SEBI headquarters in Mumbai (Photographer: Santosh Verma/Bloomberg)

Exchanges Must Impose Penalties On Companies Without Woman Director, Says SEBI Chief Ajay Tyagi

The market regulator has expressed its displeasure over the failure of exchanges to get all listed companies to comply with the Companies Act regulation of having at least one woman director on board.

Exchanges have not been able to enforce the regulations fully, said Ajay Tyagi, chairman of Securities and Exchange Board of India. “I have asked officials to look into if there are difficulties,” he said after releasing a report on women directors by proxy firm Institutional Investor Advisory Services and Prime Database Group.

The Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 mandate listed companies to have at least one woman director on their board effective from April 1, 2014. According to the IiAS report, 15 companies of top 500 companies in India did not have a woman director as on March 31. Of these, 11 are public sector companies, the report said.

The law allows stock exchanges to impose penalties on the companies that have not appointed a woman director. “Penalties which the NSE (National Stock Exchange Ltd.) can impose and collect, even in that there is laxity. Similarly, with BSE. Whatever the law is there, that (fine) should be collected,” Tyagi said.

The Regulation

According to section 17 of the Listing and Disclosure Regulation, the board of a listed entity shall have an optimum combination of executive and non-executive directors with at least one woman director, and at least 50 percent of the directors should be in non-executive role.

SEBI had set April 1, 2015 as the deadline for all listed companies to name at least one woman director on the board. The regulator empowered stock exchanges to impose fines on companies that failed to comply.

Under regulation 98 and 99 of the SEBI’s Listing and Disclosure norms, stock exchanges can…

  • Impose fines
  • Suspend trading
  • Freeze promoter/promoter group holding of designated securities, as may be applicable, in coordination with depositories.
  • Any other action as may be specified by SEBI from time to time.

Quantum Of Penalties

SEBI had, in an April 8, 2015 circular, laid down fines of Rs 50,000 to Rs 1.42 lakh for missing the April 1, 2015 deadline, and an additional Rs 5,000 a day till the date of compliance. This circular was, however, rescinded on September 8, 2015.

Exchange officials told BloombergQuint requesting anonymity that they couldn’t recover fines and penalties in the absence of clear SEBI guidelines governing fine structure. The spokespersons for the National Stock Exchange of India Ltd. and BSE Ltd. did not want to comment on the issue since it involved the regulator.

“My understanding is at some stage, the fine structure was removed and now if the stock exchanges want to penalise the companies, they are not sure what they can do. We would ask the regulator to put some of this back,” said Amit Tandon, co-founder of proxy firm Institutional Investor Advisory Services.

The proportion of women on company boards has more than doubled to 13 percent over five years through March, the IiAS report said. Of all women directors, nearly 60 percent are independent, 14 percent have an executive role, 6 percent are nominee directors while only eight percent of the directors were non-executive promoter representatives, the report said.