The Securities and Exchange Board of India (Sebi) panel on corporate governance led by Uday Kotak proposed sweeping changes. The recommendations are listed below:
a) Panel proposed more powers for independent directors, limiting chairmanship to non-executive directors, and called for a greater focus on transparency and disclosures to improve corporate governance.
b) The panel recommended that a listed company should have at least six directors on its board. Current Sebi regulations do not mandate a minimum number. The panel has suggested at least one independent director be a woman.
c) It also proposed that directors attend at least half the total board meetings held in a financial year. If they fail to do so, they would require shareholders’ nod for continuing.
d) Companies have asked to make public the relevant skills of directors, and the age of non-executive directors has been capped at 75 years.
e) In addition, the chairperson of a listed company will be a non-executive director to ensure that s/he is independent of the management.
f) An independent director cannot be in more than eight listed companies and a managing director can hold the post of an independent director in only three listed companies.
g) The committee has recommended that the number of independent directors on a company board be increased from 33% to 50%.
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h) The minimum sitting fees of independent directors has been halved from the current Rs1 lakh per meeting as stipulated by the Companies Act 2013 to Rs50,000 for the top 100 companies by market capitalization.
i) Detailed reasons would need to be furnished when an independent director resigns. This is to ensure that they remain independent of the company management.
j) An audit committee is being proposed with the mandate to look into utilization of funds infused by a listed entity into unlisted subsidiaries, including foreign subsidiaries in cases where the total investment is at least Rs100 crore or 10% of the asset size of the subsidiary.
k) The committee has also recommended that Sebi should have clear powers to act against auditors under the securities law.
l) For government companies, the committee has recommended that the board have final say on the appointment of independent directors and not the nodal ministry.
m) The panel has also proposed to tweak the definition of a “material” subsidiary to one whose net worth or income exceeds 10% (currently 20%) of the consolidated income, or net worth of the listed entity. This has been done to improve disclosure, since only the activities of material subsidiaries are disclosed to shareholders.
