Independent Directors In India: A Critique Of Their Role And Liability Under SEBI (LODR), 2015
- IJLLR Journal
- Mar 31
- 2 min read
Ajay Kumar, LL.M., NALSAR University of Law, Hyderabad
ABSTRACT
Independent directors are considered one of the most important persons associated with a company and often described as the linchpin of corporate governance. They are entrusted with ensuring transparency and accountability, they are the one who are supposed to protect the interest minority shareholders in a company. In India, their role has been defined under Companies Act, 2013 and strengthened by the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Independent directors are central to India’s corporate governance framework under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”). Recent reforms (2022-2025) have tightened board norms: for example, Regulation-17 now mandates an “optimum combination” of executive and non-executive directors with at least one woman and ≥50% non-executives.
However, this legal and regulatory framework has not been able to prevent multiple corporate governance failures and frauds, these failures have raised grave concerns regarding the true independence and effectiveness of Independent Directors. This paper tries to critically examine the role and liability of independent directors under the SEBI (LODR) framework. This paper analyses their statutory duties as a fiduciary of the companies, and personal civil and criminal liabilities if any, with reference to Indian statutes, judicial pronouncement and SEBI (LODR) framework. The study further delves on the ancillary challenges such as promotor dominance, information asymmetry and board capture. This paper draws comparative perspective from the legal frameworks of UK, USA and Singapore and proposes regulatory and institutional reforms to strengthen the independence and accountability of independent directors in India.
Keywords: Independent Directors, SEBI (LODR) Regulations, Corporate Governance, Companies Act 2013, Liability, Board Composition, India
