Code of Conduct for Organisations

1. Code of Conduct for Organisations By; CA Kamal Garg [B. Com (H), FCA, DISA (ICAI)] cakamalgarg@gmail.com

2. Introduction • A code of conductis a set of rules outlining: • the responsibilities of; or • the proper practices for an individual, party or organization

3. Introduction • Responsibility refers to the managerial commitment or duty; • Proper Practices refer to the modus operandi for executing and fulfilling such managerial commitment or duty • In its 2007 International Good Practice Guidance, "Defining and Developing an Effective Code of Conduct for Organizations", the International Federation of Accountants (IFAC) provided the following working definition: "Principles, values, standards, or rules of behavior that guide the decisions, procedures and systems of an organization in a way that: (a) contributes to the welfare of its key stakeholders, and (b) respects the rights of all constituents affected by its operations."

4. Significance of Code of Conduct • Code of Conduct is the standard of expected ethical behaviour for the company's management and employees. It is about holding oneself to the highest standards of ethical business behaviour; • Typically Codes talk about expectations to: • obey the law, • conflicts of interest, • insider trading, • preserving confidential information, • bribery, • corporate opportunities, • competition and fair dealing among other things

5. Legal Backing to Code of Conduct • US Scenario: • Section 406 of the Sarbanes-Oxley Act of 2002 ("SOX")directed the Securities and Exchange Commission to issue rules requiring each public company to disclose whether or not it has adopted a code of ethics that applies to certain of the company's key officers; • In accordance with the mandate of SOX, the SEC adopted final rules implementing Section 406 of SOX in January 2003

6. Legal Backing to Code of Conduct • The final rules define the term "code of ethics" as written standards that are reasonably designed to deter wrongdoing and to promote: • Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; • Full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with or submits to the SEC and in other public communications made by the company; • Compliance with applicable governmental laws, rules and regulations; • The prompt internal reporting of any violations of the code of ethics to an appropriate person or persons identified in the code of ethics; and • Accountability for adherence to the code of ethics.

7. Legal Backing to Code of Conduct • Indian Scenario: • As per Clause 49 of the Listing Agreement, • The Board shalllay down a code of conduct for all Board members and senior management of the company. The code of conduct shall be posted on the website of the company. • All Board members and senior management personnel shall affirm compliance with the code on an annual basis. The Annual Report of the company shall contain a declaration to this effect signed by the CEO.

8. Code of Conduct imbibed under Companies Act • Failure to maintain register of members (Section 150); • Failure to hold annual general meeting as per law (Section 166); • Acting as director without holding qualification shares (Section 272); • Acting as a director of more than 15 companies (Section 279); • Default in giving notice of Board meetings (Section 286); • Failure to appoint a whole-time secretary (Section 383A)

9. Code of Conduct imbibed under Companies Act • Wrongfully withholding or wrongfully taking possession of property of the company by an officer (Section 630); • Failure to keep proper books of account, etc. (Section 209); • Failure to lay balance sheet and profit and loss account at the AGM (Section 210); • Failure to prepare balance sheet and profit and loss account showing a true and fair view (Section 211); • Omission to make repayment of deposit (Section 58A)

10. Code of Conduct imbibed under SEBI Act, 1992

11. Penalties under the SEBI Act • Section 15A: • Failure to furnish any document, return or report to SEBI; • Failure to file any return or furnish any information, books or other documents to SEBI; • Failure to maintain the books of account or records • Section 15B: Failure by an intermediary to enter into an agreement with his client; • Section 15C: If SEBI calls upon a listed company or any intermediary to redress the investor grievance, but fails to redress such grievance within the time specified by SEBI

12. Penalties under the SEBI Act Section 15F Registered Stock Broker Fails to deliver any Security or Fails to make pymt of the amt due to investor Fails to issue Contract Note in form and manner prescribed by SE Charges brokerage in excess of that specified in the Regulations

13. Penalties under the SEBI Act • Section 15G: Where an Insider: • deals in securities of a body corporate listed on any SE on the basis of unpublished price sensitive information (UPSI); • communicates any UPSI to any person except as required in the ordinary course of business or under any law; • counsels, or procures for any other person to deal in any securities of any body corporate on the basis of UPSI

14. Penalties under the SEBI Act • Section 15HA: Person indulging in fraudulent and unfair trade practices relating to securities; • Section 15HB: Failure to comply with any provision of this Act, Rules, or Regulations made thereunder or directions issued by SEBI for which no separate penalty has been provided;

15. Code of Ethics for ICAI Members

16. First Schedule: Part I

19. Clause 6

24. Clause 11

25. Clause 12

26. First Schedule: Part I: Clause 2 • Professional Misconduct if • Directly or Indirectly • Pays; or • Allows; or • Agrees to pay or allow Any share, commission or brokerage in the • Fees; or • Profits Of his professional business with Non-members

27. First Schedule: Part I: Clause 2 • Exceptions: • ICAI Member; • Partner; • Retired Partner; • Legal Representative (LR) of deceased partner • Widow or LR of partner only if Deed provides; • Widow or LR of proprietor can receive only goodwill but no participation in earnings of the firm • Member of other specified professional bodies; • Specified qualified persons

28. First Schedule: Part I: Clause 3 • Professional Misconduct if: • Accepts; or • Agrees to accept Any part of the profits of professional work from Non-member

29. First Schedule: Part I: Clause 3 • Exceptions: • ICAI Member; • Member of other specified professional bodies; • Specified qualified persons

30. First Schedule: Part I: Clause 4 • Professional Misconduct if: • Enters into partnership; • In or outside India with Non-members • Exceptions: • ICAI Member; • Member of other specified professional bodies; • Specified qualified persons

31. First Schedule: Part I: Clause 5 • Professional Misconduct if: • Secures work from Non-members • Exceptions: • Employee; • Partner; • Other open means (e.g. Clause 6 or 7); • Persons as per Clause 2, 3 and 4

32. Professional Bodies for Clause 2, 3 and 5 • ICSI; • ICWAI; • Bar Council; • Indian Institute of Architects; • Institute of Actuaries

33. Specified Qualified Personsfor Clause 2, 3, 4 and 5 • CS; • CWA; • Bachelor in Law (from recognised University or Institution); • Bachelor in Engineering; • Bachelor in Architecture; • Actuary; • B Tech; • MBA (from recognised University or Institution recognised by AICTE)

34. Membership of Professional Bodiesfor Clause 4 • ICSI; • ICWAI; • Advocate (i.e. member of Bar Council); • Engineer (i.e. member of Institution of Engineers); • Architect (i.e. member of Indian Institute of Architects); • Actuary (i.e. member of Institute of Actuaries)

35. First Schedule: Part II

38. First Schedule: Part III

40. Second Schedule: Part I

41. Clause 1

42. Clause 2

43. Clause 3

44. Clause 4

45. Clause 8

46. Clause 9

49. Clause 7

50. Second Schedule: Part II