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Sebi for curbs on compensation agreements with PE firms

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The Securities and Exchange Board of India ( Sebi) has proposed curbs on compensation agreements between promoters of a listed entity and private equity ( PE) funds.
In a discussion paper, the markets regulator proposed that certain arrangements between listed entities and PEs would need prior approval from shareholders.
"No employee, including key managerial personnel, director or promoter of a listed entity shall enter into any agreement with any individual shareholders or any other third party with regard to compensation or profit sharing unless prior approval has been obtained from the board ( of directors), as well as shareholders by way of an ordinary resolution,” Sebi proposed in a paper titled ‘ Corporate Governance Issues in Compensation Agreements’.
The proposals were approved by the Sebi board on September 23 ( public comments have been invited till October 18).
“Provided that all such existing agreements entered into prior to the date of notification and which may continue beyond such date shall be informed to the stock exchanges for public dissemination and approval obtained from shareholders by way of an ordinary resolution in the forthcoming general meeting. In case approval from shareholders is not received, all such agreements shall be discontinued," proposed Sebi.
It said there had been instances where PE funds had entered into compensation agreements with promoters of listed companies and made gains but these were not disclosed.
Business Standard New Delhi,05th October 2016

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