"There is a lack of corporate governance practice in Bangladesh especially in the private sector and the guideline will help the listed companies establish corporate governance," SEC Chairman Mirza Azizul Islam told a press briefing in Dhaka yesterday to mark the launch of the guidelines titled 'Corporate Governance Guidelines'.

He said the recent worldwide development on corporate governance practices and non-availability of any guideline in the country prompted the capital market watchdog to take initiatives for preparing a set of guidelines.

"Corporate governance is a precondition for a vibrant and improved capital market," Islam added.

As per the new guidelines, a listed company will have to appoint at least one-fifth 'independent non-shareholder directors'. Besides, a same person cannot act as chairman and chief executive officer of a company simultaneously.

The new guidelines also asked the companies to form the board of directors within the range of 5 to 20. However, the board of banks and non-bank financial institutions, insurance companies and statutory bodies should be constituted as prescribed by their respective primary regulators, read the guidelines.

Under the new guidelines, the companies will have to appoint a chief financial officer (CFO), head of internal audit and a company secretary while the CFO and company secretary will have to attend the meetings of board of directors.

The regulatory body sets rules for setting up an audited committee as a sub-committee of board of directors comprising at least three members including at least one independent non-shareholder director.

The audit committee chairman, selected by the board of directors, should have a professional qualification and must have knowledge, understanding or experience in accounting or finance, the guidelines said.

Besides, the audit committee will have to report on its activities to the board of directors and disclose the activities in the annual reports.

The SEC, in its guidelines, also directed the company directors to carry out some additional responsibilities including preparing of fair and flawless annual financial statements, maintenance of proper books of account and highlighting the operating results about the significant deviations from the last year.

About the non-compliance of the guidelines by any listed company, the SEC chairman said, "It's not mandatory. But, if any company fails to comply with the guidelines, they will have to explain the reasons and negligence in explanation will be taken as violation of SEC's directives."

He said the guidelines came into effect from January 9 this year.

Replying to a query, Islam said the SEC will monitor the companies whether they are complying the guidelines or not.