 "Tata vs Mistry: Independent directors queue up for legal opinion")
The disputes, revelations and allegations in the ongoing Tata-Mistry battle seem to have got independent directors on boards of listed companies a little worried.
According to sources, top law firms are receiving a lot of queries seeking possible legal implications due to their position on boards.
The queries are related to their roles and liabilities and also the ramifications for controversial past decisions a company may have taken during their tenure, said a senior lawyer at a leading firm who has received dozens of such queries.
Independent directors, who are on boards of over three companies, are particularly perplexed on whether they should continue on all the boards, he added.
This cautious and proactive approach of independent directors comes in the wake of allegations of corporate governance failure at Tata group companies by former Tata Sons chairman Cyrus Mistry. Independent directors on boards of some Tata companies had issued statements on their views in some Tata group companies.
“The independent directors are under a legal obligation to balance the conflicting interest of key stakeholders, exercise objective judgement and act in a bona fide manner whilst not getting influenced by any extraneous considerations. Any non-compliance may result in an action by Sebi (Securities and Exchange Board of India) since the regulator may take cognizance of any regulatory violations of the norms prescribed by it under the listing norms,” said Tejesh Chitlangi, partner, IC Legal.
Under Sebi’s listing regulations as well as the Companies Act, independent directors have an important role in ensuring good board governance. For instance, independent directors are required to separately meet every year to review the performance of the company chairperson among other agenda items, and communicate the issues, if any, to the board of directors.
Further, they can also raise objections on the company’s core decisions and promoters cannot surpass such objections.
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