The Hindu Business Line : Adherence to Clause 49: IOC convenes EGM to induct more independent directors

WITH the revised Clause 49 of Listing Agreement coming into effect from January 1, oil major Indian Oil Corporation Ltd (IOC) is now seeking to remove a legal hitch to enable the company expand the strength of its board for meeting the prescribed norm on independent directors.

The public sector undertaking (PSU) has convened an extraordinary general meeting (EGM) on January 27 to seek shareholders' nod to amend its Articles of Association (AoA).

An amendment to the company's AoA would enable it to enhance its board strength from the existing 17 to 22, sources said. Currently, the AoA stipulates that the board strength cannot exceed 17 members.

Expanding the board's strength would enable IOC to conform to the SEBI's norm for the number of independent directors.

According to the revised Clause 49, the board of a listed company having an executive chairman should have at least 50 per cent comprising independent directors.

Currently, IOC's board comprises 17 directors - seven functional directors, one executive Chairman, three government nominees, five independent directors, and one ONGC nominee.

Meanwhile, Oil and Natural Gas Corporation (ONGC) is not looking at an amendment to its AoA for conforming to SEBI norm on independent directors.

According to sources, this is a subject where the Ministry of Petroleum and Natural Gas, which is the nodal ministry, would have to take a decision.

The AoA of ONGC stipulates that the board strength cannot exceed 21.

As of now, ONGC's board has 14 members - seven functional directors including executive chairman, three Government nominees, one IOC representative (shareholder) and three independent directors.

Indications are that the Government may withdraw one of its nominees from the ONGC's board, which according to sources would rectify the situation.

If the current board strength of 14 were taken as a base, the ONGC board would have required eight more independent directors to meet the SEBI norm of having at least 50 per cent of the board comprising independent directors.

However, appointment of eight more independent directors would have led to breach of ONGC's AoA, which stipulates that the board strength cannot exceed 21. For the purpose of SEBI's revised Clause 49, the Government nominees are not to be considered as independent directors.

All listed companies are required to report their compliance with these revised norms on corporate governance by April 15 to the stock exchanges.

Meanwhile, SAIL has appointed four independent directors towards compliance with SEBI norms.

After this appointment, SAIL's board had 16 members, including an Executive Chairman.

With two functional directors retiring on January 1, the board strength stands reduced to 14.

As of now the total number of independent directors on its board are 8.