The amended listing agreement, which comes into effect from April 1 is up for review at a board meeting of the Securities and Exchange Board of India on Wednesday and the Ministry of Company Affairs is expected to recommend that norms relating to independent directors be made non-mandatory.
The ministry, which is represented on the board, is expected to take up for review all the major differences between Clause 49 of the listing agreement and the Companies Act at the meeting.
The ministry is also expected to recommend that the requirement -- that a director should not to be member in over 10 committees or act as chairman of five committees across companies -- should not be binding.
According to the listing agreement for computing the limit on committees, all public companies (listed and unlisted) are included.
The listing agreement is perceived as particularly stiff by corporate India as it requires every listed company to have 50 per cent of its board members as independent directors, in case the chairman of the company is an executive director.
If the chairman is a non-executive director, the agreement requires every listed company to have one-third of its board consisting of independent directors.
Industry chambers have petitioned the company affairs ministry that companies are hard pressed to find independent directors.
The Companies Act, as it exists today, does not have the concept of independent director. According to government officials, it is felt that the listing agreement should be in step with the Companies Act.
As the new companies law is under discussion, it is felt that the listing agreement requirement, which is stiffer than the existing Companies Act, should be made non-mandatory.
The listing agreement's requirement that CEOs and CFOs should certify that they have reviewed the financial statement of the company does not have a corresponding provision in the Companies Act and could also be made non-mandatory.
Another area that could come up for discussion in the listing agreement is the norm that requires every listed company to have two-thirds of the members of the audit committee independent directors.
