TATA CAPITAL LIMITED GUIDELINES ON CORPORATE GOVERNANCE COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE The Company recognizes its role as a corporate citizen and endeavors to adopt e best practices and e highest standards of Corporate Governance rough transparency in business eics, accountability to its customers, government and oers. The Company's activities are carried out in accordance wi good corporate practices and e Company is constantly striving to better em and adopt e best practices. As part of e Tata Group, e Company's philosophy on Corporate Governance is founded upon a rich legacy of fair, eical and transparent governance practices. The Corporate Governance philosophy has been strengened wi e implementation by e Company of e Tata Code of Conduct applicable to e Company and its employees. In addition, e Company has adopted a Code of Conduct for its Non-Executive Directors. Bo ese codes are available on e Company's website. RBI GUIDELINES ON CORPORATE GOVERNANCE In order to enable NBFCs to adopt best practices and greater transparency in eir operations, RBI has, on May 8, 2007, issued guidelines on Corporate Governance. In pursuance of e aforesaid Guidelines, e Company has framed e following internal Guidelines on Corporate Governance. BOARD OF DIRECTORS The Board of Directors along wi its Committees shall provide leadership and guidance to e Company's management and direct, supervise and control e performance of e Company. As per e Company's Articles of Association, e Board's streng is required to be a minimum of ree to a maximum of twelve directors. The Board of Directors of e Company shall have an optimum combination of Executive and Non-Executive directors, wi not less an fifty percent of em being Non-Executive Directors. In case of a Non-Executive Chairman, atleast oneird of e Board should consist of Independent Directors and, in case of an Executive Chairman, one-half of e Board should consist of Independent Directors. A Director shall not hold e office of Director in more an 15 companies. None of e Directors on e Company's Board shall be a Member of more an 10 Board Page 1 of 10
Committees and Chairman of more an 5 Board Committees (Committees being Audit Committee and Investors' Grievance Committee) across all companies in which ey are Directors. All e Directors shall make e necessary annual disclosure regarding eir directorships and Committee positions and shall intimate changes as and when ey take place. The Board shall periodically review Compliance Reports of all laws applicable to e Company prepared by e Company as well as steps taken by e Company to rectify instances of non-compliance. The Company has adopted e following Guidelines relating to Corporate Governance 1. Size of e Board - - Not more an 12 Members Offices of e Chairman and Managing Director to be separate. 2. Nominations - To be set up for e purpose of identifying Independent Committee of e Directors to be inducted on e Company's Board and to Board take steps to refresh e composition of e Board, from time to time. 3. Executive - Committee of e Board revenue budgets, etc. - To be set up to review key items before presentation to e Board, such as, business and strategy review, capital and CEO and CFO to be members of e Committee, if members of e Board. If not, ey may be invited to attend e, wi e permission of e Chairman of e 4. Appointment of Executive Directors - Number of Executive Directors (including Managing Directors) to be not more an one-ird of e total streng of e Board. - Should not hold office beyond e age of 65 years or earlier, as determined by e Board. 5. Appointment of Non- Executive Directors - Number of Non-Executive Directors to be not less an two-ird of e total number of Directors. - Number of Independent Directors to be not less an oneird of e total number of Directors. - Ex-Managing Directors/Executive Directors may be invited to rejoin e Board as Non-Executive Directors, but preferably after an interval of 3 years. - Retirement age not to exceed 75 years. - Tenure of upto nine years, to be considered a reshold for granting furer tenure/s based, inter alia, on merit and contribution of each Director. Page 2 of 10
Board Meetings Meetings of e Board of Directors shall be held atleast four times a year, wi a maximum time-gap of four mons between any two consecutive. The minimum information to be statutorily made available to e Board, shall be furnished to e Directors. CODE OF CONDUCT The Company shall adopt e Tata Code of Conduct for its employees including e Managing Director and a Code of Conduct for its Non-Executive Directors. The same shall be posted on e Company's web-site. COMMITTEES OF THE BOARD To focus effectively on e issues and ensure expedient resolution of diverse matters, e Board shall constitute a set of Committees wi specific terms of reference / scope. The Committees shall operate as empowered agents of e Board as per eir Charter / terms of reference. The minutes of e of all Committees of e Board shall be placed before e Board for discussions / noting. While e RBI Guidelines mentioned above, require e setting up of an Audit Committee, Asset Liability Supervisory Committee, Risk Management Committee and Nominations Committee, e Listing Agreement for Debentures issued to e public, requires e setting up of an Audit Committee, e Remuneration Committee and Shareholders/Investors Grievance Committee. The Nominations Committee and Executive Committee of e Board have been set up by e Company as per e practice in e Tata Group. Details of e various Committees are as under: Audit Committee Role As per e Audit Committee Charter, a gist of which is given, below: - Recommend appointment and removal of Statutory Auditors and eir remuneration, nature and scope of audit. - Ensure adequacy of internal controls and compliances and recommend remedial measures. - Oversee financial reporting process and disclosure of financial information. - Review financial statements before submission Page 3 of 10
- Act as e link between Statutory Auditors, I nternal Auditors a n d B o a rd o f D i rectors. - Review accounting policies - Monitor compliance wi Tata Code of Conduct - Review working of Eics Committee and review significant related party transactions. - Review findings of internal investigations / fraud / irregularities, etc. - Monitoring usage of proceeds from an issue including public issue, rights issues, preferential issues, etc. on a quarterly basis/annual basis and make appropriate recommendation to e Board. - Carry out additional functions as contained in e l i s t i n g a g r e e m e n t o r o t h e r r e g u l a t o r y requirements applicable to e company or in e terms of reference of e Audit Committee. - Minimum ree Non - Executive Directors as M e m b e r s, t w o - t h i r d s o f w h i c h, s h a l l b e Independent Directors. - All Members of e Audit Committee shall be financially literate and at least one member shall have accounting or related financial management expertise. - The Chairman of e Audit Committee shall be an independent director. - The Audit Committee may invite such of e executives, as it considers appropriate (and particularly e head of e finance function) to be present at e of e Committee, but on occasions it may also meet wiout e presence of any executives of e company. The Finance D i r e c t o r, H e a d o f I n t e r n a l A u d i t a n d a representative of e Statutory Auditor may be present as invitees for e of e Audit Committee. Secretary of e Committee : Company Secretary At least four times a year and not more an four mons shall elapse between two. Page 4 of 10
Two Members or one ird of e Members of e Audit Committee whichever is greater, but ere should be a minimum of two independent members present. Shareholders/Investors Grievance Committee Role To specifically look into e redressal of shareholder and investors complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends, etc. To be under e chairmanship of a Non-Executive Director. Secretary of e Committee: Company Secretary Any two Members. Finance and Asset Liability Supervisory Committee Role (a) To approve all individual borrowings, structured instruments, finalise terms of e credit facilities, etc. wiin e overall limits approved by e Board. (b) To oversee e implementation of e Asset Liability Management system and to periodically review its functioning. Managing Director and any two oer Directors Secretary of e Committee: Company Secretary For (a) above, as and when required For (b) above, at least once a year Any two members Page 5 of 10
Investment Credit Committee Role - To approve SME /Infrastructure and oer financing proposals, which in terms of e Board approved 'Delegation of Auority Matrix', requires e approval of e Board. - To approve personal and business loans of upto Rs.1 crore wiin e Company's existing auority limit. Managing Director and atleast ree Non Executive Directors, one of which shall be an Independent Director. Secretary of e Committee: Company Secretary As may be required. Any two members Risk Management Committee Role Review e Risk Management process in e Company and e working of Risk Management Working Committee in e areas of portfolio, credit, off balance sheet and operational risk. Chairman, Managing Director and one/two Non-Executive Directors. Secretary of e Committee : Company Secretary At least once every quarter Any two Members Page 6 of 10
Remuneration Committee Role - To review e performance of e Managing/Whole-time Directors on predetermined parameters. - To review and recommend remuneration/compensation packages for e Executive Directors, wiin prescribed limits. - To decide commission payable to e directors, subject to prescribed limits and approval of shareholders. - To formulate and administer ESOPs. - To review employee compensation vis-à-vis industry practices and trends. - To review e performance of direct reportees to e Managing Director and eir compensation structure. At least ree non-executive Directors, of which two-ird (if not all) shall be Independent Directors. Secretary of e Committee : Head of HR At least once a year Any two members Remuneration Policy The Company's remuneration policy is driven by e success and performance of e individual employee and e Company. Through its compensation programme, e Company endeavours to attract, retain, develop and motivate a high performance workforce. The Company shall follow a compensation mix of fixed pay, benefits and variable pay. Individual performance pay shall be d e termined by b u s i n e s s p e r fo r m a n c e a n d t h e performance of e individuals measured rough e annual appraisal process. The Company shall pay remuneration by way of salary, benefits, perquisites and allowances (fixed component) and commission / incentive remuneration (variable component) to its Managing Director. Annual increments shall be decided by e Remuneration Committee wiin e salary scale approved by e members and are effective April 1, each year. The Remuneration Committee shall decide on e commission / incentive remuneration payable to e Managing Director, based on e performance of e Company as well as at of e Managing Director. Page 7 of 10
The Non-Executive Directors shall not be entitled to receive any remuneration from e Company except by w a y o f S i t t i n g F e e s a n d C o m m i s s i o n. T h e fees/compensation, if any, paid to Non-Executive Directors, including Independent Directors, shall be fixed by e Board of Directors. However, e prior approval of e shareholders would have to be sought, in e event of e fees being in excess of e limits prescribed under e Companies Act, 1956. The Remuneration Policy may be reviewed from time to time. Nominations Committee Role - To identify Independent Directors to be inducted to e Board, from time to time. - To take steps to refresh e composition of e Board. Three or four members, including Chairman of e Board and atleast two Independent Directors, one of whom would be e Chairman. Chairman of e Company to be a permanent member during his tenure of Chairmanship of e Board. For oer members, two terms of ree years each. Secretary of e Committee: Company Secretary At least once a year. Any two members Page 8 of 10
Executive Committee Role To review e following items before ese are presented to e Board: - Business and strategy review - Long term financial projections and cash flows. - Capital and Revenue Budgets and Capital Expenditure programmes. - Acquisitions, divestments and business restructuring proposals. - Senior management succession planning. - Customer service initiatives and innovative measures for enhancing quality of service and customer satisfaction. - Any oer item as may be decided by e Board. Chairman of e Board (who would be e Chairman of e Committee), e Managing Director, e Executive Directors, if any, and atleast two Non-Executive Directors (of which one should be independent). The CEO and CFO to be permanent invitees in case ey are not executive directors. Secretary of e Committee : Company Secretary As and when e Board of e Company expands to a streng of about 10-12 Directors, e Executive Committee would become functional and would meet at such intervals as may be determined at at time. Any two Members or 1/3 of e total streng of e Committee, whichever is e higher. SUBSIDIARY COMPANIES The signed minutes of e Board Meetings of e subsidiary companies shall be placed at every Board Meeting of e Company, alongwi a brief summary of e contents of e Minutes. The management shall periodically bring to e attention of e Board of Directors of e Company, a statement of all significant transactions and arrangements entered into by e subsidiary company. Atleast one independent director on e Board of Directors of e holding company shall be a director on e Board of Directors of e material non-listed subsidiary companies. The Audit Committee of e holding company shall also review e functioning of e Audit Committees of e subsidiary companies. Page 9 of 10
SHAREHOLDERS Shareholders shall be informed of details regarding e appointment or reappointment of a Director. Half yearly results and presentations made by e Company to analysts shall be put on e Company's web-site or sent to e Stock Exchange on which listed. DISCLOSURES The Company shall make e following disclosures, as statutorily required: - Basis of related party transactions - Disclosure of accounting treatment - Board disclosures Risk Management - Proceeds from public issues, rights issues, preferential issues, etc. - Remuneration of Directors - Management - Shareholders CEO/CFO CERTIFICATION The CEO i.e. e Managing Director and e CFO shall make e necessary certifications regarding e Financial Statements, internal controls, etc. to e Board. COMPLIANCE OFFICER The Company Secretary shall be e Compliance Officer of e Company. POLICIES ADOPTED BY THE COMPANY The following policies have been framed and adopted by e Company, viz. a) Fair Practices Code b) KYC and PMLA Policy c) Whistle Blower Policy d) Code of Conduct for Prevention of Insider Trading and Code of Corporate Disclosure Practices e) Investment Policy f) Policy on Demand and Call Loans g) Policy for Determining Interest Rates, Processing and Oer Charges h) Policy on Affirmative Action for SC/ ST communities. The above policies may be reviewed from time to time. Page 10 of 10