Big decision of SEBI, the decision to separate the post of MD and CEO was voluntary

According to SEBI, companies can keep the post of MD and CEO separately or together according to their need.

This decision of SEBI will be applicable from 1st April 2022.

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market regulator SEBI ,SEBI) has taken an important decision in today’s meeting. SEBI has changed its decision in which the post of Managing Director and Chief Executive Officer i.e. CEO was to be separated in any company. According to the latest information released by SEBI, companies can keep the post of MD and CEO separately or together according to their need. This has now been made optional from mandatory. An important meeting of the SEBI Board was held today in which this decision has been taken. This decision of SEBI will be applicable from April 1, 2022 and will be applicable to the top 500 companies.

In June 2017, SEBI had constituted a committee on Corporate Governance. The head of this committee was Uday Kotak. This committee had said in its report that the post of chairman and MD or CEO should be separated. This will strengthen corporate governance. Under SEBI rules, the top 500 listed companies were to bifurcate the role of chairperson and managing director or chief executive officer (MD or CEO) with effect from April 1, 2020. This may create a conflict of interest situation. In view of this, the regulator had introduced rules for dividing these posts in May 2018.

Earlier it was asked to separate the post of Chairman and MD.

SEBI had in January 2020 deferred the mechanism to split the roles of chairman and managing directors for listed companies by two years till April 1, 2022. This was demanded by the companies. Now this has been removed from essential and made optional. This rule will be applicable only to the top 500 companies of the stock market.

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