The Securities and Exchange Board of India (SEBI) has stated that cousins of promoters or directors will not automatically be considered related persons under listing regulations. This clarification opens the possibility for such individuals to be eligible for independent director roles, provided they meet other legal requirements.
Maithan Alloys sought informal guidance from SEBI regarding the eligibility of a promoter-group member’s cousin for an independent director position. The company was uncertain if appointing a relative of a promoter-group member would breach SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations.
SEBI emphasized that the determination hinges on the legal definition of “relative” as per applicable laws. The definition, as per the Companies Act and SEBI’s LODR regulations, includes immediate family members like spouses, parents, children, and siblings but excludes cousins.
SEBI clarified that cousins are not automatically categorized as related persons for assessing eligibility as an independent director. Based on the information provided, the proposed candidate may qualify for the independent director role in the company, according to SEBI.
However, SEBI stressed that companies must still adhere to all other independence criteria, encompassing shareholding, financial interests, pecuniary relationships, and other statutory assessments. The regulator also highlighted that its guidance is solely based on the facts presented by the applicant and should not be considered a binding decision, as different circumstances could lead to varied interpretations.
