ANALYSIS OF COMPLIANCE OF NEW SEBI REGULATIONS FOR CONTINUATION IN A LISTED COMPANY OF A NON-EXECUTIVE INDEPENDENT DIRECTOR WHOSE AGE IS SEVENTY-FIVE YEARS OR MORE.
ANALYSING THE NEW PROVISIONS
This relates to compliance of Regulation 17 {1A} of SEBI {Listing Obligations and Disclosure Requirements} Regulations, as amended, in respect of Non-Executive Independent Directors of a listed company {in short, “company”} for such director whose age as on the effective date of the said amendment is seventy-five years or more.
In this regard, one must read carefully the said Regulation 17{1A} reproduced below in verbatim:-
"No listed entity shall appoint a person or continue the directorship of any person as a non-executive director who has attained the age of seventy-five years unless a special resolution is passed to that effect, in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such a person."
As it can be seen from the above that essentially two aspects of non-executive directors are covered in this Regulation, for compliance:-
{a} Appointment of a person as a director, or
{b} Continue the directorship of any person as a director.
As a compliance, a special resolution of the shareholders of the company must be passed to that effect, in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such a person.
It would be seen that the last portion of the provision mentions about "JUSTIFICATION FOR APPOINTING SUCH A PERSON" who is the director and does not mention about continue the directorship.
However, a considered view is possible that since the opening portion of the provision clearly mentions about the appointment of a person as a non-executive director or continuation of non-executive directorship of a person who has attained the age of 75 years and passing of special resolution is to "THAT EFFECT", the provision of "JUSTIFICATION" in the explanatory statement of the notice also relates to both appointment of director as well as continuing the directorship.
Pertinently it is immaterial whether the person concerned is independent or not independent; he must be a non-executive director.
The query now arises whether the continuation of the directorship of such non-executive independent director of a listed company whose age is 75 years or more, till the end of his tenure of five years, will need to be addressed for compliance of Regulation 17 { 1A}?
CONCLUSION
After interpreting the provisions, that the matter of continuation of the directorship of a non-executive independent director, whose age is seventy-five years or more, squarely falls within the said Regulation 17 {1A} for his continuation to hold office as such director.
Moreover, as a compliance, the shareholders of the company shall have to pass a special resolution for his continuation as non-executive independent director till the end of his current five years tenure and the explanatory statement to be annexed to the notice of the general meeting of the shareholders for such motion shall indicate the justification for his continuing the directorship.
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