{"id":7099,"date":"2021-07-27T06:41:17","date_gmt":"2021-07-27T06:41:17","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=7099"},"modified":"2021-07-27T06:41:19","modified_gmt":"2021-07-27T06:41:19","slug":"sebi-norms-for-independent-directors-appointment-and-removal","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/","title":{"rendered":"SEBI Changes Norms for Independent Directors Appointment and Removal"},"content":{"rendered":"\n<p class=\"has-drop-cap\">With an opinion to authorise or allow independent directors of registered companies or entities, the <strong><em>SEBI (Securities Exchange Board of India) <\/em><\/strong>revised norms for independent directors concerning their removal, appointment, and compensation intended to deliver more say to the shareholders. The declaration was made after a board meeting held on June 29, 2021. In this write-up, we are going to discuss the revised or changed norms for independent directors.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3aa3f965afd\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3aa3f965afd\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#Independent_Directors_%E2%80%93_Who_are_they\" title=\"Independent\nDirectors \u2013 Who are they?\">Independent\nDirectors \u2013 Who are they?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#What_are_the_Regulations_Norms_for_Independent_Directors_Appointment_and_Removal\" title=\"What are the Regulations Norms for Independent Directors Appointment and Removal?\">What are the Regulations Norms for Independent Directors Appointment and Removal?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#Eligibility_Necessity_Cooling_Off_Period\" title=\"Eligibility\nNecessity: Cooling Off Period\">Eligibility\nNecessity: Cooling Off Period<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#Norms_for_Independent_Directors_IDs_Independent_Directors_Resignation\" title=\"Norms for Independent Directors (IDs): Independent Directors\u2019 Resignation\">Norms for Independent Directors (IDs): Independent Directors\u2019 Resignation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#Norms_for_Independent_Directors_Audit_Committee_Insurance_of_Directors_Officers\" title=\"Norms for Independent Directors: Audit Committee &amp; Insurance of Directors &amp; Officers\">Norms for Independent Directors: Audit Committee &amp; Insurance of Directors &amp; Officers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#Other_Decisions_Taken_by_SEBI_Securities_Exchange_and_Board_of_India\" title=\"Other\nDecisions Taken by SEBI (Securities Exchange and Board of India)\">Other\nDecisions Taken by SEBI (Securities Exchange and Board of India)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/sebi-norms-for-independent-directors-appointment-and-removal\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Independent_Directors_%E2%80%93_Who_are_they\"><\/span>Independent\nDirectors \u2013 Who are they?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An\nindependent director states to a non-executive director of an entity who helps\nthe company or entity in developing or improving the corporate credibility and\ngovernance standards. Such Director doesn&#8217;t have any type of bonding with the\ncompany that may impact the independence of their judgement. The word\nIndependent Director is determined in the Companies Act along with some new\nnecessities relating to their appointment, roles, responsibilities, and duties.<\/p>\n\n\n\n<p>The\nappointment provisions of an independent director are included in <strong><em>Section\n149 of the Companies Act<\/em><\/strong>, read along with <strong><em>Rule &amp; Rule 5 of the\nCompanies (Qualification &amp; Appointment of Directors) Rules, 2014<\/em><\/strong>. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Regulations_Norms_for_Independent_Directors_Appointment_and_Removal\"><\/span>What are the Regulations Norms for Independent Directors Appointment and Removal?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare some regulation norms for independent directors:<\/p>\n\n\n\n<ol><li>The process to be followed by\nNomination &amp; Remuneration Committee, while picking applicants for the\nappointment as Independent Directors, has been detailed, and it has been made\nmore clear, comprising enhanced disclosures regarding the skills required for\nthe appointment as an Independent Appointment and how the proposed applicant\nfits into that skill set. <\/li><li>Shareholder consent for an\nappointment for all directors consisting of Independent Directors will be taken\nat the next general meeting or within three months of appointment on the Board,\nwhichever is earlier.<\/li><li>The appointment or\nre-appointment and the removal of Independent Directors will be implemented via\na special resolution of shareholders for all registered companies.<\/li><li>The symphony of Nomination and\nRemuneration Committee has been changed to comprise 2\/3<sup>rd<\/sup>\nIndependent Directors rather than the present necessity of the majority of the\nIndependent Directors.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_Necessity_Cooling_Off_Period\"><\/span>Eligibility\nNecessity: Cooling Off Period<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>A three year cooling period has\nbeen presented for KMP (Key Managerial Personnel) and their relative or\nemployees of promoter group entities for appointment as an Independent\nDirector;<\/li><li>The employees\u2019 relatives of the\nentity its subsidiary, holding, or the associate entities are permitted to\nbecome Independent Directors, without the requirement of a cooling-off period,\nin line with the Companies Act, 2013.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Norms_for_Independent_Directors_IDs_Independent_Directors_Resignation\"><\/span>Norms for Independent Directors (IDs): Independent Directors\u2019 Resignation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>SEBI\n(Securities Exchange and Board of India) has also stiffened rules or norms\nrelating to the Independent Directors\u2019 resignation. The regulation concerning\nthe Independent Directors\u2019 resignation is as follows:<\/p>\n\n\n\n<ol><li>The complete resignation letter\nof an Independent Director should be disclosed along with a list of their\ncurrent membership and directorships in the board committees;<\/li><li>A cooling-off period of one\nyear is announced for an Independent Director transitioning to a complete-time\ndirector in the identical entity or holding or subsidiary or in a related\ncompany or any company which belongs to the promoter group.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Norms_for_Independent_Directors_Audit_Committee_Insurance_of_Directors_Officers\"><\/span>Norms for Independent Directors: Audit Committee &amp; Insurance of Directors &amp; Officers<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Directors &amp; Officers\nInsurance: The requirement to undertake Officers &amp; Directors insurance has\nbeen extended to top 1000 companies or entities (by market capitalisation).<\/li><li>Audit Committee: At least 2\/3<sup>rd<\/sup>\nof the audit committee members shall be Independent Directors (IDs), and all\nrelevant party transactions would be consented to by only Independent Directors\n(IDs) on the Audit Committee.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_Decisions_Taken_by_SEBI_Securities_Exchange_and_Board_of_India\"><\/span>Other\nDecisions Taken by SEBI (Securities Exchange and Board of India)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Securities\nExchange and Board of India also marked as a host of other decisions, like\nallowing resident Indian Fund Managers to be elements of Foreign Portfolio\nInvestors. It decreased the minimum investment level in registered\nInfrastructure Investment Trusts and Real Estate Investment Trusts to Rs.\n10,000 to Rs. 15,000 from Rs. 50,000.<\/p>\n\n\n\n<p>SEBI has also changed the norms for the <strong><a href=\"https:\/\/swaritadvisors.com\/asset-management-company\" class=\"text-primary\">Asset Management Companies<\/a><\/strong> or AMCs based on the risk of the schemes, rather than mandatory 1% of the amount raised. Moreover, with an outlook to get better information flow on insider trading cases, the market regulator has enhanced the reward to informants to Rs. 10 crores from Rs. one crore.<\/p>\n\n\n\n<p>The\nBoard of Securities Exchange and Board of India allowed payment and small\nfinance banks to register as a banker to a problem. It is expected to aid widen\nthe reach of the capital markets. The Securities Exchange and Board of India\nalso announced the idea of accredited investors; these are a class of investors\nwho are educated and well-advised regarding investment products. Such investors\nwill enjoy various advantages as those liked by institutional investors.<\/p>\n\n\n\n<p>To expand the debt market, the Securities Exchange and Board of India has announced the NCSR or <strong>Non-Convertible Securities Regulations<\/strong><sup><a href=\"https:\/\/www.sebi.gov.in\/reports-and-statistics\/reports\/may-2021\/consultation-paper-review-and-merger-of-sebi-issue-and-listing-of-debt-securities-regulations-2008-and-sebi-issue-and-listing-of-non-convertible-redeemable-preference-shares-regulations-2013-i-_50192.html\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup>. Experts or professionals believe that it would promote public issuances of debt securities &amp; lower the load on the banking system. Moreover, the Securities Exchange and Board of India simplified rules for Indian fund managers to perform as Foreign Portfolio Investors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The changes have been suggested to be in place from January 01, 2022. Further, the Securities Exchange and Board of India has also recommended some fundamental norms for Independent Directors (IDs), like allowing Independent Directors to get profit-associated commissions and ESOP (Employee Stock Ownership Plan) within the suggested limit as given under the Companies Act, 2013.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/sebi-guidance-note-on-disclosure-of-related-party-transactions\/\">SEBI Guidance Note on disclosure of Related Party Transactions<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>With an opinion to authorise or allow independent directors of registered companies or entities, the SEBI (Securities Exchange Board of India) revised norms for independent directors concerning their removal, appointment, and compensation intended to deliver more say to the shareholders. The declaration was made after a board meeting held on June 29, 2021. In this [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":7100,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[64],"tags":[772],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7099"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=7099"}],"version-history":[{"count":5,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7099\/revisions"}],"predecessor-version":[{"id":7107,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/7099\/revisions\/7107"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/7100"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=7099"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=7099"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=7099"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}