Of late, banks and financial institutions (FIs) are facing a piquant situation over the compliance of Clause 49, one of the tools in Sebi?s corporate governance mechanism. The problem has arisen in cases where institutions have investments and nominee representatives on the boards of companies.
Companies are seeking to take cover under Clause 49 and are asking banks and financial institutions to withdraw their nominee directors so that they can fill up these board-level posts with ?independent? directors.
Among many other requirements, as per Clause 49, if a company has an executive chairman, then at least 50% of the board should comprise independent directors. And in case a company has a non-executive chairman, at least one-third of the board should have independent directors.
Confirming the development, a top official of Life Insurance Corporation (LIC), which has the largest investments in India Inc, said, ?Yes, we are facing such a situation with some of the corporates. There is some confusion in the minds some of the corporates about the relevance of nominee directors and independent directors and coexistence of both in their boards. They think nominee directors have to be replaced by independent directors. We are now talking to a few to remove these doubts,?? said the official.