The Telegraph
Since 1st March, 1999
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Sebi sticks to director deadline

New Delhi, Dec. 21: The Securities and Exchange Board of India (Sebi) today said the government had not sought an extension of the deadline for implementing Clause 49 of the listing agreement.

The clause mandates that at least 50 per cent of the members of the board of a listed company should be independent directors.

All companies whose shares are traded on exchanges will have to comply with the provision by December 31.

“None that I know,” Sebi chairman M. Damodaran said when asked if the government has sought an extension of the deadline.

As the Sebi chief stuck to his guns, J.J Irani, the author of the Irani committee report on independent directors, dismissed rumours about a conflict between his proposals and the Clause 49 of Sebi’s listing agreement.

Irani has suggested changes to the Companies Act to increase the number of independent directors on the boards of companies.

“I had a discussion with Damodaran and he has told me that there is no conflict at all,” the Tata Sons director said at the sixth international conference on governance in Mumbai.

“Clause 49 is about to be implemented in less than 10 days. It is not a checklist method but has substance rather than form,” Irani added. Asked if companies would have comply with the revised Clause 49, Irani said they had been given enough of it.

“Initially, they were given six months and then nine months as grace period,” he said.

On the other amendments proposed to the Companies Act, he said the new law would be simple, practical and conducive for entrepreneurship.

While the Irani Committee recommended that a third of the boards of listed companies should be made up of independent directors, Clause 49 of the listing agreement takes that figure up to 50 per cent in firms which have an executive chairman.

While maintaining the Sebi rules that independent directors should constitute at least a third of the board, Irani said the organisations the FI nominees represent have definite interest in the company’s affairs.

Irani said independent directors normally have tenures ranging from four to five years. “So, we are not looking for too many of them at this point.”

In this context, he said the Tatas have decided to split the post of the chairman and managing director in their group firms. “No person holds the posts of chairman and managing director together in any Tata company.”

“Experience, rather than training, should be necessary for independent directors,” Irani added.

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