Published on: July 2, 2021

NORMS FOR INDEPENDENT DIRECTORS

NORMS FOR INDEPENDENT DIRECTORS

What is in news : Security and Exchange Board of India (SEBI) has cleared amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 while reviewing regulatory provisions related to independent directors.

What are the amendments:

  • Appointment, re-appointment and removal of independent directors will be done only through special resolution passed by shareholders. This provision will be applicable to all listed entities.
  • Under the amended rules, a one-year cooling period will be given for an independent director transitioning to a whole-time director in same company or holding or subsidiary or any company belonging to promoter group.
  • Process to be followed by Nomination and Remuneration Committee (NRC) when it is selecting candidates for appointment as independent directors was made transparent.
  • NRC required to disclose skills required for appointment as independent director and how proposed candidate fits into that skillset.
  • Composition of NRC has been updated to include 2/3rd independent directors instead of current requirement of majority of independent directors.
  • Under the new rules, resident Indian fund managers have been allowed to be constituents of foreign portfolio investors and to amend mutual fund rules to provide investment of a minimum amount as prescribed by SEBI.
  • Presently, investment of 1% of the amount raised in a New Fund Offer (NFO) or an amount of Rs 50 lakh (whichever is less) is required

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

  • Securities and Exchange Board of India (SEBI) on September 2, 2015 issued the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) with the aim to consolidate and streamline the provisions of existing listing agreements for different segments of capital markets such as equity shares (including convertibles), non convertible debt securities, etc. and disclosure norms in relation thereto, thereby ensuring better enforceability.
  • The Regulations shall be effective from 90 days from the date of notification of these regulations i.e. December 01, 2015. But Regulations relating to (i) passing of ordinary resolution instead of special resolution in case of all material related party transactions subject to related parties abstaining from voting on such resolutions, in line with the provisions of the companies Act, 2013, and (ii) re-classification of promoters as public shareholders under various circumstances, shall be effective from September 02, 2015 itself.