Markets regulator Sebi has delayed by two years to April 2022 it’s directive for registered companies to split the positions of chairman and MD in view of demand from corporates and to keep agreement burden lower in the track of the current financial scenario.
With the two-year extension that has been published by the business regulator, the directive will now get into impact from April 1, 2022. SEBI did not state why the deadline was stretched but sources had earlier told that the leisure is likely a result of the need for the same made by many corporate houses.
The idea to divide the roles of chairman and MD of registered firms was first mooted by the Uday Kotak panel. Following this, SEBI accordingly changed the ‘listing duties and disclosure obligations’, adding the claim that the chairperson of the company’s board must be a non-executive manager and should not be related to the MD or the chief executive officer (CEO).
However, even as the past deadline for the same was fast progressing, nearly half of the best 500 listed firms were lagging in terms of the agreement.
Now, the regulator has delayed the date of implementation of the administrative provision to April 1, 2022, without specifying any reasons thereof.
Meanwhile, sources have stated that this decision was required due to demand from corporates as well as to help the compliance responsibility amid the current economic circumstances.
SEBI has been supporting various representations concerning the regulatory requirements from industry figures including FICCI and CII. The representations highlighted the current levels of unpreparedness of registered entities to comply with the directive.
Currently, many firms have the two posts consolidated as CMD (chairman-cum-managing director), leading to some overlapping of the committee and management, which could point to a battle of interest and consequently the regulator in May 2018 reached out with its measures to split the post.
The thought was that a non-executive chairman would manage the board, while the MD and or CEO would be included in the company’s day-to-day processes. The regulation would not be relevant to those listed groups, which did not have any identifiable promoters as per the shareholding model filed with stock markets.
On Monday, the market regulator said the figure 2020 shall be replaced by the number 2022 in regulation 17(1B). However, it did not reveal the reasons to delay this move by two years. Firms will lift a sigh of relief, following SEBI’s decision to delay the deadline by two years, considering that it happens at a time the country’s market has slowed clearly over the last one year, and corporate profits remain tepid amid a slowdown in customer demand.
Statistics accumulated indicate that there are 213 firms that still have chairpersons including executive positions. In 161 of these, the chairperson is also replacing the duties of the MD or CEO. RIL is one such firm; others in the list add Hindustan Unilever, Bharat Petroleum Corporation, ONGC, Coal India, NTPC, and Power Grid Corporation.
However, several top companies like Reliance Industries, Hindustan Unilever and some state-owned firms are yet to comply with the law. According to a fresh media report citing data from nseinfobase.com, the director still holds an administrative role in 213 companies, while the director is also MD and CEO in 161 companies.