Company law, Sebi norm clash on directors

The new company law may restrict the number of independent directors on the boards of companies at 33 per cent, against 50 per cent mandated by the Securities & Exchange Board of India (Sebi).

Sebi's Clause 49 of the Listing Agreement mandates that a company's 50 per cent board should comprise independent directors if the chairman is executive, and 33 per cent if he or she is non-executive.

"I think the figure of one-third is sufficient and will give autonomy to the boards," Minister of Corporate Affairs Prem Chand Gupta told reporters on the sidelines of an Assocham seminar.

Gupta was pointing at one of the recommendations of the JJ Irani Committee, formed to suggest the framework of the new law. He said Sebi was a regulator for listed companies while the law would deal with all companies.

He said as far as the unlisted companies were concerned, Sebi's norm of 50 per cent would continue although a legal view on this was yet to be given final touches.

"The new law is being formulated in consultation with corporates and if they say the limit should be 25 per cent, we will accept it," Gupta said.

He said the Bill for the new law would be introduced in the winter session of Parliament.

"The basic idea behind bringing a new law was to bring a simple, compact and unambiguous Companies Act, incorporating best international practices in tune with the present-day requirements," he added.