On May 9, 2018, the Securities and Exchange Board of India (“SEBI”) published the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 (“Regulations”) to amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”). The Regulations shall come into force with effect from April 1, 2019 (unless otherwise specified in the Regulations).
We have listed down some of the key amendments made to the LODR:
(i) The board of directors of the top 500 (five hundred) listed entities shall have at least 1 (one) independent woman director by April 1, 2019 and the board of directors of the top 1,000 listed entities shall have at least 1 (one) independent woman director by April 1, 2020. The top 500 (five hundred) entities and 1000 (one thousand) entities shall be determined on the basis of market capitalization, as at the end of the immediate previous financial year.
(ii) The board of directors of the top 1,000 (one thousand) listed entities and the top 2,000 listed (two thousand) entities shall be required to have a minimum of 6 (six) directors by April 1, 2019 and April 1, 2020 respectively.
(iii) A new sub-regulation 1A shall be inserted that shall state that a person cannot be appointed as a non-executive director or cannot continue to be a non-executive director if such person has attained the age of 75 (seventy five) years, except by passing a special resolution accompanied by an explanatory statement justifying the appointment of such person.
(iv) A new sub-regulation 1B shall be inserted that shall state that with effect from April 1, 2020, the top 500 (five hundred) listed entities shall ensure that the chairperson of the listed entity shall be a non-executive director, and not be related to the managing director or the chief executive officer as per the definition of ‘relative’ under the Companies Act, 2013. However, this will not apply to listed entities which do not have any identifiable promoters as per the shareholding pattern filed with the stock exchanges.
(v) A new sub-regulation 2A shall be inserted that shall state that the quorum for every meeting of the board of directors of the top 1,000 (one thousand) listed entities with effect from April 1, 2019 and of the top 2,000 (two thousand) listed entities with effect from April 1, 2020 shall be 1/3rd (one-third) of its total strength or 3 (three) directors, whichever is higher, including at least 1 (one) independent director.
(vi) The approval of shareholders by special resolution shall be obtained every year, in which the annual remuneration payable to a single non-executive director exceeds 50% (fifty percent) of the total annual remuneration payable to all non-executive directors, giving details of the remuneration thereof.
(vii) The fees or compensation payable to executive directors who are promoters or members of the promoter group shall be subject to approval of shareholders by special resolution if the annual remuneration payable to such executive director exceeds Rs. 5,00,00,000 (Rupees five crore) or 2.5% (two point five percent) of the net profits of the listed entity, whichever is higher; or where there is more than 1 (one) such director, the aggregate annual remuneration to such directors exceeds 5% of the net profits of the listed entity.
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