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Narayan Murthy Committee Report, 2003

The document summarizes the key recommendations from the Narayan Murthy Committee Report on corporate governance submitted to SEBI in 2003. The report aimed to review corporate governance performance and the role of companies in responding to market rumors. Major recommendations included requirements for audit committees, related party transaction disclosures, CEO/CFO certifications, and defining independent directors. Mandatory recommendations focused on strengthening the independence and responsibilities of audit committees for oversight of financial reporting, internal controls, and related party transactions.

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Gaurav Kumar
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1K views12 pages

Narayan Murthy Committee Report, 2003

The document summarizes the key recommendations from the Narayan Murthy Committee Report on corporate governance submitted to SEBI in 2003. The report aimed to review corporate governance performance and the role of companies in responding to market rumors. Major recommendations included requirements for audit committees, related party transaction disclosures, CEO/CFO certifications, and defining independent directors. Mandatory recommendations focused on strengthening the independence and responsibilities of audit committees for oversight of financial reporting, internal controls, and related party transactions.

Uploaded by

Gaurav Kumar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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NARAYAN MURTHY

COMMITTEE
REPORT,2003
 The report on corporate governance set up by
SEBI under the chairmanship of
N.R.NARYAN MURTHY was submitted in
february 2003.
 The main objective of the report was to review

the performance of corporate governance and


to determine the role of companies in
responding to rumour and other price sensitive
information circulating in the market in order
to enhance integrity of the market.
MAJOR POINTS IN THE
REPORT
 Disclosure of contingent liabilities.
 Certification by CEO’s and CFO’S.
 Definition of independent directors.
 Independence of audit committees.
MANDATORY
RECOMMENDATIONS
 AUDIT COMMITTEE: An audit committee is the
bedrock of quality governance. An effective
audit committee is a pre-requisite for achieving
high standard of governance. It is required to
review the following points:
Financial statements and draft audit reports

including quarterly and half-yearly information.


Report related to compliance with laws and risk

management.
Contd…
 Management letters of internal control
weaknesses issued by statutory internal
auditors.
 Records of related party transactions.
 It is also empowered to recommend the

appointment and removal of statutory


auditors, fixation of audit fees and also
approval for payment for any other service in
addition to the powers of review.
RELATED PARTY
TRANSACTIONS
 A Statement of all transactions with related
parties including their bases should be placed
before the audit committee for formal approval
and if any transaction is not on an arm’s length
basis, management should provide explanation
to the audit committee justifying the same.
PROCEEDS FROM INITIAL
PUBLIC OFFERINGS.
o Companies raising money through initial public
offerings should disclose to the audit committee
the uses and application of funds under major
heads on quarterly basis.
Each year the
company should prepare a statement of funds
utilised for purpose other than those stated in the
prospectus. The audit committee should make
recommendations to the board to take major steps
in this matter.
RISK MANAGEMENT
 Procedures should be in place to inform the board
members about the risk assessment and minimization
procedures. These procedures should be periodically
reviewed.
 Management should place a report before the entire

board of directors every quarter documenting the


business risks faced by the company. The board
should formally approve the document.
 In clause 49,there is a stipulation that the

management discussions and analysis report should


include discussions on risks and concern.
CODE OFCONDUCT
 It should be obligatory for the board of a company to
lay down a code of conduct for all board members
and senior management of the company.
 The annual report of the company shall contain a

declaration to this effect signed off by the CEO and


COO.
 The code should be posted on company’s website and

all members should affirm compliance with the code


on annual basis.
NOMINEE DIRECTORS
 If a corporation wishes to appoint a director on the
board, such appointment should be made by the
shareholders.
 An institutional director should have the same duties

and responsibilities and shall be subject to the same


liabilities as any other director.
Mandatory recommendations of the committee are:
 Compensation to non-executives directors( to be

approved by the shareholders in general meeting,


restrictions placed on grant on stock option.
 Whistle blower policy to be placed in the company.
Contd…
 All these suggestions are well merited and
deserve implementation.
 The non-mandatory recommendations pertain

to moving to a regime providing for


unqualified corporate financial statements,
training of board members and evaluation of
non-executive director’s performance.
THANK YOU

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