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Sebi notifies stricter norms for appointment of MD at listed companies

Sebi has said that a person rejected by shareholders at a general meeting can be appointed or re-appointed as a managing director, only after providing detailed justifications

SEBI | BSE listed companies | Markets

Press Trust of India  |  New Delhi 


Putting in place stringent norms, has said that a person rejected by shareholders at a general meeting can be appointed or re-appointed as a managing director or whole time director or manager, only after providing detailed justifications and ensuring compliance with various conditions.

"The appointment or a re-appointment of a person, including as a Managing Director (MD) or a Whole Time Director (WTD) or a Manager, who was earlier rejected by the shareholders at a general meeting, shall be done only with the prior approval of the shareholders," said in a notification on Monday

For considering the appointment or re-appointment of such a person earlier rejected by the shareholders, there should be a detailed explanation and justification by the company's nomination and remuneration committee and the board of directors for recommending the person.

As per the Companies Act, 2013, the board cannot appoint a person who fails to get elected as a director at a general meeting as an additional director.

However, this does not explicitly prohibit the board from re-appointing a person as an MD or WTD, whose appointment to such posts was rejected by the shareholders at the general meeting.

Further, the board of a listed entity can continue to appoint such persons as WTD or MD even after subsequent rejections by the shareholders.

Experts believe that such appointments by the boards are against the will of the shareholders, who are entrusted by the law to approve the appointment of directors to the boards of companies, and also against the spirit of corporate governance.

has amended the Listing of Obligations and Disclosure Requirements (LODR) Regulations with respect to the appointments.

Separately, the Securities and Exchange Board of India (Sebi) has amended the rules pertaining to credit rating agencies.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Tue, January 25 2022. 17:25 IST