LIC’s auditor appointment made a board process, ahead of IPO

The Centre has taken one more step towards making Life Insurance Corporation (LIC) ‘IPO ready’ by turning the statutory auditor appointment into a board driven process, in line with SEBI’s listing requirements. Hitherto, the statutory auditor for central office and zones required the Centre’s approval.

The Finance Ministry’s Department of Financial Services has amended the LIC Rules, 1956 for a new framework on the selection of auditors. No longer will the government appoint the auditor, but it will be the shareholders at the Annual General Meeting, according to LIC observers.

Under the new process, LIC’s Audit Committee will recommend to the board for adoption a policy for selection of auditors. On the Board adopting this policy, the Audit Committee will draw up a panel of auditors and recommend to the board an individual or a firm for appointment. The board will then place the matter before shareholders for their approval at the AGM.

SN Ananthasubramanian, former ICSI President and practising company secretary, said: “The amendments to the LIC Rules which introduce various aspects of board-monitored governance, are essentially to make LIC IPO ready.”

Ashok Haldia, former CA Institute Secretary, said that the overhaul in auditor appointment provisions, “together with other amendments to the LIC Act/Rules is a step that could enhance corporate governance and transparency, giving more comfort to investors looking to come on board LIC,”

The Centre has brought made 27 amendments to the LIC Act through this year’s Finance Act. It is expected to issue later this month a request for proposals/expression of interest for appointment of merchant banks for the mega LIC IPO, which is set to mop-up at least ₹1-lakh crore for the government. While retaining its ‘corporation’ status, the government is moving to align the LIC Act’s corporate governance provisions with SEBI’s listing requirements. Recently, the government tweaked Securities Contracts Rules to enable public float of large issuers (like LIC), eyeing post listing market capitalisation of over ₹1-lakh crore.

Source: The hindu business line