Markets watchdog Sebi plans to overhaul the regulatory framework for corporate governance, including appointment and removal of independent directors.
Besides, a high level panel is looking at corporate governance issues such as those pertaining to related party transactions, auditing and effectiveness of board evaluation practices.
Against the backdrop of recent instances of boardroom battles involving large corporates, the Securities and Exchange Board of India (Sebi) is looking to revamp the norms and the matter is expected to be discussed at its board meeting later this month.
Strengthening corporate governance practice is a focus area for the regulator, with Sebi chairman Ajay Tyagi, recently, saying “independent directors are not independent”.
Source said the regulator is keen on having stricter norms for independent directors, including with respect to their appointment, removal and larger responsibility as part of a company’s board.
Currently, an independent director can be removed by way of an ordinary resolution -- which requires the approval of at least 50 per cent shareholders of a particular company.
However, when it comes to re-appointment of independent directors, the firm concerned has to move a special resolution under which nod from 75 per cent or more shareholders is required.
According to sources, Sebi wants to make it special resolution mandatory for removal of an independent director as such a provision will reduce the arbitrariness of promoters in deciding upon the ouster of such directors.
Besides, stringent disclosure requirements for independent directors, including at the time of their appointments, are being looked at, sources said.
Corporate governance issues will be among the slew of developments that are to be discussed during the Sebi board meeting scheduled for June 21.
Earlier this month, the watchdog set up a 21-member committee under the chairmanship of veteran banker Uday Kotak to suggest ways to further improve corporate governance standards of listed companies.