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  • Birla Committee Recommendations in Corporate Governance

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    LIZMARIA SEBY
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    The Birla Committee was formed in 1999 by SEBI to review corporate governance practices of listed companies from an investor perspective and recommend improvements. It made 25 recommendations, dividing them into 19 mandatory and 6 non-mandatory. Mandatory recommendations included requiring boards to have independent directors, setting up audit and remuneration committees, and disclosing financial and operational information. Non-mandatory recommendations covered the role of the chairman, shareholder rights, and processes for critical business decisions. The recommendations aimed to standardize and improve governance practices for investor protection.

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    The Birla Committee was formed in 1999 by SEBI to review corporate governance practices of listed companies from an investor perspective and recommend improvements. It made 25 recommendations, dividing them into 19 mandatory and 6 non-mandatory. Mandatory recommendations included requiring boards to have independent directors, setting up audit and remuneration committees, and disclosing financial and operational information. Non-mandatory recommendations covered the role of the chairman, shareholder rights, and processes for critical business decisions. The recommendations aimed to standardize and improve governance practices for investor protection.

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    50 views10 pages

    Birla Committee Recommendations in Corporate Governance

    Uploaded by

    LIZMARIA SEBY
    The Birla Committee was formed in 1999 by SEBI to review corporate governance practices of listed companies from an investor perspective and recommend improvements. It made 25 recommendations, dividing them into 19 mandatory and 6 non-mandatory. Mandatory recommendations included requiring boards to have independent directors, setting up audit and remuneration committees, and disclosing financial and operational information. Non-mandatory recommendations covered the role of the chairman, shareholder rights, and processes for critical business decisions. The recommendations aimed to standardize and improve governance practices for investor protection.

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    of 10

    Birla Committee Recommendations

    in Corporate Governance

    Presented by,
    Liz Maria
    Introduction

     Second major initiative taken by SEBI on 7th May 1999.

     Appointment of committee under chairmanship of


    Mr. Kumar Mangalam Birla

     The Committee made 25 recommendations, 19 of them


    were ‘mandatory’.
    Why was the committee
    formed?

    The primary objective of the committee was to view


    corporate governance from the perspective of the
    investors and shareholders

    To promote and raise the standard of corporate


    governance.
    The Term “Committee”.
    Suggest suitable amendments to the listing agreement
    executed by the stock exchanges with the companies and
    any other measures to improve the standards of corporate
    governance in the listed companies in areas such as
     continuous disclosure of material information (both
    financial and non-financial)
     manner and frequency of such disclosures
     responsibilities of independent and outside directors
     draft a code of corporate best practices
     suggest safeguards to be instituted within the companies
    to deal with insider information and insider trading.
    The committee divided the recommendations into two
    categories, namely,

    • Mandatory
    The recommendations which are absolutely essential for
    corporate governance can be defined with precision and
    which can be enforced through the amendment of the listing
    agreement is classified as mandatory.

    • Non- Mandatory
    Others, which are either desirable or which may require
    change of laws be classified as non-mandatory.
    Mandatory Recommendations

     The mandatory recommendations apply to the listed companies


    with paid up share capital of 3 crore and above.

     Composition of board of directors should be optimum combination


    of executive & non-executive directors.

     Audit committee should contain 3 independent directors with one


    having financial and accounting knowledge.

     Remuneration committee should be setup


     The Board should hold at least 4 meetings in a year with maximum
    gap of 4 months between 2 meetings to review operational plans,
    capital budgets, quarterly results, minutes of committee’s meeting.

     Director shall not be a member of more than 10 committee and


    shall not act as chairman of more than 5 committees across all
    companies

     Management discussion and analysis report covering industry


    structure, opportunities, threats, risks, outlook, internal control
    system should be ready for external review

     Any Information should be shared with shareholders in regard to


    their investments.
    Non-Mandatory
    Recommendations
    The committee made several recommendations with reference to:

     Role of chairman
     Remuneration committee of board
     Shareholders’ right for receiving half yearly financial performance.
     Postal ballot covering critical matters like alteration in memorandum
     Sale of whole or substantial part of the undertaking
     Corporate restructuring
     Further issue of capital
     Venturing into new businesses
    Conclusion :
     These recommendations were to apply to all the listed
    private and public sector companies, their directors,
    management, employees and professionals associated
    with such companies.

    The Committee recognizes that compliance with the


    recommendations would involve restructuring the
    existing boards of companies. It also recognizes that
    smaller ones will have difficulty in immediately
    complying with these conditions.
    THANKYOU…

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