New Delhi, July 8: The government feels industry should be allowed to fix the number of independent directors on a board.
“It is the corporate sector which has to decide,” minister of company affairs, Prem Chand Gupta, said while addressing a seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) and Institute of Chartered Accountants of India (ICAI).
The Securities and Exchange Board of India (Sebi), on the other hand, insists that 50 per cent of the directors on boards should be independent ones. It wants all companies to comply with this rule by December 31 this year under Clause 49 of its listing agreement.
Speaking at another seminar earlier this week, the minister had said the government is likely to take a final decision on the issue next month, by which time the basic framework for the new Companies Act will be ready.
The minister said the views of the corporate sector were important for arriving at a final decision on the matter. “Industry and corporate sector should say what they want. Take the initiative and say what is good,” he added.
The Irani Committee constituted by the department of company affairs has suggested restricting the number of independent directors to a third of the board strength. Ficci, too, is in favour of keeping it at 33 per cent but Assocham wants this to be slashed to 25 per cent.
“Such restrictions will unnecessarily slow the pace of industrial growth. To avoid any misuse of funds or diversion, disclosure norms have to be made more stringent,” Saroj Poddar, senior vice-president of Ficci, said.
Also, the number of companies where an individual can be a director should be raised to 20 from 15. The chamber also took up the case of directors disqualified under section 274 (1)(g) of the Companies Act. This disqualifies a person from being a director in case of defaults.
“The right course should be that in defaults, the matter should be brought to the notice of the company law board, which may decide the case either by imposing restrictions or disqualifying a person,” Poddar suggested.