SEBI, vide its notification dated 24 January 2022, has amended the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), which has come into force from the date of the publication of the notification.
SEBI had, on 27 January 2021 released a consultation paper on ‘introduction of provisions relating to appointment / reappointment of persons who fail to get elected as whole-time directors/managing directors at the general meeting of a listed entity’. The consultation paper prescribed stricter requirements for the appointment of managing directors (“MD”) / whole
time directors (“WTD”), whose appointment / re-appointment had been earlier rejected by the shareholders at a general meeting of the company. SEBI, in its Board Meeting dated 28 December 2021, approved the proposals under the consultation paper with certain modifications.
Under the LODR Regulations, a listed entity is required to ensure that for the appointment of a person on the board of directors, approval of the shareholders is taken at the next general meeting, or within 3 (three) months from the appointment, whichever is earlier. Through the amendment, this provision has been extended to the appointment of managers of the
company as well.
Further, where a person has been rejected for appointment by the shareholders earlier at a general meeting, such person can be appointed or re-appointed, including as a MD / WTD or manager, only with the prior approval of the shareholders. While the consultation paper proposed this requirement only with respect to MD / WTD, the notified amendment extends it
to all directors and managers of the company.
The amendment also prescribes that a detailed explanation and justification by the nomination and remuneration committee and the board of directors for recommending such person for appointment or re-appointment must be annexed with the notice of the meeting to the shareholders.
Please click here to read the amendment notification
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
