[Bharat Vasani is Senior Advisor – Corporate laws at the Mumbai office of Cyril Amarchand Mangaldas. An earlier version of this post was published on the Cyril Amarchand Mangaldas Blog] It is the board’s responsibility to successfully run a company, as set out in terms of section 179 of the Companies Act, 2013 (“Act”). Hence, it is imperative that the boards function effectively to ensure that...
Business Judgment Rule: The Indian Context
[Bharat Vasani is Senior Advisor – Corporate laws at the Mumbai office of Cyril Amarchand Mangaldas. An earlier version of this post was published on the Cyril Amarchand Mangaldas Blog] The business judgment rule is a legal presumption evolved by Delaware courts. The presumption is that while making business decisions, directors of a company act in good faith, on an informed basis and in the...
Analysis of SAT Order: Appointment of Independent Director Above 75 years
[Gaurav Pingle is a practising company secretary and can be reached at [email protected]] Considering the importance of independent directors on the boards of listed entities, the Securities and Exchange Board of India (“SEBI”) has been amending the provisions relating to their appointment, re-appointment, appointment process, remuneration, and the like under the SEBI (Listing Obligations and...
Directors’ Liability and Climate Risk in India
Climate change has garnered significant attention given that it poses a serious challenge to sustainable development. No longer is it merely within the domain of voluntary conduct on the part of corporations. Instead, it is a material financial risk that corporations encounter, thereby imposing duties on the boards of directors of corporations to recognise and address climate risk. In “Directors’...
Supreme Court on Directors’ Duties in the Tata/Mistry Case: A Critique
On 26 March 2021, the Supreme Court of India pronounced its much-awaited ruling in Tata Consultancy Services Limited v. Cyrus Investments Pvt. Ltd. The Court found that the allegations of oppression and prejudice raised by the Mistry group could not be sustained, and hence declined to grant any relief. It answered all the legal questions raised in favour of the Tata group. In a sense, this forces...
SEBI’s Consultation Paper Makes Minority-Shareholder Friendly Proposals on Independent Directors
The Securities and Exchange Board of India (“SEBI”) has released a consultation paper making minority-shareholder friendly proposals mainly relating to independent directors (“IDs”). The paper proposes a dual-approval process for appointment and removal of IDs, which includes a “majority of minority shareholders” approval. If this approval is not received, a...
MCA Clarifies on Legal Actions against Outside Directors
Recognizing the specific roles that different directors of a company play, section 149(12) of the Companies Act, 2013 contains a safe harbour provision that protects certain types of directors against liability. It relates to three types of directors, who are, for the sake of convenience, referred to as “outside” directors: (i) an independent director; (ii) a non-executive director who is not a...
The Foibles of a Databank and Proficiency Test for Independent Directors
There is no gainsaying that board independence has come to assume a pivotal position in corporate governance. Although it continues to receive constant criticism on account its ineffectiveness, no one musters the courage to banish it or even diminish its importance. While the concept of independent directors only gradually received the required attention and seriousness in India, it has been the...
Qualifying test requirements for Independent Directors – a hasty, slipshod & cumbersome requirement
I have written a piece for Moneylife on the new requirements of the Ministry of Corporate Affairs for independent directors that mandate existing as well as first-time independent directors to enrol in a databank as also pass certain qualifying test. The Rules, that are spread over several notifications and also an FAQ, come into force from 1st December 2019 and some transition period is also...
Recent Developments Pertaining to Independent Directors
Professor Bala N. Balasubramanian has authored the latest edition of the NSE Quarterly Briefing titled “Caution: Independent Directors – Hairpin Turns Ahead!”. The abstract/introduction is as follows: The institution of Independent Directors (D), heralded as a virtual panacea for all governance ills, nearly three decades ago in the UK’s Cadbury prescriptions, is now almost universally under...
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