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'New Sebi norms will make 91 independent directors to resign'

Press Trust of India  |  New Delhi 

Market regulator Sebi's decision to restrict the number of companies independent directors can serve simultaneously will make 97 of them to resign.

As per the new corporate governance norms cleared by Sebi, a person can serve as an independent director on boards of a maximum seven listed companies.

Besides, if an individual is a whole-time director in a listed firm, he can serve as an independent director in a maximum of three companies.

A total of 97 persons would have to resign from 283 independent directorship positions in NSE-listed companies by October 1, 2014, according to data compiled by indianboards.Com, a website created by Prime Database in association with the NSE.

"This is a welcome move as independent directors would now be able to spend more time on a company," Prime Database Managing Director Pranav Haldea said.

As per the data, one person is independent director of 14 companies, while four each are on boards of 13 firms. Yet another serves on boards of 12 entities. Three of them serve 11 firms, while seven persons hold directorships in 10 entities.

The report said that more worrying was the present state of compliance with Clause 49 of the Listing Agreement regarding composition of the board.

"As many as 17 per cent of the NSE-listed companies (247 companies) are presently non-compliant. With Sebi's new norms of not treating nominee directors as independent, the non-compliance will go up to 22 per cent (319 companies)."

At present, nominee directors are being considered independent in as many as 382 cases in 227 companies. In 104 firms, conversion from independent to non-independent will make the firm non-compliant with Listing Agreement norm.

Regarding tenure, Sebi has mandated that an independent director cannot serve on a company's board for more than two successive terms of five years each. Haldea said "this is on a prospective basis, which means that this provision would take effect only after 10 years".

"What is welcome is that Sebi has at least prescribed that if a person has already served as an independent director for 5 years or more in a listed firm (as on October 1, 2014), he shall be eligible for appointment for only one more term of 5 years," Haldea said.

The report said: "1,287 of a total of 6,050 independent directorship positions in as many as 660 of the 1,456 firms listed on NSE have already crossed tenure of 10 years.

First Published: Tue, February 25 2014. 16:43 IST