SEBI actions to improve corporate governance and transparency

SEBI actions to improve corporate governance and transparency

Subject : Economy

Section: capital market 

All listed firms asked to fill key managerial positions (KMP)

• Mar­ket reg­u­lator SEBI has intro­duced a stricter timeline of three months for lis­ted com­pan­ies to fill up vacan­cies relat­ing to their key mana­gerial per­son­nel (KMPs) such as CEO, CFO, MD, who­le­time dir­ector, man­ager and com­pli­ance officer.
• An amend­ment to this effect has been made in the SEBI’s List­ing Oblig­a­tions and Dis­clos­ure Require­ments (LODR) reg­u­la­tions.
• A stricter timeline is being intro­duced to ensure smooth func­tion­ing of lis­ted com­pan­ies, SEBI has said.
  • The latest timeline of three months for lis­ted entit­ies is stricter than the six months win­dow cur­rently provided under the Com­pan­ies Act 2013 for filling the vacan­cies of KMPs.
• Under LODR reg­u­la­tions, one of the key func­tions of the board of dir­ect­ors of a lis­ted entity is to over­see suc­ces­sion plan­ning of KMP and requires the board of dir­ect­ors of the lis­ted entity to ensure that the vacan­cies of such per­son­nel are filled up in a timely man­ner.
• The llis­ted com­pan­ies can­not fill vacan­cies of KMPs by appoint­ing a per­son in an “interim capa­city”.

 Certain shareholders enjoying special rights perpetually:

• To strengthen corporate governance at listed entities, SEBI came out with a framework to address the issue of certain shareholders enjoying special rights perpetually.
• Aim is to address the concerns around the grant of board permanency by listed entities to certain selected persons — mostly promoter-directors or related persons using rights specified in the Article of Association (AoA) of a company.
• Such measures take them out of ambit of retirement-by-rotation which stipulates ⅓ of border to retire at every Annual General Body Meeting (AGM).
• Now all directors appointed to the board of a listed entity need to go through a periodic shareholders’ approval process, thereby providing legitimacy for the director to continue to serve on the board.

Disclosure Rules: companies to confirm or deny market rumour

• Under the disclosure requirements for listed companies, SEBI has notified rules asking the top 100 listed companies by market capitalisation to confirm, deny or clarify any market rumour reported in the mainstream media.
• This is an important measure to help stop price manipulation and bring more transparency in the market.