The division of responsibilities is voluntary!
Amendment of the mandatory rule in listed companies
SEBI Board Key decision
- Market regulator SEBI (Securities and Exchange Board of India) has recently clarified that the separation of chairman and managing director (MD) positions in listed companies is not mandatory but voluntary. It announced that it was streamlining orders issued in May 2018. The SEBI Board has taken a fresh decision following the recent suggestion by Finance Minister Nirmala Sitharaman that the regulator should know the views of Indian companies on the issue but should not consider it as a ‘command’. As per the rules announced by SEBI earlier, the top 500 listed companies in the country are required to split the posts of Chairperson, Managing Director / Chief Executive Officer by April 2022. It can take up to two years with special permission if required.
There was no sufficient agreement.
- SEBI said in a statement that the board, which met on Monday, Feb 14, had taken a fresh decision as it had not yet reached a sufficient level of agreement on the issue. The top 600 listed companies had a consensus (agreement) of 50.4 percent in September 2019, up to just 54 percent by December 31, 2021. The committee, headed by Uday Kotak, appointed by SEBI, suggested that the division of powers at the top of the companies would improve management efficiency and oversight. Based on this, SEBI orders were issued in May 2018. SEBI’s latest decision comes two months before the deadline.
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Amendment to the AIF Rules
- Meanwhile, the market regulator SEBI Board on Tuesday (Feb 15) approved amendments to the Alternative Investment Funds (AIF) rules. It has brought several issues into the regulatory framework, including the disclosure of security and credit ratings. The Board has made it clear that while investing in a listed company’s equity, the third category AIFs are subject to certain conditions.
Introduce new reforms:
- Union Finance Minister, Nirmala Sitharaman has suggested to SEBI, the market regulator, to introduce more new generation reforms to facilitate business management. He said the US Federal Reserve should prepare to rectify any fluctuations in the markets with the decisions. The minister was speaking at a meeting with the SEBI board for the first time, since the introduction of the budget for the next financial year.
- Nirmala Sitharaman admired the various decisions taken by SEBI and suggested that more measures be taken to reduce the burden of regulations and provide stronger protection to investors. He said the government should support the corporate bond market and develop the green bond market in light of the growing emphasis on ESG (environmental, social, and governance) investments. SEBI Chairman Ajay Tyagi briefed the Finance Minister on key trends, expectations on the Indian securities market, and the significant increase in the number of individual investors. Officials from the Finance Ministry, the Reserve Bank, and SEBI were present at the meeting.
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