Large public companies can now appoint an individual as Chairperson as well as Managing Director or Chief Executive Officer at the same time.

This dispensation will be available for public companies with a paid-up capital of ₹100 crore or more and an annual turnover of ₹1,000 crore or more, the Corporate Affairs Ministry has said.

It will only be available for companies engaged in multiple businesses and have appointed a CEO for each such business, an executive order issued by the Ministry said.

This would mean that large public companies with multiple businesses would not be governed by the new company law requirement of having different individuals for the positions of Chairperson, Managing Director or CEO.

The new company law – which came into effect from April 1– had stipulated that a company cannot appoint an individual to the post of Chairman as well as Managing Director at the same time.

However, this stipulation did not apply if the Articles of Association of a company explicitly provided for such an appointment.

Also, it will not apply if the company concerned does not have multiple businesses.

The new law also specified that this requirement will not be applicable for certain class of companies to be specified.

The Ministry has now specified the class of companies that will be exempt from the requirement.

“The Ministry’s latest move could be considered a corporate-friendly measure,” SN Ananthasubramanian, a practicing Company Secretary, told BusinessLine .

Lalit Kumar, Partner, J Sagar Associates, a law firm, said the move will bring relief only to large public companies. “Since the thresholds are very high, only large public companies will get the benefit of this exemption,” Kumar said.

It is very common in the public sector to appoint the same person as Chairman and Managing Director, at the same time.

But critics argued that such an approach does not recognise the distinct roles that these posts carried.

Related Topics
comment COMMENT NOW