SEBI may relax deadline for separation of chairman, MD posts by 1-2 years

Correction: An earlier version of the article stated that the deadline could be extended by a year.

The Securities and Exchange Board of India (SEBI) may extend its March 31, 2020 deadline for listed companies to split the post of chairman and managing director by one or two years.

SEBI is in discussion with the Finance Ministry and the Prime Minister's Office on this issue.

The likely relaxation could be an outcome of the largescale opposition from corporates houses, many of which, sources told Moneycontrol, had brought it up with PM Narendra Modi in a recent meeting.

The Uday Kotak committee on corporate reforms had first mooted the idea of splitting the posts of chairman and MD. Experts say that a split helps segregate roles between the chairman of the board, which is in charge of the overall strategy, and MD, who is in charge of day-to-day management.

In an amendment to the 'listing obligations and disclosure requirements', the regulator called for a separation of the posts of chairman and MD, adding that the chairperson of a company's board should be a non-executive director and should not be related to the MD/CEO.

Yet, nearly half of the top 500 listed companies are yet to move on the SEBI decision, which was announced in May 2018.

A source close to the thinking behind the SEBI decision told Moneycontrol that the relaxation, if it comes through, does not mean the regulator is thinking about scrapping the rule. "This will only be an extension. The implementation of this circular will improve corporate governance systems in companies."

Earlier in November, SEBI chairman Ajay Tyagi had said that the companies have been given ample time to ensure compliance with the new rules.