It deals with the concept and need of disclosures and transparency in corporate affairs. It further enumerates the provisions of related party transactions and insider trading.

1. CORPORATE GOVERNANCE Disclosure & Transparency Related Party Transactions & Insider Trading Virender Jain & Pavan Kumar Vijay

2. Disclosures & Transparency in Corporate Affairs Concept & Need It is the responsibility of corporate houses to keep the stake holders aware of all major corporate events to help them to take informed decisions It is the duty of directors to not to place themselves in a position when their fiduciary duties towards the company conflict with their personal interests

3. Disclosure And Transparency OECD Principles “Timely and Accurate Disclosure should be made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.”

4. Disclosure And Transparency Advantages Increased access to external capital Lower cost of capital Improved operational performance Reduced risk of corporate crises, scandals Enhanced trust

6. Under Accounting Standard – AS 18

7. Listing Agreement – Clause 49 – Audit Committee

9. Listing Agreement with Stock Exchanges – Cl. 36Transparency & Disclosures Indian Legal Context

10. Related Party Transactions & Disclosures

11. Disclosures & Transparency in Corporate Affairs Meaning of Related Party Transaction “A business deal or arrangement between two parties who are joined by a special relationship prior to the deal.”

13. Both direct & Indirect interests contracts for goods or services or underwriting are covered

14. Disclosure at Board & Approval of contracts

15. Prior approval of Central Government in case of Paid-up capital of more than Rs 1 cr.

17. Both direct & Indirect Loans & Guarantees are covered

18. Prior approval of Central Government is required;

19. Penalty – Fine up to Rs 50 Thousand or Imprisonment up to 6 months + Vacation of Office by the interested Director

21. Both direct & Indirect interests are covered

22. Disclosure of Nature of interests in Contracts and Arrangements to Board is required

23. Penalty – Fine upto Rs 50 Thousand or Imprisonment upto 6 months + Vacation of Office by the interested DirectorSection 300: Interested Directors not to participate in discussion & Vote Section 301: Company to Maintenance of Register of Contracts, Companies & Firms

25. In case of any related party of Director – any office or place of profit with monthly remuneration exceeding

26. Rs. 10,000 : Special Resolution by General Meeting

27. Rs. 20,000 : Prior Approval by Special Resolution

29. Related Party DisclosuresListing Agreement- Cl. 49 Mandatory review of Related Party Transactions by the Audit Committee Disclosures on materially significant Related Party transactions that may have potential conflict with the interest of Company at large

30. Related Party DisclosuresSEBI DIP Guidelines Due Diligence Report by Merchant Banker to SEBI Disclosure in Prospectus of all related entities, promoters, companies under the same management, Other group companies, their financial performance, pending litigations and risk factors

31. INSIDER TRADING

32. Disclosures & Transparency in Corporate Affairs Insider Trading: Meaning “Act of subscribing, buying and selling or agreeing to subscribe, buy, sell or deal in securities by an Insider, who is connected with the company and who is reasonably expected to have access to unpublished price sensitive information in respect of securities of (a) Company or who has received or has excess to such unpublished price sensitive information “ - Reg. (d) & (e) of SEBI (Prohibition of Insider Trading ) Regulations

34. Leads to loss of confidence of investor in stock market

35. The process corrupts the ‘Level Playing Field’

38. Within 4 working days of receipt of information of allotment or the acquisition of shares/voting right

39. Continual disclosure by person who holds more than 5% shares/ voting rights

40. Disclosure of the number of shares held & any Changeexceeding 2%

42. Pre-clearance of Certain Trades

43. Restricted /Grey List of Securities

47. Related Party Transactions Indian Case Studies Majority Companies are following the letter part of Transparency but the Spirit is missing They are complying unavoidable provisions of Laws only & taking advantages of loop-holes Impractical Legal Provisions such as prior approval of Central Government even in case of Closely help Companies Long approval process & undue delay

48. Insider Trading Indian Case Studies Majority Listed Companies (especially Regional Listed) are complying on piece-meal basis or not at all complying There is no proper surveillance system & System of ascertaining the loss to investors Poor Implementation of Insider Code of Conduct in the Companies Improper protection of Whistle Blowers Implementation of Legal Provisions Vs. Sensitivity & Pre-mature disclosure

49. Suggestions for Better Disclosure & Transparency

50. Related Party Transactions Suggestions for Better Disclosure & Transparency Clear & Written policy & Transparent Ownership Structure with respect of Related Party Transactions; Sufficient System of Internal Control Disclosure of cost-benefits, urgency & need of all related party transactions; Role of Independent Directors with pre-defined format for actual benefit/loss to the Company Legal Provisions should be practical oriented & Time bound approvals should be granted

51. Insider Trading Suggestions for Better Disclosure & Transparency Company’s Insider Policy should be practical and not just the Rule Book; Effective protection of Whistle blowers Legal Provisions should be practical oriented (e.g. giving Public Announcement with in 4 days) Disclosures of Price Sensitive Information as given on Stock Exchanges web-sites should be prominent

52. Satyam VadaDharmamChara - Taittariya Upanishad

53. “Forever speak the truth and follow the dharma”

54. Truth: Disclosure of Actual State of Affairs (Transparency in operations and transactions)

55. Dharma: “Dharma is for the stability of society, the maintenance of social order and the general well-being and progress of humankind.” - KarnaParva of the Mahabharata. Verse-58 in Chapter 69

56. Corporates are also expected to use their Capacity, Knowledge and Resources TOWARDS Dharma Maximization of stakeholders’ value and well-being and progress of humankind THROUGH Truth Transparency, accountability and truthful disclosure of state of affairs

57. Thanking You……