The Hindu Business Line : Ministry favours 1/3 board representation for independent directors

THE Ministry of Company Affairs is in favour of adopting the J.J. Irani Committee recommendation of one-third representation for independent directors on boards of listed companies under the proposed new company law.

The Union Minister for Company Affairs, Mr Prem Chand Gupta, confirmed this stance at the sidelines of a function organised by the Institute of Chartered Accountants of India (ICAI) for giving away awards for excellence in financial reporting for 2004-05.

Mr Gupta said the apex industry associations too favoured one-third board representation for independent directors in listed companies.

The Irani Committee had submitted that one-third of the board of listed companies should comprise independent directors.

Besides prescribing the minimum number of independent directors on a company's board, the Irani Committee had left it up to the sector regulator to decide the sectoral limit.

The position taken by the Irani Committee was at variance with that of the Concept Paper on the new company law, which had suggested that close to 50 per cent of the board of a listed company should comprise independent directors.

Asked about the status of the Bill, Mr Gupta told reporters here today that his Ministry was in consultation with the Law Ministry on the various provisions of the proposed Companies Bill.

He said that the new Companies Bill would be introduced in the second-half of the Budget Session of Parliament.

Seven categories of awards: In a departure from the past practice and with an objective to encourage participation from all the major sectors of the economy, the ICAI had decided to give awards for excellence in financial reporting for 2004-05 in seven categories based on functional classification of various industries.

The Gold shield awardees include Dr Reddy's Laboratories (manufacturing and trading enterprises); Housing Development Finance Corporation Ltd (HDFC) (finance sector); ICICI Bank Ltd (Banking, Insurance and Financial Institutions); Infosys Technologies Ltd (Information Technology, Communications and Enterprises); Tata Power Company Ltd (infrastructure and construction); and Thomas Cook (India) Ltd.