NEW DELHI: Markets regulator Sebi has deferred by two years to April 2022 its directive for listed companies to separate the roles of chairman and director in sight of demand from corporates, and to stay compliance burden lower within the wake of the present economic scenario.
Under the Sebi norms, the highest 500 listed entities by market capitalization were mandated to suits the need of separation of the roles of chairperson and director (MD) or chief military officer (CEO) with effect from April 1, 2020.
The norms were aimed toward improving corporate governance structure of listed companies.
Now, the date of implementation of the regulatory provision has been deferred to April 1, 2022, consistent with a gazette notification dated January 10.
While the notice didn't specify any reason for the move, sources said that the choice to defer the implementation has been taken in sight of demand from corporates and also to ease the compliance burden amid a slowing economic process rate.
Securities and Exchange Board of India (Sebi) has been receiving various representations with reference to the regulatory requirements including from industry bodies like Ficci and CII.
The representations highlighted this levels of unpreparedness of listed entities to suits the directive.
Data from stock exchanges reveal that presently, only around 50 per cent of the highest 500 listed entities are in compliance with the regulatory provision.
Currently, many companies have merged the 2 posts as CMD (chairman-cum-managing director), resulting in some overlapping of the board and management, which could lead on to conflict of interest and consequently the regulator in May 2018 came out with its norms to separate the post.
The norms were a part of the series of recommendations given by the Sebi-appointed Kotak committee on corporate governance.
A large number of massive companies including Reliance Industries, BPCL, ONGC, Coal India, Wipro and HeroMotoCorp have one person holding the dual post of chairman and director .
Industry body Ficci has welcomed Sebi's decision to increase its deadline for splitting Chairman and MD posts by two years to April 2022.
"This was a part of multiple representations made by Ficci and that we appreciate that Sebi has extended the deadline as managerial continuity, unified vision and speed of execution are crucial to business success and are facilitated in family businesses," the industry body's President Sangita Reddy said.
Anjali Aggarwal, Partner at Corporate Professionals, said Sebi's decision to increase the deadline would surely be a sigh of relief for several a family run companies and state controlled entities, but what's needed to be understood is that the capital market regulator's intent behind mandating the splitting of positions.
"Governance measures are the highest priority for the regulator and therefore the slightest of conflict of interest is avoidable.
The same person holding both the MD also as chairman positions could have led to such a situation, thus jeopardising the essential essence of corporate governance," she added.