Page 28 - Banking Finance October 2020

ARTICLE

members to be Independent Directors with Chair of the
audit committee to also be an Independent Director.
6. Related party transactions monitoring has been made
more stringent.
7. The disclosures norms relating to Director's
compensation, performance, training etc have been
made more stringent.

8. E voting has been made mandatory which will improve
the say of, minority shareholders in the affairs of the
company.

In year 2019, rules pertaining to Significant Beneficial
Ownership also came into existence. These rules defined in
Committee under the Chairmanship of Sh Uday Kotak on
detail who is a significant beneficial owner and what are the
corporate governance. SEBI accepted some of the following
returns that he needs to file? The concept of Significant
Beneficial Ownership was incorporated to catch those recommendations of the committee:
1. Eligibility criteria for independent directors, was
individuals whose name do not appear is register of
members and who hold a significant beneficial ownership in expanded.
a company. 2. Maximum number of directorship was reduced from 10
to 7 by 01.04.2020.
While keeping in view the recent spate of corporate frauds
3. Role of risk management committee, nomination and
and default towards banks, Ministry of Corporate Affairs remuneration committee and audit committee was
(MCA) has introduced new set of Companies (Auditors
enhanced.
Report) Order 2020, which has an objective of instilling faith
and improve transparency in financial statements. A new 4. Auditor's credentials, reasons for resignation of
order has extended the applicability of CARO 2020 to FY auditors, audit fee etc to be disclosed.
2020-21 onward. Some of the points in CARO 2020 include: 5. Expertise of the directors to be disclosed.
1. Auditor has to disclose whether company has made any
cash loss in current or previous financial year. Disclosures to be made under Corporate
2. When a new auditor has been appointed after Governance:
resignation of the previous one, the new auditor has to Disclosures are important to ensure and maintain the
address the concerns raised by the previous auditor.
transparency in the affairs of the company. Few disclosures
3. Auditor need to analyse various financial ratios and are made in the annual report of the company like- financial
comment whether the company will be able to meet and accounts related disclosures, business information, key
its liabilities in next year. employee important information, audit committee related
4. Auditor need to comment whether funds raised for short information etc. Similarly some of the important disclosures
have to be posted on the company's website like- code of
term purpose have been used for long term.
conduct, criteria of payment to Non Executive Directors,
5. Auditor has to give a detailed report when the company
Quarterly results etc. Disclosures to stock exchanges
has raised funds for its subsidiary or Joint venture.
include quarterly results and quarterly compliance report on
6. Auditor need to mention if company has defaulted in Clause 49.
repayment of loans or interest thereon to ANY of its
lenders (includes other than financial institutions or Major Issues and Challenges in
banks).
Corporate Governance
In recent past there had been appointment of Kotak One of the major issues in India regarding Corporate

28 | 2020 | OCTOBER | BANKING FINANCE