The Securities and Exchanges Board of India (SEBI) has amended listing obligations and disclosure requirement (LODR) rule to bring the entire senior management of listed companies under the ambit of LODR in sync with the Companies Act, 2013. The changes will ensure that the appointment of senior management personnel and their remuneration are routed and ratified through nomination and remuneration committee followed by the board of directors, experts say.
In a notification issued on January 17, SEBI introduced a broad based definition for “senior management” to include the officers and personnel of the listed entity who are members of its core management team, excluding the Board of Directors, and all the members of the management one level below the Chief Executive Officer or Managing Director or Whole Time Director or Manager (including Chief Executive Officer and Manager, in case they are not part of the Board of Directors). The new definition also covers all the functional heads, by whatever name called and the company secretary and the Chief Financial Officer.
"After addressing the issue of key management personnnel with respect to their appointment, remuneration and conflict of interest, the regulator has turned its lens on senior management personnel by bringing them under the ambit of LODR in sync with the Companies Act, 2013. This would bring more compliance and governance in decision making even at the functional level and more such changes are likely to take place going forward", says Makarand Joshi, founding partner of corporate compliance firm MMJC and Associates LLP.
The LODR regulations was first notified in 2015 to bring all SEBI circulars issued in connection with various statutory disclosures and steps listed entities should follow under one regulation. It spells out the guiding principles for listed entities including the listing norms, rights of shareholders, role of transparency, corporate governance practices, responsibilities of the board of directors, payment of dividend, formation of various committees etc. The current amendment is the 36th one since LODR regulations were laid down about eight years ago.
The amendment to LODR regulation has also clarified that a public sector company shall ensure the approval of the shareholders for appointment or re-appointment of a person on the Board of Directors or as a Manager at the next general meeting even though the existing rules for listed entities in general says that the shareholder approval should be taken at the next general meeting or within a time period of three months from the date of appointment, whichever is earlier.
In the section that talks about the disclosures companies need to make in its annual Corporate Governance report, the amendment to LODR regulation has mandated the details of material subsidiaries of the listed entity, including the date and place of incorporation and the name and date of appointment of the statutory auditors of such subsidiaries.