Subject to fulfilling other statutory criteria, the Securities and Exchange Board of India (SEBI) has stated that promoters or directors’ cousins will not be considered related individuals under listing laws.
This may allow such people to be considered for independent director roles.
In response to informal advise sought by Maithan Alloys, which had asked for a regulatory interpretation of whether a promoter-group member’s cousin might be eligible for appointment as an independent director under current rules, the clarification was issued.
After the business suggested hiring someone who was connected to a promoter-group member and wanted clarification as to whether such a relationship would infringe the independence criteria outlined in SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, the question was raised.
According to the market monitor, the interpretation is based on the legal definition of relative as defined by relevant legislation.
It pointed out that the Companies Act’s and SEBI’s LODR rules’ definition of “relative” is limited to direct family members like spouses, parents, children, and siblings, and does not include cousins.
SEBI declared that cousins are not automatically considered related parties for determining the eligibility of an independent director after reviewing the information the company provided.
SEBI stated that the candidate’s suitability for an independent director post at the company might be evaluated based on the information supplied.
However, the regulator stated that businesses must adhere to all other independence criteria, including conditions regarding shareholding, financial interests, financial ties, and other legal exams.
Additionally, the market regulator stated that the advice is based exclusively on the information given by the applicant and shouldn’t be regarded as a binding decision of the regulator, adding that different facts or circumstances may result in a different interpretation.