SEBI amends norms for Independent Directors

June 30, 2021

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.

Highlights

To boost corporate governance between listed companies, SEBI approved amendments to rules that govern appointment, re-appointment and removal of independent directors.
It also amended the rules that requires to disclose resignation letters of such individuals.

What rules have been amended?

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.

Who are accredited investors?

Accredited investors can be individuals, HUFs, family trusts, partnership firms, sole proprietorships, trusts and body corporates on the basis of financial parameters.

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