The Securities and Exchange Board of India (Sebi) has asked the government to tighten rules related to the removal of independent directors in companies. The capital market regulator has written that boards should be allowed to remove independent directors only through a special resolution. Sebi has asked for changes in the Companies Act 2013 to this effect.
This proposal comes in the wake of Nusli Wadia’s removal by Tata Sons from three listed Tata group companies —Tata Chemicals, Tata Motors and Tata Steel — following a boardroom battle that led to the ouster of Cyrus Mistry as chairman of the group. Wadia was an independent director on the boards of the three Tata companies.
The Companies Act stipulates that an independent director can be appointed through an ordinary resolution. But if an independent director is eligible for reappointment, a second term needs a special resolution.