CORPORATE GOVERNANCE REPORT
(Pursuant to Clause 49 of the Listing Agreement)
1. Company's Philosophy on Corporate Governance
The Company's philosophy on corporate governance continues to aim at high levels of transparency, accountability and equity in all areas of its operations and its dealing with members, employees, customers, lenders, regulatory and government agencies so as to enhance the shareholder value in all possible ways.
2. Board of Directors
a. Composition and Category of Directors
The Board of Directors consist of Eight members. The Board has a Non-Executive Chairman, a Vice Chairman and Managing Director and six Non-Executive Directors of which five are Independent Directors (including a women director), who bring in a wide range of skills and experience to the Board. The number of Independent Directors is more than 50% of the total number of Directors on the Board. The composition of the Board is in conformity with the provisions contained in Companies Act 2013 and Clause 49 of the Listing Agreement.
The Board of Directors and its Committees meet at periodic intervals. Policy formulation, setting up of goals and evaluation of performance and control function vest with the Board. The Board has constituted 6 Committees, namely, Audit Committee, Nomination and Remuneration Committee, Stakeholders' Relationship Committee, Asset Liability Management Committee, Corporate Social Responsibility Committee and Risk Management Committee.
The necessary disclosures regarding committee positions have been made by the Directors. None of the Directors on the Company's Board is a member of more than ten (10) Committees and Chairman of more than five (5) Committees across all Companies in which they are Directors.
The Company has issued formal letters of appointment to the Independent Directors and the terms of their appointment are disclosed on the Company's website www.sakthifinance.com These Independent Directors have confirmed that they satisfy the criteria of independence as stipulated under Section 149(6) of the Companies Act 2013.
Two Additional Directors (non-executive Independent Directors) were appointed to the Board on 31st March 2015 and on 30th May 2015 respectively and their appointments are subject to the approval of the Members at the ensuing Annual General Meeting.
During the year, the Independent Directors had a separate meeting without the participation of Non-Independent Directors and the management team.
The Chairman, Dr.M Manickam, Vice Chairman and Managing Director, Sri M Balasubramaniam and Director, Sri M Srinivaasan are related to each other as brothers.
b. Number of Board Meetings held during the year
During the financial year, six Board Meetings were held on 28th May 2014, 9th August 2014, 14th November 2014, 17th January 2015, 14th February 2015 and 31st March 2015. The gap between two meetings is within four months. The information as required under Annexure -IA to Clause 49 of the Listing Agreement is being made available to the Board for discussion and consideration at Board Meetings. The Board has also taken on record the certificates given by the senior management personnel regarding compliance with the applicable laws on quarterly basis.
c. Familiarisation programme for Independent Directors
The familiarisation process followed by the Company includes briefing about the Board's Composition and conduct, roles, rights, responsibilities of Directors, nature of the industry, regulatory matters, details about the Company, Group and its culture. The familiarisation process is disclosed at the Company's weblink www.sakthifinance.com/reports/ > SFL_FamiliarisationProgram_2015.pdf.
d. Performance Evaluation
In terms of the requirements of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board carried out annual performance evaluation of its own performance and performance of individual directors, including the Chairman, and of the Committees formed by the Board. The evaluation process is covered in the Board's report. Similarly, Independent Directors reviewed the performance of the Chairman and of the Non-Independent Directors.
e. Code of Conduct
The Board of Directors have adopted a Code of Conduct and Ethics ("the Code") to ensure compliance with the legal requirements and standards of business conduct. The purpose of the Code is to promote ethical conduct.
All Board Members and Senior Management personnel of the company have affirmed compliance with the Code. A declaration to this effect, signed by Vice Chairman and Managing Director is annexed. The Code has been hosted on the website of the company www.sakthifinance.com
f. Attendance and other Directorships
The composition of the Board of Directors, category, relationship with other Board Members, attendance at Board Meetings held during the financial year and at the last Annual General Meeting, number of other directorships and committee Chairmanship / Membership held are given below
3. COMMITTEES OF THE BOARD
A. Audit Committee Terms of reference
The Company has adopted an Audit Committee Charter to be in line with enhanced scope for the Committee as laid down under Section 177 of the Companies Act 2013 and amended Clause 49 of the Listing Agreement.
The powers and terms of reference of this Committee are wide enough to cover the matters specified for Audit Committee under Clause 49 of the Listing Agreement as well as in Section 177 of the Companies Act 2013 and are as follows:
1. Examination of the financial statement and draft auditors' report.
2. Oversight of the Company's financial reporting process and disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible.
3. Recommendation for appointment, remuneration and terms of appointment of statutory auditors of the Company.
4. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
5. Discuss and review, with the management and auditors, the annual / quarterly financial statements before submission to the Board, with particular reference to:
a. Matters required to be included in the Directors' Responsibility Statement in the Board's report in terms of sub-section (3)(c) of Section 134 of the Companies Act 2013.
b. Disclosure under 'Management Discussion and Analysis of Financial Condition and Results of Operations'.
c. Any changes in accounting policies and practices and reasons for them.
d. Major accounting entries involving estimates based on exercise of judgment by management.
e. Significant adjustments made in the financial statements arising out of audit findings.
f. Qualifications in the draft audit report.
g. Disclosure of any related party transactions.
h. Compliance with listing and other legal requirements relating to financial statements.
i. Review the statement for uses/applications of funds by major category on a quarterly basis, with the financial results and annually the statement of funds utilized for purposes other than as mentioned in the offer document / prospectus /notice. Such review shall be conducted till the full money raised through the issue has been fully spent.
B. Nomination and Remuneration Committee
The Company has adopted a Nomination and Remuneration Committee Charter. The role of Nomination and Remuneration Committee has been enhanced / modified as required under Section 178 of the Companies Act 2013 and amended Clause 49 of the Listing Agreement.
Terms of reference
The terms of reference of the Committee includes the following:
1. Identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down;
2. Recommend to the Board about appointment and removal of Directors and senior management personnel.
3. Carry out evaluation of every Director's performance;
4. Formulate the criteria for determining qualifications, positive attributes and independence of a Director;
5. Recommend to the Board a policy relating to the remuneration for the Directors, Key Managerial Personnel (KMP) and other employees and to ensure the following:
i. the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;
ii. relationship of remuneration to performance is clear and meets the appropriate benchmarks; and
iii. remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting the short and long term performance, objectives appropriate to the working of the Company and its goals.
6. Review and recommend the compensation and variable pay for Executive Directors to the Board;
7. Recommend on Board diversification
The Nomination and Remuneration Committee determines and recommends remuneration including commission, perquisites, and allowances payable to Vice Chairman and Managing Director.
The company has complied with the mandatory requirement of Clause 49 regarding Nomination and Remuneration Committee.
Sri S Ragothaman resigned as member with effect from 14th January 2015. The board nominated
Sri A Shanmugasundaram as member of the committee. The present composition of the
Nomination and Remuneration Committee is given below:
Sri P S Gopalakrishnan, Chairman
Dr A Selvakumar, Member
Sri A Shanmugasundaram, Member
The committee held three meetings during the financial year on 9th August 2014, 14th November 2014 and 31st March 2015.
Policy on Remuneration
The Remuneration policy of the Company is in consonance with the industry practices and aims to attract, retain, develop and motivate a high performance workforce. The policy ensures equality, fairness and consistency in rewarding the employees on the basis of performance. The details of policy on remuneration for Directors, Key Managerial Personnel and other employees of the Company is given below:
" In order to identify, attract, retain and motivate competent persons, a clear relationship of remuneration to performance and a balance between rewarding short and long-term performance of the Company, the Board of Directors of the Company, as recommended by the Nomination and Remuneration Committee (NR Committee), has adopted a Charter on appointment and remuneration as enumerated in Section 178 of the Companies Act 2013 on 9th August 2014. The policy provides a framework for remuneration of members of the Board of Directors, Key Managerial Personnel (KMP) and other employees of the Company
A. Criteria for selection/appointment of and Remuneration to Non-Executive Directors:
i. Criteria of selection
a. The Non-Executive Directors shall be of persons of integrity with relevant expertise and experience so as to have a diverse Board with Directors having expertise in the fields of finance, Banking, accounts, taxation and general management.
b. In the case of Independent Directors, that the candidate, in addition to the requirements under (a) above, should satisfy the criteria of independence as stipulated in the Companies Act and the Listing Agreement.
c. The NR Committee while recommending a candidate for appointment as a Director, shall consider and get itself satisfied about:
• the candidate is qualified for appointment under Section 164 of the Companies Act 2013
• Attributes / criteria regarding qualification, and experience in relevant field
• Personal, Professional or business standing
• Requirement with respect to Board's diversity
d. In the case of re-appointment, the performance evaluation of the Director and his level of participation will be considered.
ii. Remuneration to Non-Executive Directors
The Non-Executive Directors are entitled to receive remuneration by way of sitting fees for each meeting of the Board or Committee of Board attended by them of such sum as may be approved by the Board of Directors within the overall limits prescribed under the Companies Act 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. They are also entitled for reimbursement of expenses in connection with participation in the Board/Committee meetings.
The Independent Directors of the Company are not entitled for Stock Option Scheme of the Company, if any.
B. Criteria for selection/appointment of and Remuneration to Executive Directors
i. Criteria of selection/appointment
The NR Committee shall identify persons of integrity having relevant experience, expertise and leadership quality for appointment for the position of Executive Director viz. Managing Director etc. The NR Committee shall also ensure that the identified persons also fulfil the conditions like age limit under the Companies Act 2013 and other applicable laws, if any.
The Managing Director will be paid such remuneration and perquisites as may be mutually agreed upon at the time of appointment or re-appointment between the Company and the Managing Director, taking into consideration the profitability of the Company and the overall limits prescribed under the Companies Act 2013.
The remuneration of Managing Director of the Company consist of fixed remuneration and variable portion by way of commission not exceeding 1% of the net profit calculated in accordance with the Companies Act 2013.
C. Criteria for selection/appointment of and Remuneration to Senior Management Personnel:
Based on the criticality of the role and responsibility of the Key Managerial Personnel (KMP), the NR Committee decides on the required qualifications, experience and attributes for the position and on the remuneration based on the industry bench mark and the current compensation trend in the market. The remuneration consists of fixed components like salaries, perquisites and a variable component comprising annual bonus, if declared. Based on the selection criteria laid as above and remuneration, the Committee identifies persons and recommends to the Board for consideration and appointment.
In respect of other Senior Management Employees and other employees below KMPs, the Managing Director is authorised by the Nomination and Remuneration Committee to fix the remuneration based on the criticality and responsibility of the employees.
Annual increments are given on time scale basis and further increase to deserving employees based on performance review."
Remuneration Policy of the Company is given below: For Vice Chairman and Managing Director
The total remuneration, as approved by the members, consists of a fixed component viz. salary, perquisites and allowances as per Company's Rules and a variable component, linked to the performance of the company, consisting of commission within the limits approved by the members.
For Non-Executive Directors
Sitting fees as permitted under the Companies Act 2013 plus reimbursement of actual travelling and out-of-pocket expenses incurred for attending such meetings. Non-executive directors are not being paid any commission.
1. The appointment of Managing Director is governed by the Articles of Association of the company and the resolutions passed by the Board of Directors and members of the company. These cover the terms and conditions of such appointment.
Sri M Balasubramaniam was reappointed as Managing Director of the company for a period of 5 years with effect from 29th September 2010. He will hold office up to 28th September 2015. The company does not have any service contract with Managing Director.
2. In terms of the Articles of Association, the resignation of a director becomes effective upon its acceptance by the Board.
3. No severance fee is payable to the Directors on termination of office.
4. The company has no stock option scheme either to its directors or to its employees.
5. None of the non-executive directors have any pecuniary relationship or transactions with the company.
C. Stakeholders' Relationship Committee
The function of the committee is to redress the grievances of Investors' and to create and
review the systems for improving the services.
The composition of the Stakeholders' Relationship Committee is given below:
Dr M Manickam, Chairman
Sri M Balasubramaniam, Member
Dr A Selvakumar, Member
Sri S Venkatesh, Company Secretary, is Secretary to the Committee.
The Committee meets periodically to attend grievances of shareholders in connection with transfer of shares, transposition of shares and other investors' grievances. The Committee held three meetings during the financial year on 5th July 2014, 5th September 2014 and 26th March 2015 and all the members attended the meeting.
During the year, the Company received 3 investors' complaints in addition to the requests for transfer / transmission of shares and issuance of duplicate share certificates. They were expeditiously attended to the satisfaction of the shareholders. No complaint was pending as at the close of the financial year.
D. Asset Liability Management Committee
The Asset Liability Management Committee reviews the company's fiscal and risk management policies and practices adopted by the company.
The committee has been reconstituted on 14th February 2015 consisting of the following Director / Executives:
Sri M Balasubramaniam, Vice Chairman and Managing Director - Chairman Dr S Veluswamy, Chief Financial Officer
Sri S Senthilkumar, Assistant General Manager (Finance & Accounts)
The committee held two meetings during the financial year on 27th May 2014 and 12th November 2014 and all the members attended the meetings.
E. Risk Management Committee
The Risk Management Committee has been formed for the purpose of managing the inherent risks faced by the Company.
The committee has been reconstituted on 17th January 2015 consisting of the following Directors: Sri M Balasubramaniam - Vice Chairman and Managing Director Dr A Selvakumar - Director
The committee held a meeting during the financial year on 24th May 2014 and all the members attended the meeting.
F. Corporate Social Responsibility Committee (CSR Committee)
In line with the Companies Act 2013, the company has constituted a Corporate Social Responsibility Committee (CSR Committee) of the Board consisting of three directors on 9th August 2014.
The role of CSR Committee is to formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken as specified in Schedule VII to the Companies Act 2013 and shall also recommend the amount of expenditure to be incurred on the CSR activities, to monitor the CSR Policy of the Company from time to time and prepare a transparent monitoring mechanism for ensuring implementation of the projects/programmes/activities proposed to be undertaken by the Company and to do all such acts, deeds and things as may be required in connection with the CSR activities. The CSR Policy has been hosted on the website of the Company.
The CSR Committee consists of the following Directors:
Sri P S Gopalakrishnan, Chairman
Dr A Selvakumar, Member
Sri M Balasubramaniam, Member
The committee held two meetings during the financial year on 14th November 2014 and 13th March 2015 and all the members attended the meeting
a. The details of transactions with related parties are disclosed in Note 32 of Notes forming an integral part of the financial statements. The Company has not entered into any other transactions of material nature with its promoters, directors or management, their relatives etc. that may have a potential conflict with the interest of the company at large. The policy on Related Party Transactions has been hosted on the website of the Company www.sakthifinance.com The register of contracts or arrangements containing the transactions in which the directors are interested or concerned is placed before the Board for its approval.
b. The related party transactions entered into by the company in the ordinary course of business are periodically placed before the Audit Committee for its approval.
c. The senior management has made disclosures to the Board relating to all material financial and commercial transactions stating that they did not have a personal interest that may have a potential conflict with the interest of the company at large.
There are no instances of non-compliance by the company on any matters relating to capital markets, nor have any penalty / strictures been imposed on the company by Stock Exchanges or SEBI or any other statutory authority on any matter relating to capital markets during the last three years.
d. The company follows the Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006 and in the preparation of financial statements, the company has not adopted a treatment different from that prescribed in an Accounting Standard.
In accordance with Clause 49 of the Listing Agreement relating to CEO / CFO certification, Vice Chairman and Managing Director and Chief Financial Officer have given necessary certificate to the Board for the financial year ended 31st March 2015.
7. MEANS OF COMMUNICATION
a. The quarterly results are published in national / regional daily ("Business Line" in English and "Malaimalar" in Tamil). The half-yearly results are not individually sent to the shareholders.
b. The following are also promptly displayed on the Company's Website www.sakthifinance.com
- Financial Results, Shareholding Pattern, Corporate Governance Report, Annual Reports under "Investors Section"
- Letters / intimation to Stock Exchanges in the "Investor Announcements" under "Investors Section"
A detailed Management Discussion and Analysis Report forms part of the Annual Report.
9. DIRECTORS' APPOINTMENT / REAPPOINTMENT
Details of disclosure regarding appointment of Independent Directors / reappointment of directors are given in the Annexure to the Notice.
10.GENERAL SHAREHOLDER INFORMATION 58th Annual General Meeting
Day, Date and Time : Monday, 28th September 2015 at 4.30 p.m
Venue : Smt. Padmavathi Ammal Cultural Centre 1548, Avanashi Road, Peelamedu Coimbatore - 641 004
FINANCIAL CALENDAR FOR 2014-15
Unaudited financial results for the quarter ended June 2015 : Before 14th August 2015
Unaudited financial results for the quarter ending Sept. 2015: Before 14th November 2015
Unaudited financial results for the quarter ending Dec. 2015 : Before 14th February 2016
Audited financial results for the year ending March 2016 : Before 30th May 2016
Annual General Meeting for the year ending March 2016 : Before 30th September 2016
BOOK CLOSURE DATES
From Tuesday, 22nd September 2015 to Monday, 28th September 2015, both days inclusive. Equity Dividend Payment Date: After 28th September 2015
LISTING ON STOCK EXCHANGES AND STOCK CODE
The equity shares are presently listed at BSE Limited, Mumbai. The equity shares was listed in Madras Stock Exchange Limited till 4th December 2014 and the Company has delisted it's equity shares from Madras Stock Exchange Limited as requested by them. The listing fee has been paid to both the exchanges. The company has paid the annual custodial fee for the year 2014-15 to National Securities Depository Limited and Central Depository Services (India) Limited on the basis of beneficial accounts maintained by them as on 31st March 2015.
During the year, the Company made a public issue of Secured, Redeemable, Non-Convertible Debentures (NCDs) of 100 each aggregating to 100 crore. The NCD issue opened on 27th February 2015 and closed on 19th March 2015. The Company made allotment of 1,00,00,000 NCDs to the applicants on 1st April 2015. The NCDs were listed and admitted to dealings on the BSE Limited with effect from 7th April 2015, the details of which are given below:
b. The Company's Stock Codes for equity shares is as follows:
Stock Exchange Stock Code
BSE Limited, Mumbai 511066
c. International Securities Identification Number (ISIN) INE302E01014
d. Corporate Identification Number (CIN) L65910TZ1955PLC000145
REGISTRARS AND SHARE TRANSFER AGENTS
SKDC Consultants Limited (Unit: Sakthi Finance Limited) Regd Office: 'Kanapathy Towers' Third Floor, 1391/A-1, Sathy Road, Ganapathy, Coimbatore - 641 006 Phone : (0422) 6549995, 2539835 - 836 Fax: (0422) 2539837 E-Mail : firstname.lastname@example.org Website : www.skdc-consultants.com
Share Transfer System
All transfers received are processed by the Registrars and Share Transfer Agents and are approved by the Share Transfer Committee. Share transfers are registered and returned to the shareholders within the stipulated time, if the documents are in order.
Pursuant to Clause 47(c) of the Listing Agreement with the Stock Exchange, certificates, on half yearly basis, have been issued by a Company Secretary in practice with regard to due compliance of share transfer formalities by the Company. Pursuant to SEBI (Depositories and Participant's) Regulations 1996, certificates have also been received from a Company Secretary in Practice:
a. for timely dematerialization of shares of the company; and
b. for reconciliation of the share capital of the company by conducting a share capital audit on a quarterly basis.
Mandatory Requirement of Permanent Account Number (PAN):
SEBI by its Circular dated 7th January 2010 has made it mandatory to furnish PAN copy in the following cases:
a. Deletion of name of deceased shareholder(s), where shares are held in the name of two or more shareholders;
b. Transmission of shares to the legal heir(s), where the deceased shareholder was sole holder;
c. Transposition of shares: In case of change in order of names in which physical shares are held jointly in the name of two or more shareholders.
Code of Conduct for Prevention of Insider Trading
Pursuant to the requirements of Securities and Exchange Board of India SEBI (Prohibition of Insider Trading) Regulations 2015 as amended, the company has adopted a Code of Conduct for Prevention of Insider Trading. Sri S Venkatesh, Company Secretary is the Compliance Officer. The Code of Conduct is applicable to all Directors and such designated employees of the Company and other connected persons who have access to unpublished price sensitive information relating to the company.
Unclaimed Shares Demat Suspense Account
Pursuant to Clause 5A of the Listing Agreement with the Stock Exchanges, the company opened a demat account viz. Unclaimed Shares Demat Suspense Account with Stock Holding Corporation of India Limited, Coimbatore in the name and style of "Sakthi Finance Limited - Unclaimed Shares Demat Suspense Account". The details of Unclaimed Shares Demat Suspense Account as on 31st March 2015 are as follows:
DEMATERIALISATION OF SHARES
The Company's shares are compulsorily traded in dematerialized form and are admitted for trading under both the depositories of India viz. National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL). 4,27,57,521 Equity Shares of the Company constituting 85.52% of the paid-up capital were dematerialised as on 31st March 2015.
The company is accepting nomination forms from members in the prescribed Form SH-13. Any member, who is desirous of making a nomination, is requested to contact the share department at the Registered Office of the company or the Registrar and Share Transfer Agents. Members holding shares in dematerialised form are requested to forward their nomination instructions to the depository participant concerned. Nomination is only optional and can be cancelled or varied by the member at any time.
OUTSTANDING GDR'S / ADR'S / WARRANTS OR ANY CONVERTIBLE INSTRUMENTS' CONVERSION DATE AND LIKELY IMPACT ON EQUITY
The company has not issued any GDRs / ADRs / Warrants or any convertible instruments.
ADDRESS FOR CORRESPONDENCE
Sakthi Finance Limited (CIN:L65910TZ1955PLC000145) 62, Dr. Nanjappa Road, Post Box No.3745 Coimbatore - 641 018 Tel: (0422) 2231471-474, 4236200 Fax: (0422) 2231915 E-mail : email@example.com Website: www.sakthifinance.com
All shareholders' correspondence should be addressed to the company's Registrars and Share Transfer Agents at the address mentioned above.
Contact Person: Sri K Marimuthu Shareholders may also contact Sri S Venkatesh, Company Secretary and Compliance Officer at the Registered Office of the company for any investor grievance related matters. Tel. Nos : (0422) 2231471- 474, 4236207 E-mail : firstname.lastname@example.org
Pursuant to Clause 47(f) of the Listing Agreement, the company has designated the following exclusive E-mail Id for the convenience of investors. email@example.com
11. AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE
As stipulated in Clause 49 of the Listing Agreement, the Auditors' Certificate on compliance of conditions of corporate governance is annexed to the Annual Report.
COMPLIANCE WITH NON-MANDATORY REQUIREMENTS
The company has adopted all mandatory requirements of Clause 49 of the Listing Agreement and the status of compliance in respect of non-mandatory requirements stipulated by the said clause is as under:
• No separate office is maintained for Non-executive Chairman.
• The quarterly / half-yearly financial results are published in leading newspapers as mentioned above and are also displayed on the Company's website www.sakthifinance.com Therefore, the results are not being separately circulated to the shareholders.
• There are no qualifications in the Auditor's Report on financial statements.
• The Company has separate persons for the posts of Chairman and Managing Director.
• The Company has appointed an external professional as internal auditor and he reports directly to the Audit Committee of the Company.
For and on behalf of the Board
Date : 7th August 2015
Place : Coimbatore