Analysis of disclosures relating to change in key managerial personnel, directors and senior management
Introduction:
In adherence to the standards set forth by the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [‘SEBI LODR’], listed companies are obligated to provide comprehensive disclosures to stock exchange regarding various appointments of senior management and key managerial personnel.
While we are aware that Schedule III Part A, Para A point 7 of SEBI LODR mandates listed entities to disclose changes in senior management, director, and key managerial personnel along with minimum data that is required to be provided while disclosing events given in Para A of schedule III of LODR regulations, we have come across various instances where certain listed entities have not provided certain data as required by law to be disclosed. On perusal of disclosures pertaining to the appointment of senior management and key managerial personnel, certain discrepancies have been observed.
Anomalies in disclosures given to the stock exchange have been outlined concerning the appointment of key personnel:
1. Recommendation of nomination and remuneration committee (‘NRC’): As per regulation 19(4) read with Schedule II Part D clause A point 4 of SEBI LODR, the appointment of senior management and directors is required to be done pursuant to the recommendations of nomination and remuneration committee. On perusing the disclosure it is observed that the disclosures made to stock exchanges doesn’t mention about recommendations done by NRC.
2. Standard disclosure for appointment of Company Secretary (CS):While disclosure of appointment of senior management and key managerial personnel is made, it is observed that the start and end time of the meeting wherein the appointment occurred is not being disclosed in some cases. National Stock Exchange (‘NSE’) vide its circular dt: July 14, 2023 [1]required listed entities to take note of certain key points while filing disclosure of events/information under regulation 30 of SEBI LODR. One of the key points was that listed entities to mention start and end time of meeting of board of directors.
3. CFO Appointment – Disclosure Missing in XBRL format: Disclosure of change in key managerial personnel is required to be disclosed in PDF as well as in XBRL format. In few cases it is observed that companies have failed to disclose to stock exchange CFO appointment, in XBRL format. Bombay Stock Exchange (‘BSE’)[2] and NSE[3] vide its notification dtd January 27,2023 had come with a notification stating that disclosure via XBRL format along with PDF format are mandatory for change in directors, key managerial personnel (Managing Director, Chief Executive Officer, Chief Financial Officer, Company Secretary etc.), auditor, Compliance Officer and Share transfer agent. XBRL disclosure has to be filed within 24 hours of filing of PDF disclosure.
4. Change in senior management and key managerial personnel at the subsidiary level: As per SEBI LODR regulation 30(9) listed companies are required to disclose events or information with respect to subsidiary companies that are material for the listed company. In compliance with this it is observed that few listed companies have disclosed changes in senior management and key managerial personnel at subsidiary level to stock exchange while others have not disclosed.
5. Disclosures of director debarment: Pursuant to BSE[4] and NSE[5] circular dt: June 20, 2018 listed companies while disclosing the appointment of directors are required to specifically affirm that the director being appointed is not debarred from holding the office of director by virtue of any SEBI order or any other such authority. It is observed that few listed companies have failed to mention about this disclosure.
6. Disclosure of changes pursuant to regulation 30(5): Pursuant to regulation 30(5) of SEBI LODR, the board of directors are required to authorize one or more key managerial personnel for the purpose of determining materiality of an event or information and for the purpose of making disclosure to the stock exchange. So, whenever there is a change in key managerial personnel or director who has been authorised to determine materiality and disclose same to stock exchange, there would also be a change in the disclosure to the stock exchange as required as per regulation 30(5). On perusing disclosures it is observed that pursuant to change in key managerial personnel,revised details of persons responsible for the identification of materiality of events or information and disclosure of same is not given to stock exchange.
Conclusion:
In conclusion, the observed anomalies and non-compliance in disclosures pertaining to the appointment of key personnel underscore the importance of stringent adherence to SEBI LODR regulations. Listed companies must prioritize transparency, accuracy, and completeness in their disclosures to uphold investor confidence and regulatory integrity in the Indian capital markets. Robust internal processes and diligent oversight to prevent the recurrence of such discrepancies are the need of the hour for the listed companies.
[1] Guidance on Filing Announcements: SEBI LODR Amendments 2023
[2] Filing of announcements in XBRL format on BSE listing centre
[3] Filing of announcements in XBRL format on NEAPS platform
[4] https://www.bseindia.com/corporates/Displaydata.aspx?Id=D30893B5-8E5E-4842-A37D-DA3E595FF58C&Page=cir
[5] https://nsearchives.nseindia.com/content/equities/NSE_Circular_20062018.pdf
(This article is written by Ms. Ruchira Pawase – Research Associate – ruchirapawase@mmjc.in Mr. Vallabh M Joshi – Senior Manager – vallabhjoshi@mmjc.in.)
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