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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

A company's board has 10 directors: 3 executive directors, 2 non-executive non-independent nominees of the promoter, and 5 independent directors. The chairperson is the promoter's non-executive director. Under the usual SEBI listing norms, a listed company with a non-executive chairperson who is a promoter-related person needs at least what fraction of the board as independent directors, and does this board comply?

At least half the board must be independent when the non-executive chairperson is a promoter or related to the promoter. With 10 directors that means 5, and the company has exactly 5 independent directors, so it complies with the requirement.

  1. AOne-third; it complies since 5 exceeds one-third
  2. BHalf; it complies since 5 equals half of 10Correct
  3. CHalf; it does not comply because only 5 of 10 are independent
  4. DOne-quarter; it complies since 5 exceeds one-quarter

Explanation

Where the non-executive chairperson is a promoter or related to promoters, at least half of the board must be independent directors. Half of 10 is 5, and the board has 5 independents, so it complies exactly. Option three wrongly treats 5 as insufficient.

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