The Securities and Exchange Board of India (SEBI) has extended a deadline for the country’s top 500 publicly listed companies to split the roles of managing directors (MDs) and chairpersons by two years.
The capital markets regulator extended the deadline to April 2022. It didn’t specify any reason for the move.
In March 2018, SEBI had set a deadline for listed companies to have separate roles for chairman and MDs. The deadline was set for April 2020 as part of the Uday Kotak panel’s report on enhancing corporate governance.
The panel had given detailed recommendations on the role and composition of the board of directors in listed companies. These steps, which included a restriction on the number of director-level positions a person could hold on listed companies’ board, were to be implemented in a phased manner.
Rishabh Shroff, partner at law firm Cyril Amarchand Mangaldas, said the SEBI move is good for India companies. “Many large listed companies were struggling with this issue, and were making hasty decisions on succession. With this extension, they have a good two years to carefully select suitable candidates. We anticipate many promoter-run listed companies will now make succession planning a top priority in 2020,” he said.
The Kotak panel was formed in June 2017. It was led by veteran banker Uday Kotak and comprised 23 members. These included Zia Mody of law firm AZB & Partners and Cyril Shroff, managing partner at Cyril Amarchand Mangaldas.
The panel submitted its 177-page report to SEBI in October 2017. It proposed tough norms to improve corporate governance, ranging from enhancing the role of independent directors to improving financial disclosures.
In all, the Kotak committee had proposed about 80 recommendations. SEBI accepted 40 recommendations without modification, made changes to 15 suggestions and rejected 18 others.
SEBI had also mandated enhanced disclosure of related-party transactions, besides telling listed companies for full disclosure on the use of funds raised via qualified institutional placements and preferential allotments.
The regulator had also called for mandatory disclosure of consolidated quarterly results beginning fiscal 2020. In addition, SEBI mandated top 100 companies to hold annual general meetings within five months of completing a financial year, effective 1 April 2019.