

P.P. Chaudhary, Union Minister of State for Corporate Affairs Based on the recommendations of Kotak Committee on Corporate Governance, the Securities and Exchange Board of India (SEBI) has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 splitting the positions of the Chairperson and Managing Director, to start with, for top 500 listed companies on the basis of market capitalization effective from 01.04.2020. The first proviso to section 203(1) of Companies Act, 2013 provides that an individual shall not be appointed/reappointed as the chairperson of a company as well as its MD/CEO at the same time unless the articles of such company provide otherwise or the company does not undertake multiple businesses.

The time-frame for implementation is to allow adequate transition time for companies to comply with the new requirement. This was stated by P.P. Chaudhary, Union Minister of State for Corporate Affairs in the written reply to a question in Rajya Sabha.

The SEBI constituted the committee on corporate governance in June 2017, under the chairmanship of Uday Kotak. SEBI accepted most of the recommendations of Uday Kotak Committee. In this backdrop, KPMG prepared a note on it and illustration:

Source: KPMG India

SEBI’s Decision on the Recommendations of Kotak Committee on Corporate Governance:

The SEBI Board decided to accept several recommendations of the Committee without any modifications including the following:

I. Reduction in the maximum number of listed entity directorships from 10 to 8 by April 01, 2019 and to 7 by April 1, 2020

II. Expanding the eligibility criteria for independent directors

III. Enhanced role of the Audit Committee, Nomination and Remuneration Committee and Risk Management Committee

IV. Disclosure of utilization of funds from QIP/preferential issue

V. Disclosures of auditor credentials, audit fee, reasons for resignation of auditors, etc.

VI. Disclosure of expertise/skills of directors

VII. Enhanced disclosure of related party transactions (RPTs) and related parties to be permitted to vote against RPTs

VIII. Mandatory disclosure of consolidated quarterly results with effect from FY 2019-20

IX. Enhanced obligations on the listed entities with respect to subsidiaries

X. Secretarial Audit to be mandatory for listed entities and their material unlisted subsidiaries under SEBI LODR Regulations.