Can a Compliance Officer Be Appointed by a Circular Resolution?

The appointment of a compliance officer in a listed entity is governed Regulation 6 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR).The question of whether a compliance officer can be appointed via a circular resolution can be examined by considering the provisions before and after the amendment to SEBI LODR on December 12, 2024.

Before the Amendment (Prior to December 12, 2024) :

Under the SEBI LODR regulations prior to the amendment, there was no specific requirement that the compliance officer be designated as a Key Managerial Personnel (KMP). While the compliance officer was required to be a qualified company secretary, the requirement that they be a KMP and an officer in whole-time employment of the listed entity was not explicitly stated. Consequently, compliance officers could be appointed by a circular resolution, as this method was generally permissible for officers who were not part of the KMP designation.

Moreover, as per Secretarial Standard 1 (SS-1), only KMPs are required to be appointed by a formal board resolution, not by a circular resolution. Therefore, in the earlier regime, the compliance officer, being outside the KMP structure, could be appointed by a circular resolution.

After the Amendment (From December 12, 2024) :

The amendment to SEBI LODR on December 12, 2024, introduced a crucial change to the role of the compliance officer. Under the amended provisions, the compliance officer must now be an officer who is in whole-time employment of the listed entity and positioned not more than one level below the board of directors. Additionally, the compliance officer must be designated as a Key Managerial Personnel (KMP).

The key point here is that KMPs, as per Secretarial Standard 1 (SS-1), cannot be appointed via a circular resolution. This means that the compliance officer, once designated as a KMP, can no longer be appointed by a circular resolution. A formal board resolution must now be used for such appointments.

Conclusion:

Before the amendment on December 12, 2024, a compliance officer could be appointed by circular resolution, as they were not considered a KMP. However, after the amendment, since the compliance officer is now classified as a KMP, their appointment must be made via a formal board resolution, in compliance with Secretarial Standard 1, which prohibits KMPs from being appointed through circular resolutions. Thus, the ability to appoint a compliance officer by circular resolution is no longer permissible post-amendment.

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