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Large public companies can now appoint an individual as the 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 ₹ 1000 crore or more, the corporate affairs ministry has said.
It will only be available for companies engaged in multiple businesses and have appointed a chief executive officer 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 Chief Executive Officer.
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 did not have multiple businesses.
The new company law also specified that this requirement will not be applicable for certain class of companies to be specified.
The Corporate Affairs Ministry has now specified the class of companies that will be exempt from the requirement.
“The latest Corporate Affairs Ministry move could be considered a corporate friendly measure”, S.N.Ananthasubramanian, practising company secretary, told Business Line.
Lalit Kumar, Partner, J Sagar Associates, a law firm, said that the corporate affairs ministry 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.
To add to this is the concept of executive Chairman, which makes things sometimes awkward at the Board level, especially in a diversified company.
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