The SEBI on 14.06.2023 notified the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023. These amendments are in line with the consultation papers that were previously released by SEBI on time to time basis. The amendments are aimed at strengthening corporate governance at listed entities by empowering shareholders, streamlining the disclosure requirements for material events or information and strengthening compliance. The amendment shall come into force from 14th July, 2023 (i.e. from the thirtieth day from the date of their publication in the Official Gazette). The major amendment includes a) Introduction of the concept of Non-permanency of the directors on the board b) requirement of filling of vacancy of KMPs within 3 months of vacancy, c) Introduction of threshold-based parameters for identifying the materiality of events/information d) introduction of certain agreements to be disclosed.
These reforms signify SEBI’s commitment to promoting transparency, accountability, and investor confidence in India’s capital markets. Let’s discuss and analyse the amendment provisions in detail.
1. Stricter timeline to fill the Vacancy of the Key Managerial Personnel (KMP) within 3 months from the date of the vacancy
Regulation 6(1) of LODR Regulations requires a listed entity to appoint a qualified company secretary as the compliance officer. Further, LODR Regulations cast various responsibilities and obligations on the Compliance Officer, CEO and CFO of listed entities.
Provisions under the Companies Act, 2013
Section 203(4) of the Companies Act, 2013 requires that the vacancy of whole-time key managerial personnel (Company Secretary, CFO, and CEO/MD/WTD/Manager) shall be filled up by the company within 6 months from the date of such vacancy.
There was no such timeline was prescribed under the LODR therefore, the timeline of 6 months as provided under section 203 (4) of the Companies Act, 2013 was applicable to the listed entities also.
Amended Provisions
SEBI has inserted a regulation 6(1A) which defines that any vacancy in the office of the Compliance Officer shall be filled by the listed entity at the earliest and in any case not later than 3 months from the date of such vacancy.
Further, SEBI has also inserted a new regulation 26A which states that any vacancy in the office of the Chief Executive Officer, Chief Financial Officer, Managing Director, Whole Time Director or Manager must be filled by the listed entity at the earliest and in any case not later than three months from the date of such vacancy.
Further, the listed entity shall not fill such vacancy by appointing a person in interim capacity, unless such appointment is made in accordance with the laws applicable in case of a fresh appointment to such office and the obligations under such laws are made applicable to such person. (applicable to both regulations 6(1A) and 26A)
Need of the amendment
As in the case of the listed entities, additional functions and responsibilities are assigned to the Compliance Officer/CEO and CFO, therefore, a stricter timeline of 3 months in place of 6 months as specified under the companies act is introduced to ensure the smooth functioning of the company.
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