SEBI Issues Informal Guidance In Relation To Eligibility For Appointment As Independent Directors

The Securities and Exchange Board of India (“SEBI”) recently issued an Informal Guidance through Issue no.: I/6076/2026 in response to a request from Maithan Alloys Limited (“Applicant”) regarding the interpretation of the phrase ‘related to promoters or directors’ under Regulation 16(1)(b)(iii) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). The Applicant proposed to appoint as an Independent Director an individual who was the cousin (daughter of the father's sister) of a member of its promoter group, who was also serving as a director on the boards of two subsidiary companies of the Applicant. The Applicant sought SEBI's clarification on whether such cousin relationship would render the proposed appointee ineligible for appointment as an Independent Director.

SEBI observed that a cousin is not covered within the statutory definition of ‘relative’ under Section 2(77) of the CA 2013, read with the Companies (Specification of Definitions Details) Rules, 2014 and Regulation 2(1)(zd) of the LODR Regulations. Accordingly, based on the facts presented, SEBI clarified that the proposed candidate may be eligible for appointment as an Independent Director notwithstanding the cousin relationship with the promoter group member/director. The guidance indicates that relationships falling outside the statutory definition of ‘relative’, such as cousins, would not by themselves affect a person's eligibility to serve as an Independent Director, and a cousin of a promoter or director is not automatically disqualified from such appointment solely on account of that relationship.

* SEBI issues informal guidance in relation to eligibility for appointment as Independent Directors.

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