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SEBI Proposes Amendments In the Structure of Independent Directors

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The Securities and Exchange Board of India (SEBI) has proposed several regulatory amendments to strengthen Independent Directors and eventually give more voice to the minority shareholders.

The consultation paper released by the capital market regulator on Monday proposed that the key management personnel (KMP) or employees of promoter group companies, cannot be appointed as independent directors in the company, unless there has been a cooling-off period of three years.

The restriction shall also extend to relatives of such KMPs for the same period.

Further, the Securities and Exchange Board of India has also proposed that appointment and re-appointment of independent directors shall be subject to “dual approval”, taken through a single voting process and meeting approvals of both shareholders along with nod form ‘majority of the minority’ (simple majority) shareholders.

‘Minority’ shareholders would mean shareholders, other than the promoter and promoter group.

Further, the dual approval mode will also be applicable in terms of removal of the independent directors.

Considering the importance of the Audit Committee with regard to related party transactions and financial matters, the regulator has proposed that audit committee shall comprise of 2/3rd independent directors and 1/3rd Non-Executive Directors (NEDs) who are not related to the promoter, including nominee directors, if any. SEBI has sought comments on the proposals by April 1, 2021.

SMEStreet Edit Desk

SMEStreet Edit Desk is a small group of excited and motivated journalists and editors who are committed to building MSME ecosystem through valuable information and knowledge spread.

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