MANDATORY APPOINTMENT OF WOMEN DIRECTOR AS PER LODR REGULATION OF SEBI – RECENT AMENDMENT BY SEBI
The Securities and Exchange Board of India (SEBI) in its board meeting on 26 June 2018 decided the following :
There should be at least one woman independent in the top 500 listed entities by market capitalisation
by April 1, 2019.
There should be at least one woman independent director in the top 1,000 listed entities
by April 1, 2020
This was based on a recommendation of the Kotak Committee on Corporate Governance.
What Company Act 2013 states :
CHAPTER 11 Rule 3 says that certain companies shall appoint one Woman director on the Board.-
The following class of companies shall appoint at least one woman director-
(i) every listed company;
(ii) every other public company having –
(a) paid–up share capital of one hundred crore rupees or more; or
(b) turnover of three hundred crore rupees or more:
Section 149 (1) of CA 2013
Provided that a company, which has been incorporated under the Act and is covered under provisions of second proviso to sub-section (1) of section 149 shall comply with such provisions within a period of six months from the date of its incorporation:
Provided further that any intermittent vacancy of a woman director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is later.
Explanation.- For the purposes of this rule, it is hereby clarified that the paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.
Why SEBI Insists for Women independent Director in Listed Companies?
As per Companies Act 2013, women director need not necessarily be independent. However, SEBI LODR recent amendment provides that independent women director should be appointed in top 500 and 1000 listed companies.
Presently , Women Directors are appointed in listed companies who are belong to promoter group thereby she cannot act indepentendly. Hence , SEBI LODR amendment makes it mandatory to have women independent directors in their board.
Presently listed companies of all categories used to appoint woman director from the promoter side (usually related to the promoter, (like wife, daughter etc). Now to plug thus loophole, the proviso has been added to make it clear that in case of certain listed companies, to safeguard the interest of investors, the woman director should be an independent one