A code of conduct sets out how an organisation expects its people to behave, from gifts and conflicts to data and respect at work. Most employees sign it once and never read it again.
Our course turns the code into scenarios people recognise from their own jobs. The articles below show how to make the code stick after the annual acknowledgement.
Quick answer
SEBI LODR Regulation 17(5) requires every listed entity's board to adopt a code of conduct for directors and senior management, who must affirm compliance annually under Regulation 26(3). Independent directors follow the code in Schedule IV of the Companies Act, 2013, and all directors owe duties under section 166. No statute mandates a code or training for other employees.
The course
What the law requires
SEBI LODR Regulations, 2015: Regulations 17(5) and 26(3)
Regulation 17(5)(a) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended) requires the board of a listed entity to lay down a code of conduct for all members of the board and senior management. Regulation 17(5)(b) says the code must suitably incorporate the duties of independent directors as laid down in the Companies Act, 2013.
Regulation 26(3) requires all board members and senior management personnel to affirm compliance with the code every year. Under paragraph D of Schedule V, the annual report must include a declaration signed by the CEO that directors and senior management have affirmed compliance. Under Regulation 15(2), these requirements do not apply to listed entities with paid-up equity capital up to ten crore rupees and net worth up to twenty-five crore rupees.
"Senior management" is defined in Regulation 16(1)(d) as the core management team excluding the board, including all members of management one level below the CEO, managing director, whole-time director or manager, functional heads, and KMP other than board members.
Companies Act, 2013: Schedule IV, code for independent directors
Schedule IV of the Companies Act, 2013, applied through section 149(8), is the Code for Independent Directors. It sets guidelines of professional conduct (such as upholding ethical standards of integrity and probity, acting objectively, and not abusing the position to the detriment of the company or for personal advantage), the role and functions of independent directors, and their duties.
The duties in Schedule IV include undertaking appropriate induction and regularly updating and refreshing their skills, knowledge and familiarity with the company; keeping themselves well informed about the company; not disclosing confidential information unless authorised or required by law; and reporting concerns about unethical behaviour, actual or suspected fraud or violation of the company's code of conduct or ethics policy. LODR Regulation 25(7) separately requires listed entities to familiarise independent directors with the business and with their roles, rights and responsibilities through various programmes.
Companies Act, 2013: section 166, duties of directors
Section 166 sets statutory duties for every director: act in accordance with the articles; act in good faith to promote the objects of the company for the benefit of its members as a whole and in the best interests of the company, its employees, shareholders, the community and the environment; exercise due and reasonable care, skill, diligence and independent judgment; avoid conflicts of interest; not make undue gains; and not assign their office. A director's code of conduct normally restates these duties.
Related codes required by SEBI
Listed companies also need a separate code of conduct for designated persons under Regulation 9 of the SEBI (Prohibition of Insider Trading) Regulations, 2015, and a vigil mechanism under LODR Regulation 22 for reporting breaches. Most companies cross-refer to these from their main code. See our insider trading guide and whistleblower policy guide.
Who must be trained and how often
For listed entities, the legal requirement is a code for directors and senior management with an annual affirmation of compliance (LODR Regulation 26(3)). The law does not require training on that code or set a training frequency. Independent directors must undertake induction and keep their skills and knowledge of the company up to date under Schedule IV, and listed entities must run familiarisation programmes for them under Regulation 25(7).
No statute requires a code of conduct, or code training, for employees generally. Companies adopt an employee code to set standards and to support disciplinary action. Common practice, not law, is to train new joiners at induction, run annual refresher training with a signed acknowledgement, and retrain after major changes to the code.
| Audience | Requirement | Source |
|---|---|---|
| Directors and senior management (listed entities) | Code of conduct; annual affirmation of compliance | LODR Reg. 17(5), 26(3) |
| Independent directors | Schedule IV code; induction and regular updating of skills and knowledge | Companies Act s.149(8), Schedule IV; LODR Reg. 25(7) |
| All directors | Statutory duties | Companies Act s.166 |
| Other employees | Company's own code (no statute) | Induction and annual refresher is common practice |
Penalties and consequences
The law penalises breaches of directors' duties and of the listing regulations. Breaches of an employee code are dealt with under company policy and employment terms.
| Breach | Provision | Consequence |
|---|---|---|
| Director contravenes section 166 | Companies Act s.166(7) | Fine of not less than one lakh rupees, up to five lakh rupees |
| Director makes an undue gain | Companies Act s.166(5) | Liable to pay an amount equal to the gain to the company |
| Listed entity fails to adopt the code, obtain affirmations or include the CEO declaration | LODR Reg. 98(1) | Stock exchange action, including fines and suspension of trading, as specified by SEBI |
| Contravention of SEBI regulations with no separate penalty | SEBI Act s.15HB | Penalty of not less than one lakh rupees, up to one crore rupees |
What good Code of Conduct training covers
- The company's values and why the code exists
- A simple ethical decision-making test for situations the code does not cover
- Conflicts of interest and how to declare them
- Gifts, hospitality and anti-bribery rules
- Confidential information, data protection and insider trading
- Respect at work, harassment and discrimination, including POSH
- Use of company assets, social media and external communications
- Fair dealing with customers, suppliers and competitors
- How to raise a concern and the protection against retaliation under the vigil mechanism
- Consequences of breaching the code
- For directors and senior management: the annual affirmation and the duties in section 166 and Schedule IV
Our courses for this topic
| Course | Audience | Duration | Language | Format |
|---|---|---|---|---|
| Code of Conduct | All Staff | 45 min | English | SCORM eLearning |
Laws & standards covered
- SEBI Code of Conduct for Listed Companies
- Companies Act 2013 – Director Duties
- Corporate Governance Guidelines
Who it's for
- All employees
- Contractors and consultants
- New joiners
Guides & insights
Frequently asked questions
Is a code of conduct mandatory for all companies in India?
Only listed entities are required by SEBI LODR to have a code of conduct, and it covers directors and senior management. Independent directors of any company must follow Schedule IV of the Companies Act. Unlisted companies and employee codes are a matter of good practice and company policy.
Who must sign the annual affirmation?
All members of the board and senior management personnel of the listed entity, under Regulation 26(3). The CEO then signs a declaration in the annual report confirming the affirmations were received.
Does the code have to cover independent directors' duties?
Yes. Regulation 17(5)(b) requires the code to suitably incorporate the duties of independent directors as laid down in the Companies Act, which are set out in Schedule IV.
Can an employee be disciplined for breaching the code?
Yes, if the code forms part of the terms of employment or standing orders and the employee was made aware of it. Records of training and signed acknowledgements are the usual evidence that the employee knew the standard.
Should contractors be trained on the code?
The law does not require it. Many companies extend the relevant parts of the code to contractors and vendors through a supplier code and contract terms, and give on-site contractors the same awareness training as employees.
Which Code of Conduct Training courses does Compliance at Workplace offer?
Code of Conduct (45 min, for All Staff).
Which laws and standards does Code of Conduct Training cover?
SEBI Code of Conduct for Listed Companies; Companies Act 2013 – Director Duties; Corporate Governance Guidelines.
Who should take Code of Conduct Training?
All employees, Contractors and consultants, New joiners.
Can the Code of Conduct Training be customised to our organisation?
Yes. Every course can be customised to your policies, branding and industry scenarios, and delivered on your LMS as SCORM or on our Compliance Central platform.
Sources
- SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (consolidated, SEBI)
- Companies Act, 2013 (India Code)
- SEBI (Prohibition of Insider Trading) Regulations, 2015 (consolidated, SEBI)
- Securities and Exchange Board of India Act, 1992 (as amended, SEBI)
Last updated by the Compliance at Workplace Editorial Team.