Background on Senior Management Personnel (SMP) Under Indian Corporate Law

Introduction of Senior Management Personnel (SMP) Concept

The concept of Senior Management Personnel (SMP) was introduced with the Companies Act, 2013 (Act, 2013). Prior to this, the Companies Act, 1956 did not have a specific notion of senior management. Section 178 of the Act, 2013, marked the initial legislation requiring the Nomination and Remuneration Committee to formulate policies related to the compensation of SMPs. The definition under the Listing Regulations has been aligned with that under the Act, 2013 over time. However, the SEBI LODR (2nd Amendment) Regulations have introduced new obligations and disclosure requirements for SMPs, prompting companies to reassess their SMP designations and compliance measures.

Definition and Scope Under Companies Act, 2013

Under Companies Act, 2013, Senior Management refers to the personnel of the company who are part of its core management team, excluding the Board of Directors. This includes all members of management one level below the executive directors, including functional heads.

Appointment, Removal, and Remuneration

Section 178 mandates the Nomination and Remuneration Committee to identify potential appointees for senior management and recommend their appointment or removal to the Board. The Committee also formulates criteria ensuring a balance between fixed and incentive pay for SMPs.

Definition Under SEBI LODR Regulations, 2015

The SEBI LODR Regulations, 2015 define senior management as the officers and personnel who are part of the core management team, excluding the Board of Directors, and comprising all members of management one level below the CEO, MD, or WTD, including functional heads, the Company Secretary, and the CFO.

Key Inclusions and Exclusions

Inclusions:
- Members of the core management team
- Members of management one level below the CEO, MD, or WTD
- Functional heads, Company Secretary, and CFO
Exclusions:
- Board of Directors

Identifying Senior Management Personnel (SMP)

The identification of SMPs depends on factors like the core management group, members one level below the board, and the organizational hierarchy. Core management includes individuals from the promoter group involved in crucial management discussions and those responsible for the general management of the company.

Core Management and Functional Heads

Core management typically involves members responsible for the organization’s core business functions. Functional heads are those leading core business functions like Operations, Marketing, Finance, and Compliance, reporting directly to the MD or WTD. Ancillary functions and their heads, however, are not categorized as SMPs for the purposes of these regulations.

Example: Large-Scale Organization

For a large organization with multiple plant locations and numerous functional departments:

Plant heads reporting to the Head of Operations are not SMPs.
Heads of main line functions reporting directly to the MD are SMPs.
Controllers of ancillary functions are not SMPs.

Implications and Obligations

The amended regulations and existing ones impose several obligations on SMPs and listed companies:

Operational Transparency: SMPs must act transparently while maintaining confidentiality (Regulation 4(2)(f)).
Disclosure of Transactions: SMPs must disclose material transactions involving personal interest leading to potential conflicts of interest (Regulation 26(5)).
Annual Compliance: SMPs must affirm compliance with the senior management code of conduct annually (Regulation 26(3)).
Fraud and Default: Incidents of fraud or default by SMPs are deemed material events requiring timely disclosure to stock exchanges (Regulation 30).

Disclosure Requirements

Appointment and Remuneration: The Board must be informed of recruitment and remuneration of senior officers below the board level, including CFO and Company Secretary appointments (Schedule II, Part A).
Resignation: Companies must disclose the resignation letter and reasons for resignation within seven days of the resignation becoming effective (Schedule III, Part A, Para 7C).

Conclusion

The SEBI LODR regulations impose stringent disclosure norms and obligations on senior management, emphasizing transparency and accountability. Companies must meticulously identify their SMPs and adhere to the compliance requirements to avoid regulatory repercussions and maintain robust corporate governance practices.

Here is some format that demonstrates how details of senior management incorporate into their corporate governance reports.

Infosys-Corporate Governance Report (2024) Page 27

Name	Designation
Anand Swaminathan	Segment Head – Communication, Media and Technology
Arun Kumar H.R.	Head – Business Strategy, Planning and Operations
Ashiss Kumar Dash	Segment Head – Energy, Utilities, Resources and Services
Dennis Kantilal Gada	Segment Head – Banking and Financial Services
Dinesh R.	Co-Head of Delivery
Hemant Lamba	Head – Strategic Global Sourcing
Inderpreet Sawhney	Group General Counsel and Chief Compliance Officer
Jasmeet Singh	Segment Head – Manufacturing
Jayesh Sanghrajka	Chief Financial Officer
Manikantha A.G.S	Company Secretary
Kannan Amaresh	Industry Head – Insurance
Karmesh Gul Vaswani	Segment Head – CPG, Logistics & Retail
Satish H.C.	Co-Head of Delivery
Shaji Mathew	Group Head – Human Resources
Sumit Virmani	Chief Marketing Officer
Subhro Malik	Industry Head – Life Sciences
Venkateshwaran Ananthakrishnan	Industry Head – Healthcare

Changes during Fiscal 2024

Appointments

Senior Management Personnel	Effective Date
Jayesh Sanghrajka	April 01, 2024

Resignations

Senior Management Personnel	Effective Date
Nilanjan Roy	March 31, 2024
Ravi Kiran Kuchibhotla	March 31, 2024
Richard Lobo	August 31, 2023

TCS-Corporate Governance Report (2024) Page 104

Particulars of Senior Management of Tata Consultancy Services Limited

Name	Category
Shankar Narayanan	Banking Financial Services and Insurance
Krishnan Ramanujam	Consumer Business Group
V Rajanna	Technology, Software and Services
Samir Seksaria	Chief Financial Officer
Milind Lakkad	Chief Human Resources Officer
Madhav Anchan	General Counsel Legal
Dr. Harrick Vin	Chief Technology Officer
Pradeep Manohar Gaitonde	Company Secretary

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Article Compiled by:-

~Mayank Garg

(LegalMantra.net Team)

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