SEBI tightens screws on listed cos continuing with directors aged over 75

PALAK SHAH Mumbai | Updated on March 12, 2019

From April, shareholder permission must to continue board members over 75 years

More than 110 top listed companies may have to change their board composition or seek shareholder approval if they want to continue to have one or more persons aged 75 years or more as a non-executive director on their board.

From April 1, listed companies may no longer be able to continue having directors aged 75 years and above, per a SEBI order, unless they pass a special resolution and seek shareholder permission.

Trouble for family-run cos

If shareholders reject any such proposal, it could impact some family-run companies that have founding promoters as non-executive board members and continue having them till their demise.

Shareholder advisory experts say companies are rushing to pass special resolutions and take shareholder approval for their continuance.

Data provided by Prime Database, a market and company data tracking website, show that some prominent companies, including Reliance Industries, Maruti Suzuki, Lupin, Colgate-Palmolive, Procter & Gamble, DLF, Kesoram Industries, Berger Paints, Emami, Glenmark, Apollo Hospitals and Century Textiles, have at least one board member aged over 75.

Some of these companies may have already taken shareholders approval for the continuance of such directors.

Special resolution

Any company that desires to continue such non-executive board members will have to take shareholder permission via a special resolution and even record the reason for such an act, a SEBI notification says.

“There is no law which says that companies cannot have board members aged 75 years or above. Only, SEBI has mandated that a special resolution needs to be passed and shareholder permission sought which many companies are doing already. The SEBI rule is to ensure that people don’t continue on company boards perpetually without seeking permission,” said JN Gupta, founder of proxy advisory firm SES.

Section 161 of the Companies Act, 2013, states that a person can be appointed as an additional director in any board meeting and can be regularised as a director in the next annual general meeting (AGM) with the approval of shareholders. For the same, SEBI requires a ‘prior’ special resolution while the Companies Act, 2013, allows such an approval to be taken in next AGM.

Experts say that forcing companies to organise a special resolution only to announce the age of the director appears to be a case of regulatory overkill, mainly for those companies where directors attend 75-years of age but there was long time for its AGM to carry on with SEBI’s requirements.

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Published on March 12, 2019

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