Sebi had, at its last board meeting on January 25, approved Kumaramangalam Birla Committee's recommendations on a corporate governance code and agreed to implement it fully. Companies will also have to set up audit committees, composed entirely of non-executive directors. The committee will meet thrice a year. Among its powers are: investigation of any activity within its reference, seeking any information from employees and obtaining outside legal or professional advice.

The audit committee can also oversee the company's financial reporting process and authenticate its credibility, while it can recommend appointment and removal of external auditors.It also has the authority to review the financial statements before they are placed before the board. Based on the external auditor's findings, it can undertake investigations into specific aspects of the company's functioning and evaluate its financial and risk management policies.

The remuneration of the non-executive directors will be decided by the board, while all monetary transactions of such directors will be disclosed in the annual accounts.

Board meetings will have to be held at least four times a year, with a maximum gap of four months between successive meetings.

The Governance Code, in its essence, seeks to inculcate more transparency in the operations of a company and more disclosures to be made so that investors are kept informed about the happenings in the company in which they have bought shares. Presentations made by companies to analysts should also be put in the public domain, according to the Code.

Apart from information to shareholders, the board itself should be updated frequently on the company and be kept informed of all the steps taken by the management including sale of material nature, investments, subsidiaries and assets which are not in the normal course of business. Non-mandatory requirements are setting up of a remuneration committee and holding of postal ballots for outstation shareholders.