Securities and Exchange Board of India (SEBI) has decided to drop the mandatory rule of splitting the Chairperson and Managing Director/Chief Executive Officer positions of listed companies. In a SEBI board meeting it was decided that the listed companies can now choose to keep Chairman and Managing Director positions simultaneously or separately for its top office bearer/s.

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The rule for separating Chairman and MD positions separately was to be implemented from 1 April 2022. 

The step was taken in the wake of a demand from India Inc to end this mandatory requirement from SEBI. 

The rule now will be applicable on a voluntary basis.

The listed entities were required to split the roles before April 2022.

Corporate India has been raising their demands in budget meetings earlier. Because this rule would’ve led to many reshuffles in many corporate sectors.

According to Zee Business’ Tarun Sharma, only 54 per cent of companies have implemented this rule in their company as on 31 December 2021. However, banks already have this practice in place.

Companies including Reliance Industries Limited have been raising these issues for not splitting the roles and urged the regulator to defer the rule or scrap it.

This rule was recommended by a committee chaired by Uday Kotak to improve corporate governance. Kotak is the Chairman Kotak Mahindra Bank.

But Sebi has decided that the two positions could be separate but on a voluntary basis only.

According to a report by PTI, “Sebi board at this juncture, decided that this provision may not be retained as a mandatory requirement and instead be made applicable to the listed entities on a ‘voluntary basis’,” the regulator said in a release after the board meeting.

Earlier this month, Finance Minister Nirmala Sitharaman had said the regulator should hear if Indian companies have a view on the matter even as she made it clear that she was not “giving a diktat”.

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