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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Governance Influencers

Meridian Steel Ltd's board is drafting its annual disclosures. An executive says, 'We need not worry about the stock exchange's listing requirements because only the Companies Act, 2013 binds us.' Which response correctly reflects the position for a listed company in India?

The executive is wrong. A listed company must follow SEBI's listing regulations and its listing agreement with the stock exchanges in addition to the Companies Act, 2013. These are binding on issuers, so regulators and exchanges are major governance influencers for listed entities.

  1. AIncorrect; a listed company must also comply with SEBI regulations and its listing agreement with the exchangesCorrect
  2. BCorrect; listing requirements are purely voluntary guidelines
  3. CCorrect; SEBI regulates only intermediaries and not listed companies
  4. DIncorrect; only the stock exchange, not SEBI, can prescribe governance norms

Explanation

A listed company is subject to the Companies Act and also to SEBI's listing regulations, enforced through the listing agreement with stock exchanges. SEBI regulates issuers as well as intermediaries. The exchanges enforce the framework, but SEBI prescribes it, so the last option is also wrong.

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