SEBI is tightening norms for independent directors
The recent SEBI order imposing Rs. 10 Lakhs fine on two Independent Directors of LEEL Electricals Ltd for failing to fulfil their statutory duties as members of the Audit Committee (AC) and safeguarding shareholders' interests has highlighted the SEBI’s efforts to tighten norms for independent directors emphasizing their accountability and responsibilities, particularly in cases involving financial misconduct within companies.
The SEBI order highlighted a crucial aspect of the case, revealing that the independent directors, despite lacking expertise in law and finance, were held responsible for neglecting their duties. This ruling underscores SEBI's stringent stance on the roles and liabilities of independent directors, especially in instances where financial irregularities are uncovered.
Under existing legal frameworks, independent directors are mandated to possess appropriate skills and knowledge in fields such as finance, law, management, and corporate governance, reflecting the complexity of their roles.
SEBI's recent orders in cases involving Southern Ispat and Energy Ltd. (SIEL) and Fortis Healthcare Limited (FHL) underscore the heightened accountability of independent directors, particularly those serving on Audit Committees. In these cases, independent directors were held liable for negligence in monitoring financial transactions and aiding in financial misrepresentations, resulting in substantial penalties.
