The Hindu Business Line : SEBI mulls changes in listing agreement

Time for overhaul
Many public sector banks have Govt nominees
Provision likely on status of non-executive Chairman
Minimum age mooted for independent directors

Mumbai March 9 Directors nominated by the Government or financial institutions on the boards of listed companies may not be considered as independent directors under Clause 49 of the stock exchange listing agreement.

The SEBI proposes to amend Clause 49 to make this change, as well as others, in the listing agreement.

Clause 49 requires listed companies to have a minimum number of independent directors on the board. Under the existing clause, nominee directors are considered independent directors.

The proposed amendment assumes significance as several companies and public sector banks have institutional or Government nominees, who are considered independent directors for the purpose of compliance with Clause 49.

The SEBI has taken a view that Government nominees in public sector companies need not be treated as independent directors since they have a "material pecuniary relationship with the Government as they receive salary and other perks from it."

Similarly, since institutional nominees represent the interest of the lending or investing institutions, they cannot be considered independent directors.

The SEBI also proposes to add a provision to Clause 49 stating that if the non-executive Chairman of a company is the promoter or is related to promoters or persons occupying management positions, he/she would not be treated as independent director.

In such cases, the company would be required to have 50 per cent independent directors on its board.

Under existing regulations, if the Chairman of the board is a non-executive director, the board needs to have only one third of its members as independent directors.

The SEBI also wants companies to disclose the "relation between independent directors inter se and other directors of the company not holding management position."

Under the proposed amendments, companies will have to appoint a new director within 90 days of the resignation or removal of a director.

The minimum age for an independent director would be 21 years.

There are no existing norms for independent directors in terms of age, qualifications and experience, the SEBI added.