Market regulator SEBI has introduced a stricter timeline of three months for listed companies to fill up the vacancies of their Key Managerial Personnel (KMPs) such as CEO, CFO, MD, Wholetime Director, Manager and Compliance officer.
An amendment to this effect has been made in the SEBI’s Listing Obligations and Disclosure Requirements (LODR) regulations.
A stricter timeline is being introduced to ensure smooth functioning of listed companies, SEBI has said.
Not only for KMPs, listed companies are also now required to fill the vacancies of directors within three months, SEBI has ruled.
The latest amendment to LODR on this front flows from a SEBI consultation paper issued by the market regulator in February this year.
SEBI had in that consultation paper made a case for stricter timeline of three months in view of the additional functions and responsibilities of the Compliance Officer, CFO and CEO assigned to them under the LODR regulations.
“Considering the gravity of the responsibilities entrusted on the compliance officer, CEO and CFO of a listed entity, there is a need to specify a reasonable timeline within which a vacancy arising for such officers should be filled by the listed entity,” SEBI consultation paper had said.
In case the listed entity has appointed a Managing Director/Wholetime Director/ Manager instead of a CEO, then the timeline for filling up the vacancy should be applicable to such personnel, it added.
LODR regulations
Under LODR regulations, one of the key functions of the Board of directors of a listed entity is to oversee succession planning of KMP like compliance officer, CFO and CEO. Accordingly, the board of directors of the listed entity should ensure that the vacancies of such personnel are filled up in a timely manner, SEBI consultation paper had then said.
Meanwhile, the latest timeline of three months for listed entities is stricter than the six months window currently provided under the Companies Act 2013 for filling the vacancies of KMPs (Company Secretary, CFO and CEO/MD/WTD/Manager).
The norms under the Companies Act 2013 apply to unlisted companies and not for listed entities, which are governed by SEBI’s diktats.
Another interesting requirement of SEBI in the latest changes is that listed companies cannot fill vacancies of KMPs by appointing a person in an “interim capacity”.
This can, however, be allowed only if such appointments are 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 the person coming in an “interim capacity”, SEBI has said.
