As firms grapple with the shortage of independent directors, the new Companies Bill is likely to give them relief on this front.The Ministry of Corporate Affairs may consider a 10-year term for independent directors under the new Companies Bill, instead of a six-year limit proposed by it to a Parliamentary panel that reviewed an earlier version of the Bill.
The move is expected to allay the fears of the industry, which was expecting a greater shortage of independent directors once the six-year term became mandatory.
The changes, to be incorporated in the new version of the legislation (Companies Bill 2011), may also see independent directors allowed to return to the same positions again, albeit after a specified cooling period and the fulfillment of a prescribed set of conditions.
Currently, the ministry has not set any limit for the tenure of independent
directors on a company board, though corporate governance guidelines of the Securities and Exchange Board of India give a voluntary instruction to listed companies to see that the terms of independent directors do not exceed nine years.
Corporate Affairs Minister Veerappa Moily said the industry concerns with regard to the tenure of independent directors would be addressed in the revised Bill he would present before the Cabinet soon.
The Bill is in a list of legislations to be tabled in the current session of Parliament.
Moily, who declined to provide details of the changes, hinted his ministry would also propose a code of conduct for independent directors.
The minister is also giving last-minute touches to the corporate social responsibility provisions in the Bill, which he said would be industry-friendly.
The Companies Bill, 2009 had proposed a six-year maximum tenure for independent directors on the board of a company.
