Listed companies will soon have to separate the post of CEO and Chairman, disclose expertise of directors and have at least one independent woman director as Securities and Exchange Board of India (Sebi) has partly accepted the Uday Kotak panel recommendations on corporate governance.
The Sebi board, at its meeting here today, considered the panel's suggestions and decided to accept around 80 per cent of them.
The separation of CEO/MD and Chairperson positions at listed companies would come into effect from April 1, 2020. Initially, it would be applicable only for the top 500 listed entities in terms of market capitalisation, Sebi said in a release.
Besides, these firms should have at least one woman independent director by April 1, 2019. The rule will be applicable for top 1,000 listed entities by April 1, 2020.
Further, there should be at least six directors in the top 1,000 listed entities by April 1, 2019 and in the top 2,000 listed entities, by April 1, 2020, the release said.
In terms of directorship, an individual can be part of only up to eight listed companies by April 1, 2019 and it will be reduced to seven by April 1, 2020. Currently, the maximum allowed directorship is 10.
Among others, the board has approved expanding the eligibility criteria for independent directors, enhancing the role of audit, nomination and remuneration, and risk management committees.
The companies will also be required to disclose details about utilisation of funds raised from Qualified Institutional Placement and preferential issues.
Seeking to put in place stricter disclosure requirements, the firms have to disclose credentials of auditors, audit fee, reasons for resignation of auditors as well as the expertise and skills of directors.
Enhanced disclosure of related party transactions and related parties to be permitted to vote against such transactions, mandatory disclosure of consolidated quarterly results with effect from financial year 2019-20, would be made applicable. Besides, secretarial audit would be "mandatory for listed entities and their material unlisted subsidiaries".
Sebi Chairman Ajay Tyagi said it has partly accepted the 80-odd recommendations. Of these, 40 were accepted without modification, 15 with certain modifications and 8 have been referred to the government and other departments.
According to Tyagi, around 18 recommendations, including those related to sharing of information with promoters and significant shareholders, have been rejected.
The committee was set up under the chairmanship of noted banker Uday Kotak in June 2017 for improving standards of corporate governance of listed entities and the report was submitted in October last year.