Introduction to Corporate Governance Compliance

Corporate governance is a system of rules, practices, and processes by which a company is directed and controlled. The Corporate Governance Report is an essential part of the disclosure obligations of listed companies. It provides information about how the company’s governance structure aligns with regulatory requirements, ensuring accountability, transparency, and fairness in its dealings with stakeholders, including shareholders, employees, customers, and regulators.

For listed entities in India, the corporate governance framework is primarily governed by the SEBI (LODR) Regulations, 2015, which lays down the norms for corporate governance practices.

Objectives of Corporate Governance Compliance Reports

The Corporate Governance Compliance Report serves several important purposes:

• Transparency: It helps stakeholders (investors, regulators, etc.) understand how the company is being managed and how decisions are being made.
• Accountability: By disclosing key governance information, companies hold themselves accountable to their stakeholders.
• Investor Confidence: A robust governance framework boosts investor trust, as it ensures that companies are operated ethically, with the interest of shareholders and other stakeholders in mind.
• Regulatory Compliance: Compliance with the regulations ensures that the company is adhering to the rules set by SEBI and other regulatory bodies.

Timelines for Submission

Now, the listed entities are also required to submit twice a year, on a half yearly basis (i.e. for Second and Fourth Quarter), the disclosures provided in Annex – IV at the end of every 6 months of the financial year.

The format for compliance report on Corporate Governance shall be as under:

• Annex – I – on quarterly basis;
• Annex – II – at the end of a financial year

• Annex – III – at the end of 6 months from the close of financial year.

• Annex – IV – on a half yearly basis (w.e.f. first half year of the FY 2021-22)

Important points as per format are as under:

1. CEO/CFO of the Company has to affirm that all loans (or other form of debt), guarantees, comfort letters (by whatever name called) or securities in connection with any loan(s) (or other form of debt) given directly or indirectly by the listed entity to promoter(s), promoter group, director(s) (including their relatives), key managerial personnel (including their relatives) or any entity controlled by them are in the economic interest of the company.
2. Transactions relating to Loan (or other form of debt), guarantee / comfort letter (by whatever name called) or security provided in connection with any loan or any other form of debt entered into by following class of listed companies shall exclude from disclosure in Annexure-IV to CG Report:

• by a government company to/ for the Government or government company;
• by the listed entity to/for its subsidiary (and joint-venture company) whose accounts are consolidated with the listed entity;
• by a banking company or an insurance company ; and
• by the listed entity to its employees or directors as a part of the service conditions

Conclusion

The Corporate Governance Compliance Report plays a crucial role in ensuring that listed companies maintain high ethical standards, are accountable to their stakeholders, and operate in a transparent and responsible manner. Compliance with these reporting requirements not only enhances investor confidence but also ensures that companies adhere to the legal and regulatory framework set forth by bodies like SEBI.

By regularly submitting comprehensive corporate governance reports, listed entities can demonstrate their commitment to ethical business practices, contributing to the long-term sustainability of the organization and its ability to meet shareholder expectations.

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