SEBI gives India Inc 2 more years to split CMD post

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SME Times News Bureau | 13 Jan, 2020
In a major breather to India Inc, the Securities and Exchange Board of India (SEBI) has extended the deadline for the top 500 companies to split the posts of Chairman and Managing Director (MD) by two years, till April 2022.

As per the market regulators' norms, which were to come into effect on April 1, 2020, the top 500 listed companies in terms of market capitalisation would have to separate the roles of Chairperson and MD.

The move comes in the backdrop of requests in this regard from several corporates. Industry participants and analysts have hailed the decision, saying it would have a positive impact.

"This move from SEBI was much needed, and is extremely good news. Many large listed companies were struggling with this issue, and were being forced to make hasty decisions on succession," said Rishabh Shroff, Partner, Cyril Amarchand Mangaldas.

Shroff added that with this extension, companies now have time to carefully select suitable candidates.

"We anticipate many promoter-run listed companies will now make succession planning a top priority in 2020," he said.

As many entities have a single post of CMD, fearing that the overlapping of board and management functions could lead to conflict of interest, the market regulator, consequently, announced regulations to separate the two posts.

Many companies, including many top ones, have merged the two posts into a CMD (chairman-cum-managing director), leading to some overlapping of the board and management and potential conflict of interest situations.

The regulator, in May 2018, came out with its norms to split the post.

The norms were part of the series of recommendations given by the Uday Kotak-led committee on corporate governance commissioned by the market regulator.