing with market and information asymmetry Directors: vigilant and pro active in questions, hesitant to actDirectors: vigilant and pro active in questions, hesitant to act

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Concerns: ease of doing business Information and data overload: duplication and excess Thresholds vary for different compliances: keeping track Perfect at times is the enemy of good Maintaining company’s strategy and confidentiality complicated LoDR may even serve as a disincentive for listing Independent directors’ increased responsibility Personally liable for fraud Disqualified for multiple reasons Certification on controls, risk management, systems for legal compliance KMP/MD/WTD disqualified for INR 1000/fine under various laws Mergers to be notified to all authorities: next to impossible to close Updates on Commercial dealings of financially independent relatives Are multiple compliances and filings an employment generation scheme Numerous meetings, postal ballots, notices through registered post, bulging annual report

© COPYRIGHT 2012, LAKSHMIKUMARAN & SRIDHARAN Copyright 2015, Lakshmikumaran & Sridharan / Confidential Founded by V. Lakshmikumaran and V. Sridharan in 1985, Lakshmikumaran & Sridharan (L&S) is one of the largest integrated law firms in India with over 500 professionals, including 41 partners. The firm has eleven offices located across India in New Delhi, Gurgaon, Mumbai, Bengaluru, Chennai, Hyderabad, Ahmedabad, Pune, Kolkata and Chandigarh. In Europe, the firm’s office is in Geneva and London. It specializes in the areas of Corporate law, Customs & International Trade, Taxation and Intellectual Property. The firm has handled more than 40,000 litigation cases before various fora both in India and abroad including 3,000 cases before the Supreme Court of India. For more information, visit us at and This presentation is prepared based on the applicable laws in India as on April 28, 2016 and is limited in scope. It is meant for information purpose only and does not purport to be advice or opinion, legal or otherwise, whatsoever. Lakshmikumaran & Sridharan does not intend to advertise its services through this presentation. Lakshmikumaran & Sridharan or its associates are not responsible for any error or omission in this presentation or for any action taken based on its contents. © 2016 Lakshmikumaran & Sridharan. All rights reserved.