SEBI has become stricter with the board composition of directors at Market Infrastructure Institutions (MIIs) i.e. stock exchanges, depositories and clearing corporations. SEBI has already been strict with the appointment and tenures of board member at MIIs. The main concern of the market regulator is the appointment of “Shareholder Director” for a long period of time in these institutions. Recently, SEBI has advised the National Stock Exchange (NSE) to refrain from reappointing its two senior directors who already served on its board for more than eight years. SEBI also wants to apply this procedure to Bombay Stock Exchange (BSE). Other MIIs such as National Securities Depositories Limited (NSDL) and Central Depositories Services Limited (CDSL) have got new shareholder directors this year. So, the purpose of SEBI is to urge the MIIs to appoint shareholder directors for a shorter tenure.
There are two kinds of Directors on the board of MIIs – Public Interest Directors (PIDs) and Shareholder Directors. PIDs are appointed by the exchanges and SEBI. Their purpose is to safeguard the interest of the stock market. These directors are also appointed for a short period.
On the other hand, shareholder directors are appointed by the majority shareholders in general meeting. And, Companies Act, 2013 governs the appointment of shareholder directors. They can be appointed up to five years and can be further reappointed by passing a special resolution (i.e. by 3/4th) majority. So, in effect, it can be said that though Companies Act, 2013 allows longer tenure, SEBI believes in shorter tenure of directors to avoid conflict of interest.
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