At a time when boardroom tussles are increasingly turning into legal battles, a panel appointed by the Securities and Exchange Board of India (SEBI) is looking into the matter of lawyers and chartered accountants being on corporate boards as independent directors and the framework to follow if such directors’ law or audit firms were engaged in advising the respective companies.
There are many instances of leading lawyers and chartered accountants (CAs) being appointed as independent directors on the boards of companies and the regulator is evaluating whether there is a need to put in place a proper mechanism or protocol to deal with such instances and appointments to avoid any conflict of interest, said a person familiar with the matter.
Report in 4 months
The corporate governance committee formed under the chairmanship of Uday Kotak is, among other things, looking into this aspect and will be submitting its report within four months, the person, who did not wish to be identified, said.
“The regulator is looking at instances wherein a CA or a lawyer is on the board of a company as an independent director and persons from their firm are advising the company in any manner whatsoever and whether this creates any kind of conflict,” the person said.
Interestingly, the committee has among its members, leading corporate lawyers like Zia Mody and Cyril Shroff, along with Nilesh Vikamsey, who is the president of The Institute of Chartered Accountants of India (ICAI), the governing body of audit firms in India.
Ever since the committee was formed on June 2, the members have met on two occasions and the third meeting is scheduled soon. An email query sent to SEBI remained unanswered till the time of going to press.
According to data from Prime Database, Shardul Shroff of Shardul Amarchand Mangaldas & Co. is a director in three companies while his wife Pallavi Shroff sits on the boards of four companies. Berjis Desai, formerly of J Sagar Associates, is a non-executive director on the boards of six companies, including Adani Enterprises, Edelweiss Financial Services, Praj Industries and Jubilant Foodworks. Rajendra Shah, who is a senior partner with noted law firm Crawford Bayley & Co. is also part of the boards of nine companies including Bombay Dyeing, Pfizer, Lupin, Colgate Palmolive (India) and Deepak Fertilisers.
Disclosure issue
Among other things, the SEBI committee will look into the matter of “ensuring independence in spirit of independent directors and their active participation in functioning of the company” along with “disclosure and transparency related issues” as per information provided on SEBI’s website.
Meanwhile, Shuva Mandal, who was formerly with Shardul Amarchand Mangaldas, is a director on the board of AGC Networks, as per Prime Database. Interestingly, he recently joined Tata Sons as Group General Counsel after providing legal advice to the conglomerate on various matters, including the recent tussle with former chairman Cyrus Mistry. He had earlier worked with the Tata group as a legal adviser to Tata Motors and Tata Chemicals on international projects, Tata Sons said in a statement at the time of his appointment.
Similarly, Haigreve Khaitan, managing partner, Khaitan & Co. LLP is a director on six companies. Senior lawyers of the firm like Padam Khaitan, Pradip Khaitan, Nandini Khaitan and Rajiv Khaitan also serve as independent directors on the boards of a few firms. Rajendra Chitale, managing partner of the well-known chartered accountancy firm M P Chitale & Co. is also a director on the boards of five companies including Ambuja Cements, Reliance Capital and Hinduja Ventures.
