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Introduction

The Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements), Regulations, 2015 (Listing Regulations) lays down provisions for transparency and fair disclosures by all Indian listed companies. Amendments to the Listing Regulations have been made from time to time to reinforce compliances and protect the interest of investors.

SEBI has been working to strengthen the institution of Independent Directors (IDs) and has set up various committees over last few years to deliberate on this topic and implemented their recommendations. A need was felt to further bolster the independence of IDs and enhance their effectiveness in order to protect the interest of the minority shareholders, and other functions. In this regard, in March 2021, SEBI issued a consultation paper on review of regulatory provisions relating to independent directors on the boards of listed companies.

On 29 June 2021, SEBI, in its board meeting approved some of proposals pertaining to IDs mentioned in the consultation paper. These decisions come into effect though SEBI’s notification dated 3 August 2021 which amended the Listing Regulations pertaining to regulatory provisions related to IDs. The amendments mainly pertain to the following areas:

  • Eligibility of IDs
  • Appointment, reappointment and resignation of IDs
  • Committees of the board
  • Related party transactions
  • Directors and Officers insurance (D&O insurance) for IDs

These amendments will be applicable to all listed companies (however, requirement to procure D&O insurance for IDs is applicable to top 1,000 listed companies) effective 1 January 2022.

In this issue of First Notes, we aim to provide an overview of the key amendments made by SEBI in the Listing Regulations relating to IDs.

To access the text of SEBI notification on amendments to provisions related to independent directors, please click here.

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