Capital markets regulator SEBI on Tuesday floated a consultation paper seeking comments from public on propsals to strengthen corporate governance in listed entities. The proposal seeks to empower shareholders, the consultation paper said. Zee Business Brajesh Kumar reports!

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Binding Agreement  

One of the proposals put in the conultation paper is that it will be binding on the companies to get shareholder approval on the binding agreements of the companies. All agreements pertaining to management and control will require shareholders’ permission. From 1 April 2023, all binding agreements will also require mandatory disclosures by the companies.

The companies will have to put all the information related to binding agreements in their annual reports at one place. Promoters will have to give information on binding agreements to the respective companies by 31 May.

The company board will have to give its view on the binding agreements and will have to spell out the benefits from it.

The binding agreement will not be considered valid until the company getsapproval from the shareholders.

The approval has to be sought through special resolution, majority of minority voting.

Under the current rules, the companies are required to give disclosures by 30 June. 

The SEBI has also proposed if current binding agreements should get approval on first AGM of FY23-24. 

Special Rights are not permanent

- Special rights given to certain shareholders will not be permanent 

- A shareholders’ approval will be required on this once every 5 year

- Many a times, Pre-IPO gives such rights to investors, promoters 

- There is a growing concern about these special rights given in cae of new age companies 

- Many times nomination rights are given without certain shareholders having significant shareholding

- Principally rights should be given in accordance to the shareholding 

- Shareholders’ approval mandatory within 5 years according special rights 

- The companies will have to take approval within 5 years for ongoing special rights

Shareholders’ approval will be required on sale of property 

- In certain cases, the rules governing sale of properties quite stringent

- Conditions on comapany’s, shares or sale of subsidiary

- Sale only when public vote in favour higher to those opposing it

- This condition will be apart from that of special resolution 

 No permanent seat on board 

- No mememer will enjoy a permanent seat on the baord

- Seat by article/not-liable to retire by rotation 

- Shareholders’ voting required for appointment of all directors 

- Shareholders’ approval will be required in all AGMs post 1 April 

- By all means, it will be mandatory to get shareholders’ approval in every 5 years 

- Their will be relaxation in those cases where appointments have been made by courts or tribunals