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India Inc requests SEBI to defer rule that makes it mandatory for chairman, MD not to be related

India Inc requests SEBI to defer rule that makes it mandatory for chairman, MD not to be related

India Inc requests SEBI to defer rule that makes it mandatory for chairman, MD not to be related
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By CNBCTV18.com Jan 20, 2022 1:56:01 PM IST (Published)

India Inc has requested SEBI to either delay by two years or stay the implementation of the provision that makes it mandatory for large listed companies to not have a chairman and managing director related to each other. The market regulator has already extended the deadline for implementation of the provision from 2020 to this year.

India Inc has asked market regulator Securities and Exchange Board of India (SEBI) to stay the implementation of the provision that makes it mandatory for large listed companies to not have a chairman and managing director related to each other.

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The provision is part of SEBI’s rules that mandates the two roles be separated in India’s top 500 companies by market capitalisation from April 1, 2022. The market regulator has already extended the deadline for implementation of the provision from 2020 to this year, following protests from industry. Last month, SEBI Chairman Ajay Tyagi hinted that the market regulator is unlikely to extend the deadline. "I can only make an appeal to the industry to follow it," Tyagi had said.


Corporate India has asked SEBI to either defer the implementation of the provision by another two years or make it ‘recommendatory’, The Economic Times reported.

Industry body Confederation of India Industry (CII) has already written a letter to SEBI opposing the amendment, saying such over-regulation could dampen business spirits.

"Since the compliance date is approaching soon, it is requested to kindly defer the implementation of the provisions relating to the chairperson not being related to the MD & CEO and that the chairperson should be a non-executive director, by two years; if not withdraw altogether, or the requirements may be recommendatory and not mandatory, as requested earlier, therefore, a clarification in this regard may be issued soon," the CII letter to SEBI last month said.

Family-run businesses are likely to be most impacted by the proposed rule. Some PSUs, which combine the role of chairman and MD, will also have to split the two posts.

Despite the deadline fast approaching, nearly half of the Nifty 500 companies are yet to comply with the rules, a recent report by proxy advisory firm Institutional Investor Advisory Services (IIAS) showed.

The report revealed that of the 244 companies that were yet to adhere to the rules, 204 still had executive chairpersons, Mint reported. Most of these companies were family-run businesses or state-run companies. The report also revealed that of the 244 companies, 33 have a non-executive chairperson related to the managing director, the Mint report said.

Opposing the new amendments, Bajaj Finserv Chairman and MD Sanjiv Bajaj told ET that majority of businesses in India were family-owned and passed on from one generation to the other.

Given that the chairman and directors take on greater responsibility, giving a non-executive role to the chairman may “weaken our competitiveness, especially at a time when the pandemic is on," Bajaj said.

In a family-owned or managed company, it takes years to groom a successor, Sangita Reddy, Managing Director of Apollo Hospitals, told ET, adding that the successor is often a family member who has been mentored by an elder.

SEBI did not comment on the CII letter.

 
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