Pavan Kumar Vijay Past President, ICSI Compliance under  SEBI Regulations and Guidelines Corporate Compliance Management  ...
Do you usually confront with these?? I don’t know which laws are applicable How to make compliances on time?  I am bored o...
Outstanding Performance,  Higher Profits,  Expanded Market Reach and the like   FAILS  to protect a company  which has put...
Secret behind building foundations ..…Only the culture of  strict adherence to good compliance  can keep a company  ahead ...
Disclosure & Transparency Compliance in Letter Compliance in Letter & Spirit Filing the Gap
Designing  effective & user friendly  COMPLIANCE MANAGEMENT SYSTEM to lay down strong foundation for  GOOD GOVERNANCE
Compliance of Rules & Regulations  Good Corporate Governance
Benefits of Effective Compliance To Industry  Better Investors confidence Brand Value Enhancement  Reduced risk of embarra...
IMPLEMENTING EFFECTIVE   COMPLIANCE MANAGEMENT SYSTEM
<ul><li>ROLE OF  </li></ul><ul><li>CS  ?? </li></ul>
Coporate Governance in System  <ul><li>Clause 49 of Listing Agreement:   </li></ul><ul><li>“  The Board shall periodically...
<ul><li>ENSURING </li></ul><ul><li>COMPLIANCE OF ALL LAWS   </li></ul><ul><li>Therefore,  </li></ul><ul><li>WE ARE ANSWERA...
What is Compliance of all laws?? <ul><li>Compliance of all laws   </li></ul><ul><li>Not just any another compliance  ……………...
HIDDEN KHAZANA for  all   STAKEHOLDERS   Company Professional INVESTORS GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS CUSTOM...
EXPLAINING THE PROCESS   <ul><li>TEXTILE INDUSTRY </li></ul><ul><li>Manufacturing & Trading  </li></ul><ul><li>1000 worker...
Identification of applicable laws <ul><li>General Laws   </li></ul><ul><li>Companies Act, 1956 </li></ul><ul><li>Securitie...
Compliance Timings: Evaluation  Compliance Timings  Fixed / Regular  Event Based
The assessment process: <ul><li>Identify the gap between the present compliance system and the results of evaluation proce...
Simplification: The Next Move <ul><li>Developing Compliance Management Tools </li></ul>C hecklist Law wise   Period wise
Corporate Compliance Management   Compliance under  SEBI Regulations and Guidelines SEBI (SAST) Regulations,  1997 SEBI (P...
Topics Covered
SEBI (SAST) Regulations, 1997
Key Regulations Regulation 3(3) Regulation 3(4) Regulation 3(5) Regulation 6 Regulation 7 Regulation 8 Regulation 10, 11 &...
Disclosures Requirements
Thresholds Defined Acquisition of more than   5%, 10%, 14%, 54% & 74%   [Regulation 7 (1)] Persons, who are holding betwee...
Compliance Chart – Regulation 6 Regulation No. By whom To whom Time limit ( from date of notification ) 6(1) Any person ho...
Compliance Chart – Regulation 7 Regulation No. By whom To whom Time limit 7(1) Any person who acquires more than 5%, 10%, ...
Thresholds Defined Disclosures by  Promoters or Person having control over a company  [ Regulation 8 (2 )] Disclosure by P...
Compliance Chart – Regulation 8 Regulation No. By whom To whom When Time limit 8(1) Any person who holds more than 15% sha...
Query Whether an unlisted Company is also required to make disclosure under regulation 6, 7 & 8? Yes If an unlisted Compan...
Query Whether dispatch of disclosures is sufficient to ensure compliance? No The proof of dispatch is not sufficient to pr...
Whether shares held by all persons acting in concert with acquirer have to be taken into account for determining whether r...
Whether regulation 7(1) enjoins on any acquirer to report his shareholding once  it exceeds 5 per cent regardless of wheth...
Thresholds Defined-Regulation 8A Disclosure by Promoters or Person forming part of promoter group about the shares pledged...
Compliance Chart – Regulation 8A Regulation No. By whom To whom When  (Event) Time limit 8A(1) Promoter or person forming ...
Compliance Chart – Regulation 8A Regulation No. By whom To whom When Time limit 8A (4) Company Stock Exchange On receipt o...
Thresholds Defined Acquisition of  15% or more voting rights   [Regulation 10] Persons, who are holding between  15% - 55%...
Compliance Chart – Regulation 10, 11& 12 Regulation No. By whom To whom When  (Event) Time limit 10 Acquirer or by his  PA...
Compliance Chart – Regulation 10, 11& 12 Regulation No. By whom To whom When  (Event) Time limit 11(2) Acquirer or  along ...
Amendment in Regulation 11 (2) w.e.f. October 31, 2008 Proviso to Regulation 11 (2) Extra limit of 5% is allowed to person...
SEBI (Prohibition of Insider Trading) Regulations, 1992
What Is INSIDER TRADING?
Insider Trading It is  dealing in  the securities  by a  Insider ,  who has the knowledge of  material  “inside”  informat...
Who Is Insider ???
Reg 2 (e) ANY PERSON WAS IS  CONNECTED  WITH THE COMPANY WHO OR OR DEEMED TO HAVE BEEN CONNECTED AND WHO IS REASONABLY EXP...
Reg 2 (ha) ANY INFORMATION OR AND TO A COMPANY LIKELY TO  MATERIALLY AFFECT  THE PRICE OF  SECURITIES OF THE COMPANY INDIR...
Disclosures  To be  Made
Reg 13(1) Disclosures To be  Made PARTICULARS TO BE SUBMITTED To PERIOD  Initial disclosure by person who holds  more than...
Reg 13(2) Disclosures To be  Made PARTICULARS TO BE SUBMITTED To PERIOD  Initial disclosure by person who is either  direc...
Reg 13(3 & 5) Disclosures To be  Made PARTICULARS TO BE SUBMITTED To PERIOD  Continual disclosure by person who holds more...
Reg 13(4 & 5) Disclosures To be  Made PARTICULARS TO BE SUBMITTED To PERIOD  Continual disclosure by person who is either ...
Reg 13(6) Disclosures To be  Made PARTICULARS TO BE SUBMITTED To PERIOD  Disclosure by the company on the receipt of infor...
Modal  Code  of Conduct
Code of Conduct to be Abide By Reg 12 <ul><li>All Listed Companies  </li></ul><ul><li>Organizations Associated with Securi...
<ul><li>The Professional Firms  </li></ul><ul><ul><li>Such as  Auditors, Accountancy Firms, Law Firms ,  </li></ul></ul><u...
Model Code of Conduct Schedules SCHEDULE I  MODEL CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING   PART A -  FOR LISTED...
Important Terms  In Code of Conduct
<ul><li>PSI  should be disclosed only to those within the company  who need the information to discharge their duty .  </l...
Model Code of Conduct <ul><li>All   D/O/E   of the Co who intend to deal in the securities beyond a limit  should pre-clea...
<ul><li>Company shall specify a   trading period ,   to be called &quot;Trading Window&quot;, for trading in the company’s...
<ul><li>To  restrict trading in certain securities  and designate such list as  restricted / grey list.  </li></ul><ul><li...
<ul><li>&quot;Chinese Wall&quot;  policy  demarcates “inside areas” from &quot;public areas&quot;. </li></ul><ul><li>Those...
Interesting  Judgements on Insider Trading
MATTER OF DEBATE WHETHER AN ACTION UPON ANY PRICE SENSITIVE  INFORMATION WHICH TURN OUT TO BE INCORRECT FALLS UNDER INSIDE...
MATTER OF DEBATE WHEN AN PRICE SENSITIVE INFORMATION WILL BE  TREATED AS MADE PUBLIC  DSQ HOLDINGS VS. SEBI HELD THE DAY O...
SEBI (ESOS & ESPS) Guidelines, 1999
Objectives <ul><li>The main objectives of implementing ESOPs are as under: </li></ul><ul><li>  </li></ul><ul><li>Link pers...
Legal Provisions relating to ESOS
Legal Provisions relating to ESOS
Eligibility to participate in ESOS An Employee Other than Employee who is promoter Employee who belongs to Promoter Group ...
Constitution of Compensation Committee
Important Provisions <ul><li>Minimum vesting period of one year between the date of grant of option and vesting of option....
<ul><li>The Board of Directors shall place the following documents at each AGM: </li></ul><ul><li>  Directors’ report cont...
ESOS Valuation and Accounting Calculation of Fair Market Value On the date of Vesting of Option Listed Company Unlisted Co...
Compliance Under Listing Agreement Activity Time Line CLAUSE 16    Notice for Book Closure/ Record Date In case of Right i...
Compliance Under Listing Agreement CLAUSE 19(a),(d)    Board meeting notice for dividend, convertible debentures, buy-back...
Compliance Under Listing Agreement CLAUSE 31    Periodical Reports As soon as they are issued Notices, resolutions, circul...
Compliance Under Listing Agreement CLAUSE 35    Share Holding Pattern Within 21 days of the end of each quarter  CLAUSE 38...
Compliance Under Listing Agreement CLAUSE 40 A    Minimum Level of Public Shareholding The company shall maintain on a con...
Compliance Under Listing Agreement CLAUSE 49    Compliance report on corporate governance signed by CEO/Compliance officer...
Advantages of Corporate Compliance <ul><li>Easy Quantification of risk  </li></ul><ul><li>Establishing Risk appetite   </l...
Good Corporate governance Reduces Risk  Higher Profits Higher Valuation of Company  RESULT OF GOOD CORPORATE COMPLIANCE MA...
E xellence <ul><li>Happy Company  </li></ul><ul><li>Happy Management </li></ul><ul><li>Happy Investors </li></ul><ul><li>H...
The Conclusion is ……….   Make Your Company  GOOD GOVERNED COMPANY
Thank You Pavan Kumar Vijay  Managing Director  Corporate Professionals (India) Pvt. Ltd. D – 28, South Ext- I, New Delhi ...
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Corporate Compliance Management

  1. 1. Pavan Kumar Vijay Past President, ICSI Compliance under SEBI Regulations and Guidelines Corporate Compliance Management 27.03.2010
  2. 2. Do you usually confront with these?? I don’t know which laws are applicable How to make compliances on time? I am bored of Stereotyped Compliance system
  3. 3. Outstanding Performance, Higher Profits, Expanded Market Reach and the like FAILS to protect a company which has put good governance & ethics at the back burner…. History is Witness S U C E S S D I S A S T E R
  4. 4. Secret behind building foundations ..…Only the culture of strict adherence to good compliance can keep a company ahead on sustainable basis , bring in larger profits…
  5. 5. Disclosure & Transparency Compliance in Letter Compliance in Letter & Spirit Filing the Gap
  6. 6. Designing effective & user friendly COMPLIANCE MANAGEMENT SYSTEM to lay down strong foundation for GOOD GOVERNANCE
  7. 7. Compliance of Rules & Regulations Good Corporate Governance
  8. 8. Benefits of Effective Compliance To Industry Better Investors confidence Brand Value Enhancement Reduced risk of embarrassment due to defaults
  9. 9. IMPLEMENTING EFFECTIVE COMPLIANCE MANAGEMENT SYSTEM
  10. 10. <ul><li>ROLE OF </li></ul><ul><li>CS ?? </li></ul>
  11. 11. Coporate Governance in System <ul><li>Clause 49 of Listing Agreement: </li></ul><ul><li>“ The Board shall periodically review compliance </li></ul><ul><li>reports of all laws applicable to the company , </li></ul><ul><li>prepared by the company as well as steps taken by </li></ul><ul><li>the company to rectify instances of non-compliances.” </li></ul>
  12. 12. <ul><li>ENSURING </li></ul><ul><li>COMPLIANCE OF ALL LAWS </li></ul><ul><li>Therefore, </li></ul><ul><li>WE ARE ANSWERABLE…… </li></ul>
  13. 13. What is Compliance of all laws?? <ul><li>Compliance of all laws </li></ul><ul><li>Not just any another compliance ……………… it is a “ HIDDEN KHAZANA ” for all stakeholders . </li></ul>
  14. 14. HIDDEN KHAZANA for all STAKEHOLDERS Company Professional INVESTORS GOVERNMENT AND REGULATORS SOCIETY SUPPLIERS CUSTOMERS LENDERS
  15. 15. EXPLAINING THE PROCESS <ul><li>TEXTILE INDUSTRY </li></ul><ul><li>Manufacturing & Trading </li></ul><ul><li>1000 workers </li></ul><ul><li>Export process </li></ul><ul><li>Polluting Unit </li></ul><ul><li>Unlisted Company </li></ul><ul><li>Haryana </li></ul>IDENTIFICATION, EVALUATION & ASSESSMENT AT ONE PLACE…
  16. 16. Identification of applicable laws <ul><li>General Laws </li></ul><ul><li>Companies Act, 1956 </li></ul><ul><li>Securities Law </li></ul><ul><li>Income Tax Act, 1961 </li></ul><ul><li>Area Specific </li></ul><ul><li>All laws applicable to </li></ul><ul><li>Uttar Pradesh City </li></ul><ul><li>Sector Specific </li></ul><ul><li>Excise Act </li></ul><ul><li>Factories Act </li></ul><ul><li>International Transaction </li></ul><ul><li>FEMA , 1999 </li></ul><ul><li>No of Employees </li></ul><ul><li>Factories Act, 1948 </li></ul><ul><li>Payment of Wages Act, 1936 </li></ul><ul><li>Contract Labour (regulation & abolition) act, 1970 </li></ul><ul><li>Subjective </li></ul><ul><li>Air (Prevention of Pollution Control) Act, 1981 </li></ul><ul><li>Environment (Prevention of pollution control) Act, 1986 </li></ul>
  17. 17. Compliance Timings: Evaluation Compliance Timings Fixed / Regular Event Based
  18. 18. The assessment process: <ul><li>Identify the gap between the present compliance system and the results of evaluation process </li></ul>
  19. 19. Simplification: The Next Move <ul><li>Developing Compliance Management Tools </li></ul>C hecklist Law wise Period wise
  20. 20. Corporate Compliance Management Compliance under SEBI Regulations and Guidelines SEBI (SAST) Regulations, 1997 SEBI (PIT) Regulations, 1992 SEBI (ESOS & ESPS) Guidelines, 1999
  21. 21. Topics Covered
  22. 22. SEBI (SAST) Regulations, 1997
  23. 23. Key Regulations Regulation 3(3) Regulation 3(4) Regulation 3(5) Regulation 6 Regulation 7 Regulation 8 Regulation 10, 11 & 12 Regulation 20(4) & 20(5) Clause 40A of Listing Agreement Regulation 3 (1) Exemptions under Takeover Code Regulation 4 Takeover Panel Exemptions Definitions Regulation 2 Disclosures & Compliances Open Offer Provisions
  24. 24. Disclosures Requirements
  25. 25. Thresholds Defined Acquisition of more than 5%, 10%, 14%, 54% & 74% [Regulation 7 (1)] Persons, who are holding between 15% - 55%, acquisition/ sale aggregating 2% or more share capital/ voting rights [Regulation 7(1A)] Person holding more than 5% shares and Promoter or any person having control over the company.(Transitional Provisions) [Regulation 6]
  26. 26. Compliance Chart – Regulation 6 Regulation No. By whom To whom Time limit ( from date of notification ) 6(1) Any person holding More than 5% shares or voting rights Target Company within 2 months 6(2) Target Company All Stock Exchanges where shares are listed within 3 months 6(3) Promoter or any person having control over the company Target Company within 2 months 6(4) Target Company All Stock Exchanges where shares are listed within 3 months
  27. 27. Compliance Chart – Regulation 7 Regulation No. By whom To whom Time limit 7(1) Any person who acquires more than 5%, 10%, 14%, 54%, 74% Target Company & Stock Exchanges where shares are listed Within 2 Days of Acquisition 7 (1A) Any person who holds 15%-55% shares and purchases/sells 2% or more of shares or Any person who holds 55%-75% shares and purchases 2% or more of shares in terms of second proviso to regulation 11(2) Target Company & Stock Exchanges where shares are listed Within 2 Days of purchase/sale 7 (3) Target Company All Stock Exchanges where shares are listed Within 7 Days of receipt of information
  28. 28. Thresholds Defined Disclosures by Promoters or Person having control over a company [ Regulation 8 (2 )] Disclosure by Person holding more than 15% shares [ Regulation 8(1 )] Disclosures by Target Company [ Regulation 8 (3 )]
  29. 29. Compliance Chart – Regulation 8 Regulation No. By whom To whom When Time limit 8(1) Any person who holds more than 15% shares Company As on 31 st March 21 Days 8 (2) Promoters or person having control over a company Company As on 31 st March Record Date 21 Days 8 (3) Target Company Stock Exchange As on 31 st March Record Date 30 Days 8 (4) Maintenance of Register of Holdings
  30. 30. Query Whether an unlisted Company is also required to make disclosure under regulation 6, 7 & 8? Yes If an unlisted Company acquirers or holds shares/voting rights of a Listed Company beyond the limits specified under regulation 6, 7 & 8, then it is also required to make disclosures as any other acquirer. DALP Tradepool Pvt. Ltd – IG
  31. 31. Query Whether dispatch of disclosures is sufficient to ensure compliance? No The proof of dispatch is not sufficient to prove compliance. The obligation is to ensure delivery to the stock exchange. Therefore, proof of delivery should be produced. Sudeep Chitlangia vs. AO
  32. 32. Whether shares held by all persons acting in concert with acquirer have to be taken into account for determining whether regulation 7 gets triggered? Query Yes The shares held by all the persons, who act in concert with the acquirer, are to be taken into account for determining whether regulation 7 gets triggered. Radheshyam Tulsian –SAT
  33. 33. Whether regulation 7(1) enjoins on any acquirer to report his shareholding once it exceeds 5 per cent regardless of whether his shareholding was acquired or reacquired? No, disclosures under regulation 7 are required to be made as and when the acquirers’ shareholding exceeds the threshold limits because the compliance under regulation 7 is not one time compliance. E.g. A person has acquired more than 5% shares and accordingly made disclosures under regulation 7(1), and then he sells 2% shares. Now, he will again be required to make disclosures, if his shareholding again crossing the limit of 5% on further acquisitions. Query
  34. 34. Thresholds Defined-Regulation 8A Disclosure by Promoters or Person forming part of promoter group about the shares pledged before notification [ Regulation 8A(1) ] Disclosures by Promoters or Person forming part of promoter group on pledge of share.[ Regulation 8A (2) ] Disclosures by Promoters or Person forming part of promoter group on invocation of pledge .[ Regulation 8A (3) ] Disclosures by Company when shares pledged exceeds 25000 or 1% of share capital .[ Regulation 8A (4) ]
  35. 35. Compliance Chart – Regulation 8A Regulation No. By whom To whom When (Event) Time limit 8A(1) Promoter or person forming part of the promoter group Company Details of shares pledged before notification Within 7 working Days of notification 8A (2) Promoter or person forming part of the promoter group Company On pledge of single shares Within 7 working days of pledge 8A(3) Promoter or person forming part of the promoter group Company On invocation of pledge Within 7 working days of invocation of pledge
  36. 36. Compliance Chart – Regulation 8A Regulation No. By whom To whom When Time limit 8A (4) Company Stock Exchange On receipt of information under regulation 8A (1), (2) and (3) if the total number of shares pledged during the quarter exceeds 25000 or 1% of the total paid up capital of the company Within 7 working days of receipt of information
  37. 37. Thresholds Defined Acquisition of 15% or more voting rights [Regulation 10] Persons, who are holding between 15% - 55%, acquisition more than 5% or more voting rights in a financial year.[Regulation 11(1)] Persons, who are holding between 55% - 75% , acquisition of any additional single share or voting right [Regulation 11(2)] Acquisition of Control or Change in Control with or without acquisition of shares [Regulation 12]
  38. 38. Compliance Chart – Regulation 10, 11& 12 Regulation No. By whom To whom When (Event) Time limit 10 Acquirer or by his PAC Shareholders of Target Company Acquisition of 15% or more voting rights Within 4 working Days of entering in to agreement for acquisition of share/voting rights 11(1) Acquirer or along with PAC holding equal or more than 15% but less than 55% of shares/ voting rights Shareholders of Target Company Acquisition of 5% or more shares or voting rights in Financial Year Within 4 working Days of entering in to agreement for acquisition of share/voting rights
  39. 39. Compliance Chart – Regulation 10, 11& 12 Regulation No. By whom To whom When (Event) Time limit 11(2) Acquirer or along with PAC holding equal or more than 55% but less than 75% of shares/ voting rights Shareholders of Target Company Acquisition of any additional single share or voting right Within 4 working Days of entering in to agreement for acquisition of share/voting rights 12 Acquirer or by his PAC Shareholders of Target Company Acquisition of control irrespective of with or without acquisition of shares Within 4 working Days of occurring the event
  40. 40. Amendment in Regulation 11 (2) w.e.f. October 31, 2008 Proviso to Regulation 11 (2) Extra limit of 5% is allowed to persons holding 55%-75% shares Routes Allowed Purchase through Open market Buy-back Routes Dis-allowed Bulk Deal Block Deal Off-market Preferential Allotment
  41. 41. SEBI (Prohibition of Insider Trading) Regulations, 1992
  42. 42. What Is INSIDER TRADING?
  43. 43. Insider Trading It is dealing in the securities by a Insider , who has the knowledge of material “inside” information which is not known to the general public
  44. 44. Who Is Insider ???
  45. 45. Reg 2 (e) ANY PERSON WAS IS CONNECTED WITH THE COMPANY WHO OR OR DEEMED TO HAVE BEEN CONNECTED AND WHO IS REASONABLY EXPECTED TO HAVE ACCESS HAS RECEIVED HAS HAD ACCESS OR OR TO UNPUBLISHED PRICE SENSITIVE INFORMATION INSIDER
  46. 46. Reg 2 (ha) ANY INFORMATION OR AND TO A COMPANY LIKELY TO MATERIALLY AFFECT THE PRICE OF SECURITIES OF THE COMPANY INDIRECTLY DIRECTLY Price Sensitive Information WHICH RELATES WHICH IF PUBLISHED
  47. 47. Disclosures To be Made
  48. 48. Reg 13(1) Disclosures To be Made PARTICULARS TO BE SUBMITTED To PERIOD Initial disclosure by person who holds more than 5% shares/ voting rights in any listed company Company within 2 working days of receipt of information of allotment or the acquisition of shares/voting right TO INTIMATE The number of shares held by such persons
  49. 49. Reg 13(2) Disclosures To be Made PARTICULARS TO BE SUBMITTED To PERIOD Initial disclosure by person who is either director or officer of listed company Company within 2 working days of becoming the director or officer of company TO INTIMATE The number of shares held by such persons
  50. 50. Reg 13(3 & 5) Disclosures To be Made PARTICULARS TO BE SUBMITTED To PERIOD Continual disclosure by person who holds more than 5% shares/ voting rights in any listed company Company within 2 working days of receipt of information of allotment or the acquisition of shares/voting right TO INTIMATE The number of shares held & any Change exceeding 2%
  51. 51. Reg 13(4 & 5) Disclosures To be Made PARTICULARS TO BE SUBMITTED To PERIOD Continual disclosure by person who is either director or officer of listed company Company as well as to the stock exchange where the shares of the company are listed within 2working days of receipt of information of allotment or the acquisition of shares/voting right TO INTIMATE The number of shares held & any Change exceeding Rs. 5 Lakh OR 25000 Shares OR 1% whichever is Lower
  52. 52. Reg 13(6) Disclosures To be Made PARTICULARS TO BE SUBMITTED To PERIOD Disclosure by the company on the receipt of information under regulation 13(1), 13(2), 13(3) and 13(4) Stock Exchange where the shares of the company are listed within 2working days of receipt of information under regulation 13(1), 13(2), 13(3) and 13(4)
  53. 53. Modal Code of Conduct
  54. 54. Code of Conduct to be Abide By Reg 12 <ul><li>All Listed Companies </li></ul><ul><li>Organizations Associated with Securities Markets including: </li></ul><ul><li>All intermediaries </li></ul><ul><li>AMC and trustees of mutual funds; </li></ul><ul><li>The Self Regulatory Organizations; </li></ul><ul><li>The Stock Exchanges / Clearing House / Corporations; </li></ul><ul><li>The Public Financial Institutions </li></ul>
  55. 55. <ul><li>The Professional Firms </li></ul><ul><ul><li>Such as Auditors, Accountancy Firms, Law Firms , </li></ul></ul><ul><ul><li>Analysts, Consultants, etc., </li></ul></ul><ul><li>Assisting or Advising Listed Companies </li></ul>Code of Conduct to be Abide By Reg 12
  56. 56. Model Code of Conduct Schedules SCHEDULE I MODEL CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING PART A - FOR LISTED COMPANIES PART B – FOR OTHER ENTITIES SCHEDULE II CODE OF CORPORATE DISCLOSURE PRACTICES FOR PREVENTION OF INSIDER TRADING
  57. 57. Important Terms In Code of Conduct
  58. 58. <ul><li>PSI should be disclosed only to those within the company who need the information to discharge their duty . </li></ul><ul><li>Limited access to confidential information </li></ul><ul><li>Files containing confidential information shall be kept </li></ul><ul><li>secure. </li></ul><ul><li>Computer files must have adequate security of login and pass word etc. </li></ul>Model Code of Conduct IMPORTANT TERMS NEED TO KNOW
  59. 59. Model Code of Conduct <ul><li>All D/O/E of the Co who intend to deal in the securities beyond a limit should pre-clear the transactions . </li></ul><ul><li>An application to the Compliance officer indicating </li></ul><ul><li>The estimated number of securities that the D/O/E intends to deal in, </li></ul><ul><li>The details as to the depository with which he has a security account, </li></ul><ul><li>The details of securities in such depository mode. </li></ul><ul><li>Other details as may be required by any rule made by the company in this behalf. </li></ul>IMPORTANT TERMS PRE CLEARANCE OF TRADES
  60. 60. <ul><li>Company shall specify a trading period , to be called &quot;Trading Window&quot;, for trading in the company’s securities . </li></ul><ul><li>The trading window shall be closed during the time the Price Sensitive information is un-published . </li></ul><ul><li>When the trading window is closed, the D/ E /O shall not trade in the company's securities in such period. </li></ul><ul><li>The trading window shall be opened 24 hours after the Price Sensitive Information is made public. </li></ul>Model Code of Conduct IMPORTANT TERMS TRADING WINDOW
  61. 61. <ul><li>To restrict trading in certain securities and designate such list as restricted / grey list. </li></ul><ul><li>Client Companies for which any assignment or appraisal report or credit rating assignments are going on. </li></ul><ul><li>Any security which is purchased or sold by the organisation / firm on behalf of its clients / schemes of mutual funds, etc. shall be put on the restricted / grey list. </li></ul><ul><li>As the restricted list itself is a highly confidential information, It shall be maintained by Compliance Officer. </li></ul>Model Code of Conduct RESTRICTED /GREY LIST IMPORTANT TERMS
  62. 62. <ul><li>&quot;Chinese Wall&quot; policy demarcates “inside areas” from &quot;public areas&quot;. </li></ul><ul><li>Those areas having access to confidential information , considered “inside areas” and areas which deal with sales / marketing / investment considered &quot;public areas&quot;. </li></ul><ul><li>The employees in the inside area shall not communicate any PSI to anyone in public area. </li></ul><ul><li>In exceptional circumstances employees from the public areas may be brought &quot;over the wall&quot; and given confidential information on the basis of &quot;need to know&quot; criteria, under intimation to the CO </li></ul>CHINESE WALL Model Code of Conduct IMPORTANT TERMS
  63. 63. Interesting Judgements on Insider Trading
  64. 64. MATTER OF DEBATE WHETHER AN ACTION UPON ANY PRICE SENSITIVE INFORMATION WHICH TURN OUT TO BE INCORRECT FALLS UNDER INSIDER TRADING SAMEER ARORA VS. SEBI HELD INFORMATION WHICH FINALLY TURNS OUT TO BE FALSE OR AT LEAST UNCERTAIN CANNOT EVEN BE LABELED AS INFORMATION.
  65. 65. MATTER OF DEBATE WHEN AN PRICE SENSITIVE INFORMATION WILL BE TREATED AS MADE PUBLIC DSQ HOLDINGS VS. SEBI HELD THE DAY ON WHICH THE INFORMATION IS SENT TO THE STOCK EXCHANGE AS PER THE LISTING AGREEMENT.
  66. 66. SEBI (ESOS & ESPS) Guidelines, 1999
  67. 67. Objectives <ul><li>The main objectives of implementing ESOPs are as under: </li></ul><ul><li>  </li></ul><ul><li>Link personal wealth creation to organizational wealth creation </li></ul><ul><li>Attract and retain talent at the start-up / growth stage </li></ul><ul><li>Reduction in cash costs - market pays not the company – can be especially important for start-up companies that are cash starved </li></ul><ul><li>Promote employee ownership culture </li></ul><ul><li>Industry practice </li></ul>
  68. 68. Legal Provisions relating to ESOS
  69. 69. Legal Provisions relating to ESOS
  70. 70. Eligibility to participate in ESOS An Employee Other than Employee who is promoter Employee who belongs to Promoter Group Director who directly or indirectly holds more than 10% shares of the Company OR OR
  71. 71. Constitution of Compensation Committee
  72. 72. Important Provisions <ul><li>Minimum vesting period of one year between the date of grant of option and vesting of option. </li></ul><ul><li>The Company is free to specify any lock-in period for the shares issued pursuant to exercise of option </li></ul><ul><ul><li>Compliance with the Accounting Policies. </li></ul></ul><ul><ul><li>Obtain in principal approval from the stock exchange. </li></ul></ul>
  73. 73. <ul><li>The Board of Directors shall place the following documents at each AGM: </li></ul><ul><li>  Directors’ report containing the specified details. </li></ul><ul><ul><li>A certificate from the auditors of the company that the scheme has been implemented in accordance with these guidelines and in accordance with the resolution of the company in the general meeting. </li></ul></ul>Important Provisions
  74. 74. ESOS Valuation and Accounting Calculation of Fair Market Value On the date of Vesting of Option Listed Company Unlisted Company Stock Exchange means Recognized Stock Exchange where highest trading volume has been recorded Listed on One Recognized Stock Exchange Date of Vesting of Option Any date earlier than, but not more than 180 days earlier than, the date of Vesting of Option Closing price available on last date preceding the date of vesting of option FMV shall be the value as determined by Category I Merchant Banker Listed on more than One Recognized Stock Exchange Average of Opening and Closing Price on the date of Vesting of Option If price is not available on the date of vesting On Specified Date
  75. 75. Compliance Under Listing Agreement Activity Time Line CLAUSE 16   Notice for Book Closure/ Record Date In case of Right issue In case of Bonus Issue In case of Dividend declaration 7 working days prior to Record Date
  76. 76. Compliance Under Listing Agreement CLAUSE 19(a),(d)   Board meeting notice for dividend, convertible debentures, buy-back, right issue Declaration of dividend or cash bonus 2 working days prior to the date of Board meeting 5 days before the book closure or record date fixed for that purpose CLAUSE 19(b)   Board meeting notice for bonus issue (No intimation to stock exchange is required if declaration of bonus is not part of agenda) Simultaneously with the sending of notice to BODs CLAUSE 22   Intimation regarding the outcome of Board meeting regarding increase in capital, reissue of forfeited shares, new issue, alteration of capital, calls to be made Within 15 minutes of the conclusion of the Board meeting
  77. 77. Compliance Under Listing Agreement CLAUSE 31   Periodical Reports As soon as they are issued Notices, resolutions, circulars regarding new issue of capital Prior to their dispatch to the shareholders Notices, circulars, call letters, annexures regarding s.391, 394 At the same time when they are sent to the concerned persons Proceedings of AGM/EGM No time limit is given Notices, circulars, proceeding regarding reconstruction or reduction of capital No time limit is given
  78. 78. Compliance Under Listing Agreement CLAUSE 35   Share Holding Pattern Within 21 days of the end of each quarter CLAUSE 38   Annual Listing Fees to the Stock exchange Annual payment of Custodian Fees to the Depositories On or before 30th April each year CLAUSE 32   Submission of the Balance sheet and Profit and Loss account. Supply a copy of the complete and full Balance Sheet, Profit and Loss Account and the Directors’ Report, to each Shareholder and upon application to any member of the Exchange.
  79. 79. Compliance Under Listing Agreement CLAUSE 40 A   Minimum Level of Public Shareholding The company shall maintain on a continuous basis, public shareholding of at least 25%/ 10% of the total number of issued shares of a class or kind as the case may be, for every such class or kind of its shares which are listed. CLAUSE 41   Financial Results Filing Within one month of the end of each quarter (other than last quarter) Intimation of Board Meeting Atleast 7 clear days before Board meeting Publication of financial results Within 48 hours of the conclusion of the Board Meeting at which financial results are approved
  80. 80. Compliance Under Listing Agreement CLAUSE 49   Compliance report on corporate governance signed by CEO/Compliance officer Within 15 days of the end of each quarter
  81. 81. Advantages of Corporate Compliance <ul><li>Easy Quantification of risk </li></ul><ul><li>Establishing Risk appetite </li></ul><ul><li>Identify and prioritize controls </li></ul><ul><li>Multitude of Compliance obligations . </li></ul><ul><li>Building Strong Foundations </li></ul><ul><li>Extended Confidence to Investors </li></ul><ul><li>Gaining Competitive Edge </li></ul><ul><li>Good Compliance System leads to Excellence in Operations </li></ul>
  82. 82. Good Corporate governance Reduces Risk Higher Profits Higher Valuation of Company RESULT OF GOOD CORPORATE COMPLIANCE MAKING YOUR COMPANY DIFFERENT & LEADING TOWARDS EXCELLENCE
  83. 83. E xellence <ul><li>Happy Company </li></ul><ul><li>Happy Management </li></ul><ul><li>Happy Investors </li></ul><ul><li>Happy Customers </li></ul><ul><li>Happy Regulators </li></ul>EXCELLENCE PAYS…
  84. 84. The Conclusion is ………. Make Your Company GOOD GOVERNED COMPANY
  85. 85. Thank You Pavan Kumar Vijay Managing Director Corporate Professionals (India) Pvt. Ltd. D – 28, South Ext- I, New Delhi 1100049 Tel: +91.11.40622200, Fax: +91.11.40622201 Email: info@indiacp.com Visit us at: www.corporateprofessionals.com
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