Financial Daily from THE HINDU group of publications
Sunday, Jun 15, 2003
Financial Daily from THE HINDU group of publications Sunday, Jun 15, 2003 |
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Corporate
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Regulatory Bodies & Rulings Board composition: DCA for further changes in Cos Bill
Richa Mishra
NEW DELHI, June 14 THE board composition in corporate India continues to be a thorny issue, with the Department of Company Affairs (DCA) now coming to the view that further modifications have to be made to the provision governing this aspect in the Companies (Amendment) Bill, 2003. The provision in the Bill that is in for a change is the one that requires the boards of public companies having a paid-up capital and free reserves of Rs 5 crore or more or a turnover of Rs 50 crore or more to have minimum seven directors out of which majority should be independent directors. DCA has now decided to specify that nominee directors should be excluded from the overall calculations relating to the norm requiring the board to have a minimum seven directors of which majority should be independent. Confirming that Department would make suitable changes to this provision to reflect this "legal intent," the DCA Secretary, Mr Vinod Dhall, told Business Line that changes would be made to the Bill to clarify the position that nominee directors should be excluded in the calculation. "From the total number of directors, nominee directors will be excluded and out of the balance, at least 50 per cent should have to be independent," Mr Dhall elaborated. He said that the proposed norm would result in a healthy mix of insiders and outsiders in a board and also ensure greater confidence in the functioning of board. He highlighted that the Sarbanes-Oxley Act of the US too prescribed that boards of public companies must have a majority of independent directors. The Secretary clarified that proposed norm which bars a person, who has been a director or an independent director in the company for period of nine years or more, from being appointed as an independent director was not something which has been `pulled out of a bag'. Mr Dhall said that this provision has been brought in after much deliberations and consultations.
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