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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

CMA clarifies issues raised on Corporate Governance

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By Kabeer Yousuf — MUSCAT: Dec 4: Laying all the concerns of public listed companies about the Corporate Governance Code by the Capital Market Authority to rest, the Authority has issued a circular clarifying the various doubts of the corporates. Accordingly, two SAOG companies cannot have a common person as their secretary and that the secretary must be appointed at the beginning of each term. If the same person is desired to be appointed for new term it is acceptable taking into consideration changing the secretary from time to time to ensure impartiality and avoid conflicts or accumulation of interests.


“Past experiences indicate that if the secretary stays long, he may be influential to the extent impeding the efficiency and independence of the board”.


In a circular dated (E/10/2016), Abdullah Salim al Salmi (pictured), Executive President of the Capital Market Authority said that since the issue of the Code of Corporate Governance provide CMA circular No (E/4/2015) on July 22 last year, there have been several questions, queries and comments on the clauses affecting the directors and officers of public listed companies and other parties.


“In order to ensure proper regulatory compliance, we assembled all queries raised and our correspondent responses in a compendium to provide an easy reference for all those concerned and interested facilitating the implementation of the Code”, Al Salmi said.


The chairperson of the audit unit is not permitted to act as chairperson or director of other associates or subsidiaries as it can cause conflict of interests in the longer run and if the internal auditor reports to the board then he or she cannot assume the role of the secretary. For this, the condition and criteria set forth in the Code need to be checked.


“By virtue of Articles of Association, Internal Auditors usually report to the Audit Committee hence he/she may be the secretary to the board.


Likewise, if a financial manager is member of senior executive management and reporting directly to the board of directors he can’t combine these roles and act as the company secretary”, he further added.


The circular notifies that ‘without prejudice to the conditions set forth in the Code, the company should draft and approve a policy that outlines the rules, terms and conditions for adoption of resolutions by circulation in the first subsequent meeting of the board of directors. Ideally, these rules should form part of the Article of Association’.


To a question seeking if a Board meeting where a majority of Directors are present physically though few of them participate by videoconferencing be treated a meeting out of two videoconference meeting that are allowed, he said a meeting where a majority of directors are present in person and few directors participate by video conference would not be counted for the maximum permitted videoconference meeting.


Setting out the appraisal criteria and approving it is the power of the shareholders because the goal of appraising the performance of the directors is to find out a mechanism to monitor the efficiency of the board members and their ability to effectively contribute in guiding the company to better performance.


The board may propose the criteria but the approval is the authority of the general meeting.


Al Salmi further said that the approval for transactions and invoice with related parties can be taken for the maximum cap of sales or procurement of goods and services from related parties which should be subject to transparent competitive bidding. The approval for each and every sales and purchase invoice is not practical.


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