SEBI – Corporate Governance Issues in Compensation Agreements

The Securities Exchange Board of India (“SEBI”) has issued a consultative paper, proposing the amendments to the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015. The Consultative Paper proposes to add new Sub-regulation 6 to Regulation 26, which provides for prior approval of Board of Directors and the shareholders by way of ordinary resolution, with regard to compensation or profit sharing agreements between the Employees, Key Managerial Personnel, Director or Promoter of a listed entity and any individual shareholder(s) or any other third party. Further, agreements entered into, prior to the date of proposed amendment and which may continue beyond such date, shall be informed to the stock exchanges for public dissemination along with the approval obtained from shareholders by way of an ordinary resolution. In case where the approval from shareholders is not received, all such agreements shall be discontinued.

October 15th, 2016