NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance
Under the Companies Act, 2013 and SEBI LODR norms, which statement about independent directors on the board of a listed company is correct?
An independent director must have no material pecuniary relationship with the company, its promoters or its directors, apart from sitting fees and permitted remuneration. They are non-executive and appointed with shareholder approval, which is why promoter-group employees cannot qualify.
- AThey may be employees of the promoter group if they hold no shares
- BThey must not have a material pecuniary relationship with the company, its promoters or directors, other than sitting feesCorrect
- CThey are appointed only by the promoters without shareholder approval
- DThey are the executive directors responsible for day-to-day management
Explanation
Independence requires the absence of material pecuniary relationships apart from sitting fees and permitted remuneration. Employees of the promoter group are not independent, and appointment needs shareholder approval. Independent directors are non-executive, so day-to-day management is not their role.
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