The Securities and Exchanges Board of India (SEBI) has amended the Listing Obligations and Disclosure Requirement (LODR) rule to bring all senior management of listed companies within the scope of LODR and align with the Companies Act 2013. The changes will ensure the experts say executive appointments and their compensation will be guided and ratified by a nominating and compensation committee, followed by the board.
In a statement issued on Jan. 17, SEBI introduced a broad definition of “senior management” to include the public company’s officers and employees who are members of its core management team, excluding the Board of Directors, and all members of management one level below the chief executive officer or managing director or full-time director or manager (including chief executive officer and manager if not on the board of directors). The new definition also includes all functional heads, whatever they are called, as well as the company secretary and chief financial officer.
“Having addressed the issue of key staff in relation to their appointment, remuneration and conflicts of interest, the regulator has turned its attention to senior management staff by bringing them within the scope of LODR in accordance with the Companies Act 2013 has brought. This would bring more compliance and governance into decision-making at a functional level as well, and more such changes are likely to occur in the future,” said Makarand Joshi, founding partner at corporate compliance firm MMJC and Associates LLP.
The LODR regulations were first notified in 2015 to bring under one regulation all SEBI circulars issued in connection with various statutory disclosures and steps that publicly traded companies should follow. It establishes the guiding principles for publicly traded companies, including the listing norms, shareholders’ rights, role of transparency, corporate governance practices, responsibilities of the board of directors, payment of dividends, formation of various committees, etc. The current change is the 36th since the LODR regulations were set about eight years ago.
The amendment to the LODR regulation has also clarified that a public sector company must ensure shareholder approval to appoint or re-appoint an individual to the board or as a manager at the next general meeting, although the existing rules for listed companies say in general that shareholder approval should be obtained at the next general meeting or within a period of three months from the date of appointment, whichever is earlier.
In the section dealing with the disclosures companies are required to make in their annual corporate governance report, the LODR regulation amendment has mandated the details of material subsidiaries of the listed company, including date and place of incorporation and name and Date of appointment of the statutory auditors of these subsidiaries.
