The Corporate Laws (Amendment) Bill, 2026, attempts a useful balancing act: ease the burden of routine compliance while tightening rules where corporate governance genuinely matters. Its proposal to strengthen the eligibility test for independent directors belongs firmly in the latter category. It would allow the government to prescribe a threshold below the existing 10% limit for transactions between a company group and the legal or consulting firm an independent director is associated with. It would also extend the assessment to the current financial year and require directors to satisfy independence criteria throughout their tenure. The changes recognise a basic truth too often obscured by formal designations: independence is not secured merely by calling a director “independent”.
The present framework leaves room for relationships that comply with the letter of the law but weaken its purpose. A lawyer, consultant, or other professional may have no direct pecuniary relationship with a company, yet the firm in which that person is a partner or employee could derive substantial business from the company or its holding, subsidiary, or associate entities. Even when such transactions remain below 10% of the professional firm’s turnover, their absolute value and importance to the firm may be considerable. A director in that position may remain technically independent while having strong economic reasons to avoid challenging management. Since the central function of an independent director is to question controlling shareholders and executives, protect minority investors, and bring objective judgement to the board, such dependence cannot be dismissed as a technicality. The proposed power to lower the threshold is therefore justified.
But the government should use that power with care. An excessively low uniform ceiling could disqualify experienced lawyers, accountants, and consultants whose knowledge would strengthen boards, even when their firms’ dealings with a company are incidental and exert no meaningful influence on them. Large professional firms also operate through multiple practices and offices; a director may have neither involvement in nor financial benefit from a transaction handled elsewhere. A rigid numerical rule could consequently shrink an already limited pool of credible independent directors without necessarily improving independence. The threshold should be calibrated after consultation, differentiated where necessary and accompanied by reasonable transition provisions. Companies and directors must also be given certainty: frequent changes through subordinate rules would complicate appointments and succession planning.
More fundamentally, board independence is about economic dependence and behaviour, not labels or a single percentage. Numerical thresholds are useful because they create a clear minimum standard, but they cannot capture every relationship capable of influencing judgement. The reform should thus be reinforced by granular disclosure of commercial links between directors, their professional firms, and the entire company group — including the nature, value, and duration of assignments and the director’s link with them.
Nomination and remuneration committees should record why such relationships do not compromise independence, while shareholders should receive enough information to make their own assessment. Annual declarations should become a substantive review rather than a box-ticking exercise. The Bill’s wider package — decriminalising procedural defaults, modernising meetings, and simplifying requirements for smaller companies — rightly distinguishes business facilitation from governance dilution. That principle should guide the independent-director provisions: reduce pointless compliance, but demand genuine distance wherever judgement and accountability are at stake. Independence must mean independence, without turning exclusion into a substitute for scrutiny. That is the balance the final law and its rules must strike.