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Shaily Engineering Plastics Ltd.

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Shaily Engineering Plastics Ltd. Accounting Policy

REPORT ON CORPORATE GOVERNANCE

(Annexure B to the Director's Report)

1. Company's Philosophy on Corporate Governance

Corporate Governance for Shaily Engineering Plastics Limited is about achieving the highest standards of integrity, transparency and accountability. The Company is committed to maintain high standards and continues to practice good Corporate Governance. The core principles of Corporate Governance:

(A) Lay Emphasis on Integrity and accountability.

(B) Incorporate several practices aimed at a high level of business ethics and effective supervision.

(C) Provide for enhancement of value for all stakeholders.

Shaily Engineering Plastics Limited ("Shaily") conforms to all regulatory and legal requirements. The basic philosophy behind an endeavor towards better Corporate Governance is to achieve business excellence. This Corporate Governance Report sets out a description of Shaily's Corporate Governance Practices.

2. Board of Directors

Your Board of Directors, closely monitors the performance of the Company and Management, approves the plans, reviews the strategy and strives to achieve organisational growth. Your Board ensures statutory and ethical conduct with high quality financial reporting. It holds itself accountable to the shareholders as well as other stakeholders for the long-term well-being of the Company.

(A) Composition of Board

(i) The Company's Board comprise of eight Directors, four of them are Executive Directors and four are Independent non-executive Directors. The Directors are professionals, having expertise in their respective functional areas and bring a wide range of skills and expertise to the Board.

(ii) The management of your Company is entrusted to the Managing Director, Mr. Amit Sanghvi, who is assisted by a Management Core Team and Senior Executives having rich experience and expertise in their respective fields.

(iii) None of the Directors on the Board is a Member of more than 10 Committees or a Chairman of more than 5 Committees [as stipulated in Clause 49 of the Listing Agreement or Regulation 26(1) of the Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015] across all the Indian Public Companies, in which he • she is a Director. The necessary disclosure regarding the committee position & other Directorship has been made by the Directors.

(iv) The names and categories of the Directors on the Board, their attendance at Board Meetings, last Annual General Meeting held during the year, number of directorships held by them in Indian Companies (Public and Private) and committee chairmanship • membership held by them in Indian Public Companies are given herein below. For reckoning the maximum number of chairmanships • memberships in committees, only two committees viz. 'Audit Committee' and 'Stakeholders Relationship Committee' of the Board are considered.

(v) Executive Directors

Mr. Mahendra Sanghvi - Executive Chairman

Mr. Laxman Sanghvi - Executive Director

Ms. Tilottama Sanghvi - Whole Time Director

Mr. Amit Sanghvi - Managing Director

(vi) Independent Directors

- Mr A S Anandkumar having vast experience in the field of "Banking, and Financial Advisory is an Independent Director.

- Mr. Sarup Chowdhary having vast experience in the Polymer Sector is an Independent Director.

- Mr. Pushp Raj Singhvi having vast experience in the " Polymer Industry" is an Independent Director.

- Mr. Milin Mehta, Chartered Accountant & a Law Graduate is an Independent Director.

(B) Inter-se Relation

Mr. Mahendra Sanghvi, Executive Chairman is the :

- Brother of Mr. Laxman Sanghvi, Executive Director.

- Spouse of Ms. Tilottama Sanghvi, Whole Time Director.

- Father of Mr. Amit Sanghvi, Managing Director. None of the other Directors is inter-se related.

 (C) Board Meeting Procedures :

Annual Calendar of Board Meetings of the year is usually considered in the Board Meeting of the last quarter of the previous financial year. The notice convening Board Meeting is sent to each of the Directors along with relevant papers well in advance of the meeting date. The items in the Agenda are backed by comprehensive background information to enable the Board to take appropriate decisions. All significant developments and material events are brought to the notice of the Board; either as a part of the agenda papers in advance of the meeting or by way of presentations or circulation of relevant documents during the meeting. The Managing Director and the Chief Financial Officer briefs the Board on the financial performance of the Company during the previous quarter and trend analysis as compared to the budgets, operational performance and market scenario.

The Company receives reports from various departmental heads, certifying the compliance of applicable statutory laws, rules and regulations every quarter. The Managing Director, on basis of the reports certifies the Board, the compliance with various applicable statutory laws, rules and regulations.

The Board has complete access to all the information of the Company. The following information is provided to the Board as and when occasion arises:

1. Annual Operating Plans, budgets and any updates

2. Capital Budgets and any updates

3. Quarterly Results of the Company and its operating divisions or business segments

4. Minutes of meeting of Audit Committee & other committees of the Board

5. The Information on recruitment and remuneration of senior officers just below the level of Board of Directors, including appointment or removal of Chief Financial Officer and the Company Secretary.

6. Show Cause, Demand, Prosecution notices and penalty notices, which are materially important.

7. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.

8. Any material default in financial obligations to and by the listed entity, or substantial non-payment for goods sold by the listed entity.

9. Any issue, which involves possible public or product liability claims of substantial nature, including any judgment or order which may have passed strictures on the conduct of the listed entity or taken an adverse view regarding another enterprise that may have negative implications on the listed entity.

10. Details of any joint venture or collaboration agreement.

11. Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property.

12. Significant labour problems and their proposed solutions. Any significant development in Human Resources/industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement scheme, etc.

13. Sale of Investment, subsidiaries, assets which are material in nature and not in normal course of business.

14. Quarterly details of foreign exchange exposures and the steps taken by the Management to limit the risks of adverse exchange rate movement, if material.

15. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer.

16. Investor Relation Activities undertaken by the Company.

(D) Code of Conduct

The Company has laid down a Code of Conduct, for all its Board Members and Senior Management Personnel for avoidance of conflicts of interest. The declarations with regard to its compliance have been received for the financial year 2015-16 from all the Board Members and Senior Management Personnel. There were no material financial and commercial transactions, in which Board Members or Senior Management Personnel had personal interest, which could lead to potential conflict of interest with the Company during the year. The Code of Conduct is also available on the Company's website www.shaily.com  and can be viewed on on the web link - <http://www.shaily.com/downloads.aspx>.

(E) Familiarization Programme to Independent Directors

Guided by the principles laid down for Corporate Governance under the Listing Agreement, SEBI Listing Regulations, 2015 and the Companies Act, 2013, Independent Directors are appraised through familiarization programmes to provide insights into the Company, including; nature of Industry in which the Company operates, business model of the Company, relevant information on business processes and roles, responsibilities, duties and rights of the Independent Directors.

The details of such familiarization programmes have been disclosed on the website of the Company on the web-link - <http://www.shaily.com/downloads.aspx>

4 Audit Committee

The Company has an Audit Committee at the Board level, with the powers and roles in accordance with the prevailing regulatory requirements. The Committee acts as a link amongst the Management, Auditors and the Board of Directors. The existing Audit Committee was last re-constituted in a Board Meeting

The Company Secretary acts as Secretary to the Audit Committee.

The meetings of Audit Committee were also attended by the Managing Director, Other Executive Directors, the Chief Financial Officer, the Company Secretary, the Statutory and the Internal Auditors of the Company.

All the members of Audit Committee are financially literate and majority of them have accounting and financial management expertise. The Chairman of the Audit Committee, Mr. A S Anandkumar, attended the 35th Annual General Meeting held on Saturday, August 08, 2015.

(A) Terms of Reference

The terms of reference of this Committee include matters specified in the Companies Act, 2013, Rules made thereunder, Listing Agreement or Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as may be applicable, and those specified by the Board in writing. Besides having access to all required information within the Company, the Committee may investigate any activity within its terms of reference, seek information from any employee, secure attendance of outsiders with relevant expertise, or obtain legal or other professional advice from external sources, whenever required.

The Committee acts as a link amongst the Management, Auditors and the Board of Directors. The Audit Committee acts in accordance with the terms of reference which, inter alia, include:

1. Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

2. Recommending the appointment, remuneration and terms of appointment of statutory auditors including cost auditors of the Company.

3. Approval of payment to statutory auditors, including cost auditors and internal auditors, for any other services rendered by them.

4. Reviewing with the management, the annual financial statements and auditors report thereon before submission to the Board for approval, with particular reference to:

a) Matters required to be included in the Directors' Responsibility Statement to be included in the Board's Report in terms of clause (c) of sub-section 3 of Section 134 of the Companies Act, 2013;

b) Changes, if any, in accounting policies and practices and reasons for the same;

c) Major accounting entries involving estimates based on the exercise of judgment by the management;

d) Significant adjustments made in financial statements arising out of audit findings;

e) Compliance with listing and other legal requirements relating to financial statements;

f) Disclosure of any related party transactions; and

g) Modified opinion(s) in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.

6. Reviewing with the management, the statement of uses• application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilised for purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter.

7. Reviewing and monitoring the Auditors Independence and performance, and effectiveness of audit process.

8. Approval or any subsequent modification of transactions of the Company with related parties.

9. Scrutiny of inter-corporate loans and investments.

10. Valuation of undertakings or assets of the Company, wherever it is necessary.

11. Evaluation of internal financial controls and risk management systems.

12. Reviewing, with the management, the performance of statutory auditors and internal auditors, adequacy of internal control systems.

13. Discussion with internal auditors of any significant findings and follow-up thereon.

14. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

15. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post audit discussion to ascertain any area of concern.

16. To look into the reasons for substantial defaults, if any, in the payment to depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors.

17. To review the functioning of the Vigil Mechanism and Whistle Blower mechanism.

18. Approval of appointment of the Chief Financial Officer (the Wholetime Finance Director or any other person heading the finance function or discharging that function) after assessing qualifications, experience and background, etc. of the candidate.

19. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

5 Nomination & Remuneration Committee (NRC)

Pursuant to the provisions of Section 178 of the Companies Act, 2013, read with Regulation 19 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirement) Regulations, 2015, as may be applicable, "Nomination & Remuneration Committee" of the Board (hereinafter referred to as "NRC") was re-constituted with effect from August 08, 2015, upon resignation of Mr. William Sean Sovak on July 22, 2015.

 (B) Terms of Reference of NRC

The Committee acts as a link between the Management and the Board of Directors. Besides having access to all required information within the Company, the Committee may investigate any activity within its terms of reference, seek information from any employee, secure attendance of outsiders with relevant expertise, or obtain legal or other professional advice from external sources, whenever required.

The Nomination and Remuneration Policy of the Company is available on the website www. shaily .com of the Company at the weblink - <http://www.shaily.com/downloads.aspx>.

The Committee shall act in accordance with the terms of reference which, inter alia, include:

a) To identify persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and to recommend to the Board their appointaient and/or removal;

b) To carry out evaluation of every Director's performance;

c) To formulate the criteria for determining qualifications, positive attributes and independence of a Director, and recommend to the Board a policy, relating to the remuneration for the Directors, key managerial personnel and other employees;

d ) To formulate the criteria for evaluation of Independent Directors and the Board;

e) To devise a policy on Board diversity;

f) To recommend/review remuneration of the Managing Director(s) and Whole-time Director(s) based on their performance and defined assessment criteria;

g) To carry out any other function as is mandated by the Board from time to time and • or enforced by any statutory notification, amendment or modification, as may be applicable;

h) To perform such other functions as may be necessary or appropriate for the performance of its duties.

(C) Performance Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Regulations 17 & 19 read with Part D of Schedule II to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own, and that of its Committees and Individual Directors on certain parameters set out in the Nomination and Remuneration Policy adopted by the Board.

The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the non-Independent Directors including the Executive Directors was carried out by the Independent Director.

6 Stakeholders Relationship Committee (SRC)

Pursuant to the provisions of Section 178(5) of the Companies Act, 2013, read with the Regulation 20 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, "Stakeholders Relationship Committee (hereinafter referred to as "SRC") has been constituted to especially look into the mechanism of redressal of grievances of shareholders.

(A) Terms of Reference of SRC

The Committee shall act in accordance with the terms of reference which shall, inter alia, include:

a. To specifically look into the mechanism of redressal of grievances of shareholders.

b. The Committee shall consider and resolve the grievances of the shareholders of the Company including complaints related to transfer of shares, non-receipt of annual report and non-receipt of declared dividends and;

c. To review effectiveness of Investors' relations system of the Company. There were no complaints received during the year ended on March 31,2016.

7. Corporate Social Responsibility Committee (CSR Committee)

Pursuant to the provisions of Section 135 of the Companies Act, 2013, "Corporate Social Responsibility Committee (hereinafter referred to as "CSR Committee") of the Board was constituted effective from May 17, 2014.

 (A) Terms of Reference of CSR Committee

The Committee shall act in accordance with the terms of reference which shall, inter alia, include:

a. Formulate and recommend to the Board, a Corporate Social Responsibility (CSR) Policy, which shall indicate the activities to be undertaken by the Company as per Schedule VII to the Companies Act, 2013;

b. Recommend the amount of expenditure to be incurred for CSR Purpose; and

c. Monitor the CSR Policy of the Company from time to time.

10 Means of Communication

I. Financial Results

Pursuant to provisions of the erstwhile Listing Agreement or SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, as may be applicable, periodical financial results and other publications of the Company are being published in a widely circulated English newspaper (Business Standard -Mumbai & Ahmedabad Edition) and a Vernacular Gujarati newspaper (Vadodara Samachar). The Audited Financial Results for the Quarter and Year Ended on 31st March, 2016, were published in "Economic Times - All India Edition". Financial results, as soon as they are approved by the Board, are forwarded to the Bombay Stock Exchange (BSE) and also displayed on Company's Website - www.shaily.com  and can be viewed at the weblink ; <http://www.shaily.com/Financial> Results.aspx .

II. Filings with Stock Exchange

All the reports, statements, documents, filings and any other information that are required to be submitted with the recognised stock exchange(s) as per the Listing Agreement or Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, as may be applicable, and other news releases, are disseminated vide the BSE Listing Centre and uploaded on website of the Company -www.shaily.com  as may be required from time to time.

III. Analyst Presentation

Pursuant to the requirement of the Securities Exchange Board of India (listing Obligations and Disclosure Requirements) Regulations, 2015, as may be applicable, from time to time, the Company disseminates the information on :

- Investors/Results Presentation

- Earnings Call Invite

- Earnings Call Transcripts

to the Bombay Stock Exchange (BSE) as also displays it on the website of the Company available on the following weblink : - <http://www.shaily.com/Corporate> presentation.aspx

11 General Shareholder Information

(i) 36th Annual General Meeting is scheduled to be held

On : Tuesday, August 02, 2016

Venue : Patel Wadi, Opp. Jalaram Temple,

At : 11:30 a.m. Village Rania - 391 780, Sankarda Bhadarwa Road, Tal. Savli, Dist. Vadodara, Gujarat, India.

(ii) Financial Year and Reporting

01st April to 31st March

a. 01st April to 30th June - 1st Quarter - By August 15

b. 01st July to 30th September - 2nd Quarter - By November 15

c. 01st October to 31st December - 3rd Quarter - By February 15

d. 01st January to 31st March - 4th Quarter - By May 30

(iii) Date of Book Closure

July 26, 2016 to August 02, 2016 (Both days inclusive)

(iv) Dividend

The Directors have recommended dividend of Rs. 4/- (40 %) per equity share for the financial year ended on March 31, 2016 under Agenda Item No. 2 of the forthcoming 36th Annual General Meeting scheduled on August 02, 2016. If declared, the dividend shall be credited/dispatched between August 02, 2016 to August 07, 2016, within the time frame prescribed in the Companies Act, 2013.

(v) Listing of Equity Shares on Stock Exchange

The Equity Shares of the Company are listed on :

BSE Limited (BSE)

Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001, Maharashta, India The requisite listing fees have been paid to the BSE upto March 31, 2016.

(vi) Custodial Fees to Depositories

The Company has paid custodial fees for the year 2015-16 to the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

(vii) Stock Code

BSE Limited - 501423

Scrip Code - SHAILY

International Securities Identification Number(ISIN) - INE 151 G01010

Corporate Identification Number (CIN) - L51900GJ1980PLC065554

(viii) Registrar & Share Transfer Agent (RTA)

The details are as under :

Name Address

Bigshare Servies Private Limited

E-2/3, ANSA Industrial Estate, Saki Vihar Road, Saki Naka, Andheri (East), Mumbai - 400 072   

Phone +91-22-4043200 +91-22-28475207

Email investors@bigshareonline.com  Fax : Website : www.bigshareonline.com

BigShare Services Private Limited is acting as a 'Registrar & Share Transfer Agent' for Company's Equity shares in physical & dematerialized form.

(ix) Share Transfer System

Shares sent for transfer in physical form are registered and returned by our Registrar & Share Transfer Agents within 15 days of receipt of the documents, provided the documents are found to be in order. The shares under objection are returned within two weeks. The RTA provides the company quarterly reports in this context. The Company obtains Half Yearly Certificate under Clause 47(c) of the erstwhile Listing Agreement and Regulation 40(9) of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and necessary submissions with the Stock Exchange are complied with

(x)Dematerialization of Shares and Liquidity

89.69% of the Paid-up Equity Share Capital is held in Dematerialised Form with the National Securities Depository Limited and Central Depository Services (India) Limited as on March 31, 2016.

 (xi) Plant Location

The manufacturing activities are carried out from the plants located in the State of Gujarat, out which four Plants are in Rania and one plant is in Halol.

(xii) Correspondence Address

Shareholders • Beneficial owners are requested to correspond with the Company's RTA (Registrar & Share Transfer Agent) as shown in Para (xi) with respect to any query, request, information or clarification pertaining to shares and are further advised to quote their folio number, DP & Client ID number as the case may be, in all correspondence with it. In addition to the Registrar's details given in (xi), shareholders may correspond at the following address:

Registered Office :

The Secretarial Department

Shaily Engineering Plastics Limited

Survey No. 364-366, At. & Po. Rania - 391 780, Tal. Savli, Dist - Vadodara, Gujarat, India

Phone +91 - 2667 - 244307/244348/244361 Fax +91 -2667 - 244372

Email investors@shailly.com  Website www.shailly.com   

(xiii) Information through Company's website

The information pertaining to financial performance, shareholding pattern, compliance with Corporate Governance & announcements are being updated and can be viewed on the Company's website-www.shaily.com  and contains comprehensive information about the Company, its products, services, solutions, press releases and investor's information, etc. The required information is being placed from time to time on the website.

(xiv) Management Discussion & Analysis

The Management Discussion and Analysis Report for the year ended on March 31, 2016, forms part of the Annual Report.

Disclosures

1. The Board has received disclosures from the Senior Management relating to material, financial and commercial transactions, where they and/or their relatives have personal interest. There are no materially significant related party transactions of the Company, which have potential conflict with the interest of the Company at large; however, transactions with related parties as per requirements of Accounting Standard - 18 are disclosed under notes to accounts.

2. All transactions with related party, as defined under the Companies Act, 2013, Clause 49 of the Listing Agreement or Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as may be applicable, during the year were in ordinary course of business & at arm's length basis and do not attract provisions of Section 188 of the Companies Act, 2013. The Board has approved a policy on dealing with related party transactions, and the same has been uploaded on the Company's website at the web link - <http://www.shaily.com/downloads.aspx>

3. The Company has established Vigil Mechanism to provide for the safeguards against victimisation of Directors and Employees who follow such mechanism. The Board has approved Whistle Blower Policy  establishment of Vigil Mechanism pursuant to Provisions of Companies Act, 2013, Clause 49 of the Listing Agreement or Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as may be applicable, and the same has been put up on the website of the Company at the web link - <http://> www.shaily.com <http://www.shaily.com/> downloads.aspx

As per the Policy no person has been denied access to the Chairman of Audit Committee.

4. There have been no instances of any penalties or strictures imposed on the Company on any matter relating to the capital market, either by Stock Exchange, Securities and Exchange Board of India or any statutory authority during the last three years.

5. The Company has adopted and complied with mandatory requirements as per Clause 49 of the Listing Agreement or provisions of Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015. Some of the non-mandatory requirements have also been complied with.

6. The requisite certificates from CEO and CFO were placed before the Board Meetings for consideration.

7. The Company has adequate risk assessment and minimization system in place. The risk management procedure is reviewed periodically.

Non-mandatory Requirements {Clause 49 Annexure - XIII to the Listing Agreement} OR Discretionary Requirements {Reg. 27(1) of Securities and Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015 read with Schedule II - Part E}

 (A) Reporting of Internal Auditor

M/s Shah Jain & Hindocha, Chartered Accountants, Internal Auditor of the Company, submits report to the Audit Committee regularly.

(B) Separate Posts of Chairman and CEO

The Chairman and the Managing Director are two separate individuals with vast experience and expertise.

(C) Audit Qualification • Modified Opinion(s)

There has been no Audit Qualification • Modified Opinion(s) in the Audit Report by the Auditor in the year 2015.

For and on behalf of the Board

Mahendra Sanghvi

Executive Chairman

DIN: 00084162

Vadodara : May 18, 2016