A working group set up by Reserve Bank of India to review the regulatory and supervisory framework for core investment companies (CIC) has suggested that such entities should only have a two-tier structure, and stronger boards, with at least 50% independent directors.
It is suggested that capital contribution by a CIC in a step-down CIC, over and above 10% of its owned funds, should be deducted from its adjusted net worth.
Further, step-down CICs will not not be permitted to invest in any other CIC, but can ‘freely’ invest in other group companies.
ACIC is a non-banking financial company (NBFC) which carries on the business of acquisition of shares and securities and holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. Further investments in equity shares in group companies constitutes not less than 60% of its net assets, according to RBI norms.
“The number of layers of CICs in a group should be restricted to two. As such, any CIC within a group shall not make investment through more than a total of two layers of CICs, including itself,” the panel said.
It was recommended that every group having a CIC should have a Group Risk Management Committee and several board level committees should be constituted, such as Audit Committee and Nomination and Remuneration Committee.
“At least one third of the board should comprise of independent members if chairperson of the CIC is non-executive, otherwise at least half of the board should comprise of independent member,” it said.
It was also suggested that Audit Committee of the Board will be be chaired by an independent director and the committee should meet at least once a quarter.
