Government plans review of functioning of independent directors

The government plans to carry out a comprehensive review of the functioning of independent directors, including analysing the reasons for their exit from the boards of companies.

Published: 14th January 2018 01:48 PM  |   Last Updated: 14th January 2018 02:57 PM   |  A+A-

Image used for representational purpose

By PTI

NEW DELHI: The government plans to carry out a comprehensive review of the functioning of independent directors, including analysing the reasons for their exit from the boards of companies, as part of efforts to strengthen the corporate governance framework.

The corporate affairs ministry, which is implementing the Companies Act, is also looking to bolster the regime for independent directors and might also take a relook at certain regulatory requirements pertaining to their appointment and removal, a senior government official said.

Besides, the ministry would be creating a database of independent directors under the Companies Act, 2013.

Against the backdrop of the government making efforts to make its role minimal in the affairs of corporates, the role of independent directors is more vital and in recent times there have been instances of concerns being raised about the independence of such people.

The official said there is a need to have a better understanding of the role of independent directors and the kind of challenges faced by them.

There is a need to do research on aspects such as reasons for independent directors resigning from companies and having a database would help as it would provide credible information, the official added.

Section 150 of the Companies Act, 2013 provides for setting up of a database of independent directors.

Among others, an independent director can be removed by way of an ordinary resolution, wherein approval of at least 50 percent of shareholders of the company is required. On the other hand, for re-appointment of independent directors, a special resolution has to be passed. The latter requires the nod of 75 percent or more of shareholders.

Last week, Minister of State for Corporate Affairs P P Chaudhary said that independent directors act as the fulcrum of corporate governance framework and emphasised that they have both advisories as well as monitoring role.

Independent directors should exercise special care in issues of conflict of interest in related party transactions and those pertaining to managerial remuneration as they are the watchdogs of companies, he had said.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

facebook twitter whatsapp