Companies that fail to comply with SEBI's revised 'clause 49' to ensure that independent directors constitute at least one-third of their boards will be delisted.
To ensure corporate governance the securities and Exchange Board of India (SEBI) has stipulated that effective from January 2006 at least one-third of the directors on the board of a company should comprise "independent directors". Known as 'revised clause 49', SEBI has made it clear that all listed entities would have to comply with this directive by December 31, 2005.
The revised clause 49 stipulates that in companies which have executive chairmen, at least 50 per cent of the board is required to have independent directors. For companies with non-executive chairmen one-third of the board must comprise independent directors.
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