Government plans to carry out review of functioning of independent directors

Vastavam web: The government plans to carry out a comprehensive review of the functioning of independent directors, including analysing the reasons for their exit from the boards of companies, as part of efforts to strengthen the corporate governance framework.The corporate affairs ministry, which is implementing the Companies Act, is also looking to bolster the regime for independent directors and might also take a relook at certain regulatory requirements pertaining to their appointment and removal, a senior government official said.The official said there is a need to have a better understanding of the role of independent directors and the kind of challenges faced by them.

There is a need to do research on aspects such as reasons for independent directors resigning from companies and having a database would help as it would provide credible information, the official added.Among others, an independent director can be removed by way of an ordinary resolution, wherein approval of at least 50 per cent of shareholders of the company is required. On the other hand, for re-appointment of independent directors a special resolution has to be passed. The latter requires the nod of 75 per cent or more of shareholders.

Last week, Minister of State for Corporate Affairs P P Chaudhary said that independent directors act as the fulcrum of corporate governance framework and emphasised that they have both advisory as well as monitoring role.