Disclosure of Senior management – Annual report 23-24 - MMJC

Securities and Exchange Board of India(SEBI) vide its amendment notification dt: June 15, 2023 notified Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), (Second Amendment) Regulations, 2023. Vide this amendment SEBI provides that listed companies will now have to disclose particulars of senior management including the changes therein since the close of the previous financial year in the ‘Corporate governance Report as per Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015 [‘SEBI LODR’]’. This provision was introduced with effect from July 15, 2023. Disclosures pursuant to this would be required to be made in the annual report for financial year 2023-24. This article highlights anamolies in disclosures to be made in this regard.

Applicability

Particulars of senior management and change therein is required to be given only by listed companies to whom provisions of corporate governance as per SEBI LODR are applicable. So accordingly, companies listed on SME platform, only debt listed companies, main board listed companies to whom corporate governance provisions are not applicable would not be required to give details of senior management and change therein. Main board listed companies to whom corporate governance provisions are applicable and high value debt listed companies would be required to give this disclosure.

Anamolies  

Particulars of senior management for entire year or from July 15, 2023?

SEBI LODR second amendment brought the disclosure requirement of particulars of senior management including changes therein in Part C of Schedule V of SEBI LODR. This amendment was effective from July 15, 2023. So, the question arises is whether the disclosures relating to details of senior management including changes therein shall be given from July 15, 2023 onwards only or details of senior management prior to this date shall also be given in the annual report as per Schedule V of SEBI LODR?

Exact wordings of Point 5B[1] state that particulars of senior management and change therein for the previous financial year shall be given. Wordings of provision are clear that details of senior management for the entire preceding financial year (i.e. FY 23-24) shall be given. Hence in the annual report for FY 23-24 particulars of senior management and change therein for the entire financial year shall be given.

Disclosure of change in senior management to stock exchange:

Regulation 30 read with Schedule III, Part A, Para A, point 7 provides for disclosure of changes in senior management to stock exchange. Companies have been disclosing to stock exchange the change in senior management pursuant to this. These disclosures to stock exchange shall now be mapped while making disclosures of change in senior management in corporate governance report as per schedule V of SEBI LODR. It needs to be ensured that disclosures made to stock exchange regarding change in senior management post July 15, 2023, are also captured in corporate governance report as per schedule V of SEBI LODR. Any change in senior management prior to July 15, 2023, shall also require disclosure in corporate governance report section of annual report.

Change in senior management:

What would be covered under the term ‘change in senior management’ is not enumerated in detail in SEBI LODR. MMJC had written an article highlighting different practices being followed by market participants in intimating change in senior management. The article can be accessed at given link: https://www.mmjc.in/wp-content/uploads/2024/02/MMJC-insights-31.01.24.pdf – Title of the article “SEBI Compliance Unveiled: Non- Standard disclosures of KMP Resignation amid SEBI’s Regulatory Framework”.

This article highlights that listed entities have inter-alia considered following also as ‘change in senior management’ and have given disclosures

a. change in designation of listed entity and its subsidiary,

b. change in scope of work of listed entity and its subsidiary,

c. promotion or transfer of an individual being part of senior management etc.

So, the term ‘change’ has wide import. Accordingly, if companies have disclosed these changes in senior management to stock exchange, they need to be made part of annual report of listed company for FY 23-24.

Conclusion:

Accurate disclosure to market participants strengthens the trust investors have in the company. Senior management personnel are an important part of the corporate hierarchy. Disclosure of changes in senior management would help investors have an idea about management of the company. Hence disclosures of change in senior management shall be disclosed correctly.

Mr. Vallabh M Joshi – Senior Manager – vallabhjoshi@mmjc.in

[1] Particulars of senior management including the changes therein since the close of the previous financial year