The Securities and Exchange Board of India (Sebi) on Tuesday tightened the rules regarding independent directors to improve corporate governance and check the influence of promoters in listed companies.
At its board meeting, the market regulator also took a slew of other crucial decisions to reduce the subscription size in REITs and InvITs apart from making mutual funds more accountable when it comes to new fund offerings (NFOs).
The regulator decided that the appointment, re-appointment and removal of independent directors (IDs) shall be done through a special resolution of shareholders.
The nomination and remuneration committee, which picks the independent directors, have to make greater disclosures on the skills required for the director and how the director possesses the skills.
The composition of the committee has been modified to include 2/3rd independent directors, instead of the existing requirement of majority of independent directors.
There will be a one-year cooling period for an independent director transitioning to a whole-time director in the same company, holding firm, subsidiary or any company belonging to the promoter group.
Sebi also tightened rules for asset management companies (AMCs) to ensure that they have more “skin in the game”. Its step could lead to fund houses investing more in their NFOs (new fund offerings) depending on risk level. At present, AMCs have to make an investment of 1 per cent of the amount raised or Rs 50 lakh, whichever is less.
Sebi also reduced the minimum application value to Rs 10,000-15,000 from Rs 55,000 in REITs and InvITs and the revised trading lot will be one unit.