The Securities and Exchange Commission (SEC) has introduced new regulations to enhance corporate governance in public companies and capital market operators. A recent circular prohibits Independent Non-Executive Directors (INEDs) from taking on executive director roles within the same company or its group, including Chief Executive Officer (CEO). This measure aims to maintain board independence and ensure impartial decision-making, as transitioning INEDs to executive positions can compromise their objectivity, conflicting with the National Code of Corporate Governance and SEC guidelines.
Additionally, the SEC has set a three-year cooling-off period for CEOs or executive directors before they can assume the role of chairman in the same company. This rule promotes clear separation of roles and strengthens oversight. The commission also limits director tenures to 10 consecutive years in a single company or 12 years within the same group structure. After serving these terms, a CEO or executive director must wait three years before becoming chairman, with the chairman role capped at four years.
These regulations, effective immediately, apply to public companies and significant public interest capital market operators. The SEC emphasized that years already served by directors will count toward the tenure limits. Companies must align their board appointments and succession plans with these directives to ensure compliance.
