The markets regulator, Securities and Exchange Board of India (Sebi) has introduced a new option for appointment and removal of independent directors from the boards of companies, a move that will provide flexibility to such a process.
Under this new option, the appointment and removal of independent directors could be done by way of two parameters: 1) threshold for ordinary resolution 2) threshold for majority of minority shareholders. To give these effects, Sebi has amended “Listing Obligations and Disclosure Requirement” rules, as per a notification made public by the regulator on Tuesday.
Under the alternate mechanism, if the special resolution for appointment of an independent director does not get the requisite majority, then 2 other thresholds, i.e for ordinary resolution and for majority of minority shareholders, would be tested. If the resolution crosses the above two thresholds in the same voting process then such a resolution for appointment of the independent director would be deemed to be approved by shareholders.
"In case a special resolution for the appointment of an independent director fails to get the requisite majority of votes, but the votes cast in favour of the resolution exceed the votes cast against the resolution, and the votes cast by the public shareholders in favour of the resolution exceed the votes cast against the resolution then the appointment of such an independent director shall be deemed to have been made," the market regulator said.
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