SEBI Extends Its Deadline To Separate Top Posts

The Securities & Exchange Board of India (SEBI) has announced that it has deferred by two years, until April 2022, its directive for companies to separate the roles of chairman and managing director.

The development has come after intensive lobbying by industrial houses and to keep compliance cost lower during an economic slowdown.

It may be recalled that revised SEBI norms had made it mandatory for the top 500 listed companies to separate the roles of chairperson and managing director or chief executive officer (CEO) with effect from April 1, 2020.

However, after the latest statement by SEBI, the date of implementation of the regulatory provision has been deferred to April 1, 2022.

Incidentally, around half of the top 500 publicly-listed companies are yet to conform to SEBI's suggestion to split these posts which was first announced in May 2018.

The proposal to split the post of chairman and MD was first mooted by a SEBI panel headed by eminent banker Uday Kotak in order to carry out a major overhaul of corporate governance norms for listed companies.

Later, SEBI suggested splitting the posts of chairman and MD in an amendment to its ‘Listing Obligations and Disclosure Requirements’ in line with the Uday Kotak committee's proposal.

The Uday Kotak Committee had suggested that only the non-executive director should be allowed to be made chairman, which would eventually lead to a split in the posts of chairman and managing director.

Such a separation of posts was suggested in order to help segregate roles between the chairman (of the board) who takes care of the overall strategy, and managing director, who is responsible for the day-to-day functioning of the management.