Capital market regulator SEBI has given an impetus to the institution of ‘independent directors’ in corporate boards, bringing an alternative method for the appointment and removal of such directors in situations where the special resolution does not get the requisite majority, reported Business Line.
Legal and governance experts see the latest SEBI move as one that may temper the influence of promoters in the removal of independent directors.
There have been several instances in recent years — Zee vs Invesco battle in the appointment and removal of independent directors; removal of independent director Nusli Wadia from certain Tata companies five years back — where the legal framework around independent directors have come under scrutiny and promoters’ influence in their removal from the Board has come in for public debate.
SEBI has now sought to reduce the influence of the promoters, giving an opportunity for those independent directors with the support of the majority of the minority shareholders to be appointed in listed company boards, to discharge their role without fear of being removed by the promoter.
In a special resolution, the number of votes in favour must be three times the number of votes against it.
If the special resolution for appointment or removal of an independent director does not get the requisite majority, SEBI has said that two thresholds will now be tested. One is threshold for ordinary resolution and the other is threshold for majority of minority shareholders.
If the resolution crosses these two thresholds, in the same voting process, such a resolution for appointment of the independent director would be “deemed” to be approved by shareholders.