Uday Kotak Committee Recommendations on [SEBI (LODR) Regulation, 2015] By CS Aakanchha Vyas

Uday Kotak Committee Recommendations on [SEBI (LODR) Regulation, 2015]

The SEBI has formed a committee on 2nd June,2017 under the chairmanship of Mr. Uday Kotak with the aim of improving standards of corporate governance of listed companies

in India. The committee has submitted its report on 5th October,2017.

In my this article, I am sharing the highlights of the committee recommendations, hope it will be helpful for all of you.

The terms of the reference of the committee:-

  • Ensuring independence in spirit of Independent Directors and their active participation in functioning of the company.
  • Improving safeguards and disclosures pertaining to Related Party Transactions;
  • Issues in accounting and auditing practices by listed companies;
  • Improving effectiveness of Board Evaluation practices; 
  • Addressing issues faced by investors on voting and participation in general meetings;
  • Disclosure and transparency related issues. 




Minimum Number of Directors

The Act requires, minimum three directors in case of public listed company.

No specific provisions in LODR

Insert a new clause in regulation 17 of LODR:-

The Board of listed entities shall comprise minimum six directors.

Gender Diversity on Board

Sec 149, of the act provides that the Board shall have a women director.

Regulation 17(1)(a), provides that the board shall have an optimum combination of ED &NED with at least one women director.

The committee recommends that the every listed company should have one independent women director.

Attendance of Directors

Sec 167(1), the office of the directors shall become vacant, if the director is absent from all the meetings of the Board held during a 12 month period.

No provisions in LODR

Insertion of a new sub regulation providing that if a director does not attend atleast half of the total number of board meetings over two financial years on a rolling basis, his/her continuance on the board should be ratified by the shareholders at the next annual general meeting.

Disclosures of Skills of Directors

Companies Act and LODR requires, disclosure of brief details of directors, his/her expertise in functional areas, experience etc. However there is no specific requirement in act and lodr, regarding disclosure of expertise of the Board on regular basis.

The committee recommends to insert a new clause in schedule V, that every listed company should disclose in its annual report the details of competencies of every director along with their names.

Minimum number of Board meetings

As per the provision of companies act & listing regulation, every listed company shall hold 4 board meetings in a year with maximum gap of 120 days between two meetings.

The committee recommends that the Board of every listed company should meet five times in a year with maximum gap of 120 days between two meetings and and at least once a year, the board shall specifically discuss strategy, budgets, board evaluation, risk

management, ESG (environment, sustainability and governance) and succession planning.

Quorum of Board meetings

According to the proviso of companies act, the quorum of the Board meetings 1/3rd or two directors whichever is higher.

The quorum for every

board meeting of the listed

entity should be a minimum of three directors or one-third of the total strength of the board of directors, whichever is higher, including at least one independent director.

Maximum number of Directorship

The Act provides that the maximum number of public companies in which a person can be appointed as a director shall not exceed ten.

The committee recommends to insertion of new regulation 17A,

No person shall hold office as a director, including any alternate directorship, in more than eight listed entities at the same time (of which independent directorships shall not exceed seven), with effect from April 1, 2019 and not more than seven listed entities with effect from April 1, 2020:

Disclosure of RPT

(a) No specific provision on half yearly disclosure of RPTs


(b) The annual report shall contain any other

disclosures specified in Companies Act, 2013 along with other requirements as specified in Schedule V of these regulations

The committee recommends to insertion of new clause in regulation 33

The listed entity shall submit within 30 days of publication of its standalone and consolidated financial results for the half year, disclosures of related party transactions on a consolidated basis, in the format prescribed in the relevant accounting standards for annual results, to the stock exchanges and publish the same on its website.


The annual report shall include disclosures of transactions of the listed entity with any person or entity belonging to the

promoter/promoter group which hold(s) 10% or more shareholding in the listed entity, in the format prescribed in the relevant accounting standards for annual results.

Approval of RPT

According to the regulation 23, all entities falling under the definition of related parties shall abstain from voting irrespective of whether the entity is a party to the particular transaction or not.

The committee recommends to amend the existing regulation to allow the related party to vote but not to approve the relevant transaction. The related

parties may vote even


Prior Intimation of Board Meeting to Discuss Bonus Issue:-

In view of the price sensitive nature of bonus issues, advance notice for consideration of bonus issue by the board should be required to be submitted to stock exchanges.

Timeline for Annual General Meetings of Listed Entities:-

Initially, the top 100 listed entities by market capitalization (as at the end of the previous financial year) may be required to hold AGMs by August 31, 2018, i.e. within five months from the end of the next financial year.

Remuneration of Non- Executive Directors:-

The committee recommends to insertion of a new clause under regulation 17 to provide that where the remuneration of a single non-executive director exceeds 50% of the pool being distributed to the non-executive directors as a whole, shareholder approval should be required.

Remuneration of Executive Directors:-

The committee recommends to insertion of a new clause under regulation 17 for providing remuneration payable to executive director with approval of members. Shareholder approval by special resolution should be required if the total remuneration paid: 

a) To a single executive promoter-director exceeds Rs. 5 crore or 2.5% of the net profit, whichever is higher; or

b) To all executive promoter-directors exceeds 5% of the net profits.
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