In August 2021, the Securities and Exchange Board of India (SEBI) amended the SEBI (Listing Obligations and Disclosure Requirements (LODR)) Regulations, 2015 named LODR (Third Amendment) Regulations, 2021.
- It modified certain norms related to the process of appointment/removal of Independent directors (IDs).
- Objective: To enable the transparent appointment/removal of IDs and overcome corporate fraud and promoters’ mismanagement.
Key Amendments:
i.Appointment/Re-appointment and Removal of IDs were now directed to be made only through a special resolution of shareholders.
- Under the special resolution, the number of votes favouring the resolution should be at least 3 times those against the resolution.
- The approval through resolution has to be executed at the next general meeting of the board or within 3 months from the date of appointment of IDs.
ii.The Nomination and Remuneration Committee (NRC) needs to evaluate and describe the balance of skills, knowledge and experience required for the ID’s appointment.
- After selection, the selection panel needs to explain how a particular selected candidate fits into those capabilities requirements.
- After the retirement of an ID, the company must disclose the resignation letter along with directorships and membership of the ID in board committees.
iii.The composition of NRC has been modified to include 2/3rd IDs instead of the current requirement of 50 percent of IDs.
iv.A cooling-off period of 1 year has been introduced for an ID transitioning to a whole-time director (WTD) in the same company.
v.At least 2/3rd of the audit committee members should be of IDs.
vi.The appointed IDs should not have been in any financial relationship with the company/their promoters/ directors during the 3 immediately preceding financial years (Earlier it was 2 years).
Note – The amended norms would be effective from January 1, 2022.
Recent Related News:
SEBI has amended the SEBI (Infrastructure Investment Trusts (InvITs)) Regulations, 2014, and introduced the minimum number of unitholders of unlisted InvITs, other than sponsor, to 5 and their holding in the total unit capital of the InvIT not less than 25 percent.
About Securities and Exchange Board of India (SEBI):
Establishment – On April 12, 1992, in accordance with the SEBI Act, 1992.
Headquarters – Mumbai, Maharashtra
Chairman – Ajay Tyagi
