Listed companies that have not yet complied with the Securities and Exchange Board of India’s (SEBI) order to have at least one woman director on their boards by April 1 can be asked to pay a penalty of up to ₹25 crore.

The capital market regulator can also take additional action under Section 11B of the SEBI Act, which gives it wide-ranging powers to act against companies flouting its orders.

SEBI had last year brought in changes to corporate governance norms and made it mandatory for companies to have an independent woman director on board.  

The regulator had initially set October 1, 2014 as the deadline but extended it to April 1 this year. It had also relaxed the requirement from an independent woman director to a woman director.  But about 160 of the top 500 companies (by market capitalisation) have not yet complied with the order 

Stiff penalty

“Since the requirement to have a woman director is a condition under clause 49 of the equity listing agreement, SEBI can impose a penalty of ₹5 lakh and up to ₹25 crore for breach of such listing conditions,” said Tejesh Chitlangi, Partner, IC Legal.

Similarly, under Section 15HB of the SEBI Act, it can impose a penalty for violation of its circulars, which prescribed the requirement to have a woman director.

SEBI Chairman UK Sinha had last week cautioned that the consequences of non-compliance could be serious.

Other instances

SEBI has cracked down in other instances when companies failed to comply with its orders. For example, on June 4, 2013, it passed an order against 105 companies for not complying with its norm of a minimum public shareholding of 25 per cent. This included freezing of voting rights and corporate benefits such as dividend with respect to the promoter group shareholding of non-compliant companies till such time as they complied.

It also prohibited promoters from dealing in securities besides restraining shareholders of promoter groups from holding new directorial positions in any listed company.

Arun Kejriwal, Founder KRIS, Research, said, “Many companies have started elevating women employees to their board. Non-compliance should be penalised with a fine that is charged on a per-day basis and should be levied on both the promoter and the compliance officer.”