20 firms get Sebi rap for violation of clause 49

The Securities and Exchange Board of India (Sebi) has finally got tough with those firms which did not comply with the Clause 49 norms. On Tuesday it initiated adjudication proceedings against a total of 20 companies from the private sector and the public sector. Of the 20, five companies are public sector companies against whom proceedings have been launched for non-compliance with provisions relating to the composition of the board. The remaining 15 companies are in the private sector.
Sebi chairman M. Damodaran in his trademark gentle but acerbic wit said, "there was serious criticism against Sebi that it was only barking and not biting. I think we barked long enough and needed to bite." Clause 49 is meant to protect shareholders. The composition of the board with independent directors, signing of accounts, constitution of committees — everything in the governance framework is meant to protect investors.
In the action taken on Tuesday proceedings have been initiated against three of the 15 private sector companies for non-compliance with almost all the major provisions of Clause 49; against two companies for non-compliance with provisions like board/audit committee composition and Ceo/Cfo certification; while for the balance 10 companies, proceedings have been initiated for non-submission of compliance reports on Clause 49 to the stock exchanges.
The regulator declined to give the names of the companies involved. It said that some companies may have a valid reason for non-compliance so it would not be fair. It said that at this stage it wanted to "send a signal to errant companies that they will have to face penalty if they do not comply with the requirements of corporate governance." Sebi wa-nts firms to be aware that they should take the implementation of clause 49 seriously in letter and spirit.