Not Hired Female Director Get Ready to Pay Fine

Stock exchanges earlier this week fined over 500 listed companies who had not complied and regulator to take action for any non-compliance beyond September 30

Market regulator Sebi may take action against companies who have not appointed women directors on their boards to meet the requirements of the new Companies Act.

Earlier this week, stock exchanges fined over 500 listed companies who had not complied. “As per the provisions of the Sebi circular, BSE has till date issued advisory letters to 530 companies regarding levy of fines for non-compliance with the said provision within the prescribed timelines,“ said a statement from BSE. The NSE has fined 260 companies. However, both stock exchanges have not disclosed the names of the firms which were penalised.

There are over 5,700 companies listed on BSE and nearly 3,000 on NSE.

“I hardly believe that in a country like India, companies are not able to find women directors,“ said Sandeep Parekh, founder of Finsec Law Advisor. He added that though the BSE penalty was a small amount, it could spur promoters to comply with the rule. Last year, capital market regulator Sebi had mandated that listed companies appoint at least one female director on their boards in line with the new Companies Act and to boost gender diversity. It had asked companies to meet its April 1, 2015 deadline or face serious consequences. After some companies failed to comply, Sebi proposed higher fines based on the delay in meeting the requirement.

Last month, the regulator wrote to the cabinet secretary that women directors should be appointed on the boards of public sector undertakings to meet corporate governance norms. Sebi said if a company doesn't complies with its listing agreement rule, which mandates ap pointment of at least one woman director on the board before June 30, 2015, it would have to pay a fine of Rs.50,000.

Companies complying with this requirement between July 1 and September 30, 2015, would have to cough up Rs.50,000 plus Rs.1,000 per day starting from July 1 till the date of compliance and those entities complying on or after October 1, 2015, would have to pay Rs.1.42 lakh plus Rs.5,000 per day from October 1, 2015, till the date of compliance.

For any non-compliance beyond September 30, 2015, Sebi will take other action against the non-compliant entities, their promoters andor directors or issue such directions in accordance with law, as considered appropriate, the regulator had said. “It's really unfortunate that several listed companies have failed to appoint women directors despite reminders from market regulators,“ said Shriram Subramanian, founder and MD, InGovern Research Services. “Unless the market regulator takes stringent action against these companies, they won't be serious in complying with this rule,“ he added.

India is one of several countries to mandate an appointment of woman directors on the boards of listed companies, but many companies that have complied have female relatives of the promoters in order to comply with the new rules. “On one hand, companies seem to be finding it difficult to find qualified women directors, while on the other there is a concern that with companies appointing women who are merely proxies or name-lenders to ensure compliance, it is likely that Sebi will issue further orders possibly along the lines used to ensure compliance with minimum public holding norms,“ said Vaneesa Agarwal, a practicing lawyer at the Bombay High Court.

The Economic Times, New Delhi, 16th July 2015