SEBI amends Clause 49

SEBI amends Clause 49

Loophole left in the Clause 49 was plugged...

1) Companies are complying with Clause 49 of the listing Agreement only in letter and not in spirit. Now, if you have a person related to promoter as non-executive chairman, then half of the board should be independent.

2) The age limit of the Independent director fixed to a minimum of 21 years.

3) The time limit for appointment of another independent director after resignation of an independent director fixed as max. 180 days...but if the one-third/half composition is complied with, even after resignation, then this provision is not applicable.

SEBI had received requests/suggestions to bring about clarifications on certain provisions of the clause. After examining the same, it has been decided to modify the existing Clause 49. Hence SEBI vide circular SEBI/CFD/DIL/CG/1/2008/08/04 dated April 08, 2008 issued to stock exchanges has amended Clause 49 of the Listing Agreement to include the following provisions:

Mandatory provisions:

1. If the non-executive Chairman is a promoter or is related to promoters or persons occupying management positions at the board level or at one level below the board, at least one-half of the board of the company should consist of independent directors.

2. Disclosures of relationships between directors inter-se shall be made in specified documents/filings.

3. The gap between resignation/removal of an independent director and appointment of another independent director in his place shall not exceed 180 days. However, this provision would not apply in case a company fulfils the minimum requirement of independent directors in its Board, i.e., one-third or one-half as the case may be, even without filling the vacancy created by such resignation/removal.

4. The minimum age for independent directors shall be 21 years.

Non-mandatory provisions:

The company shall ensure that the person who is being appointed as an independent director has the requisite qualifications and experience which would be of use to the company and which, in the opinion of the company, would enable him to contribute effectively to the company in his capacity as an independent director.

Full text of SEBI circular at http://www.sebi.gov.in/Index.jsp?contentDisp=WhatsNewScroll&FilePath=/circulars/2008/cfdcir08.html

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