Boardroom Balance Sheet: Board Composition Pitfalls Under Regulation 17
Board composition is the foundation of corporate governance. Regulation 17 of SEBI (LODR) Regulations, 2015 outlines clear mandates for listed entities on the structure, conduct, and oversight role of the Board. Yet, several listed companies continue to falter on basic compliance—especially concerning independence, gender diversity, and timely shareholder approvals.
Key Compliance Requirements under Regulation 17 – Snapshot
| Clause | Compliance Mandate |
| 1(a) | Optimum mix of Executive & Non-Executive Directors; at least 50% NEDs, and 1 woman director. Top 1000 listed companies must have at least 1 independent woman director. |
| 1(b) | Board must have at least 1/3 Independent Directors if Chairperson is Non-Executive. If there is no regular Non-Executive Chairperson (or if Chair is related to promoter), then 50% must be Independent Directors. |
| 1(c) | Top 2000 listed entities must have minimum 6 directors.
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| (1A) | No NED aged 75+ without special resolution and justification.
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| (1D) | Subject to other conditions, from April 1, 2024, continuation of any director requires shareholder approval at least once every 5 years.
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| (1E) | Any vacancy in the office of a director shall be filled by the listed entity at the earliest and in any case not later than three months from the date such vacancy |
Key Observations from Secretarial Audit Reports
A recurring concern across several Secretarial Audit Reports of marquee listed companies is the non-compliance with Regulation 17 of SEBI (LODR) Regulations, 2015, particularly around board composition norms. Institutions such as SBI, ONGC, Power Grid Corporation, Coal India, and IRFC have faced observations regarding inadequate representation of Independent Directors, often falling short of the mandated 50% threshold. Companies like Power Grid, Indian Oil Corporation, and Max Healthcare were found non-compliant with the requirement of appointing an Independent Woman Director, a critical inclusion aimed at ensuring diversity. Notably, Bharat Electronics and Power Finance Corporation reported temporary mismatches due to executive appointments, while entities like Adani Green, Dalmia Bharat, and Lloyds Metals faced monetary penalties or show cause notices for delays in compliance or approvals of directors over 75 years of age. In several CPSEs like HUDCO, NMDC, and Container Corporation of India, the power to appoint directors vests with the Government, often resulting in prolonged board-level vacancies and compliance gaps, despite management-level follow-ups.
These patterns highlight that even well-established entities are susceptible to board governance lapses—be it due to procedural delays, dependency on external appointments, or lapses in calendar tracking. They underscore the critical need for proactive board composition monitoring and timely shareholder resolutions to ensure seamless compliance.
*Regulation 17: Board Composition Non-Compliances Snapshot
| S. No. | Company | Nature of Non-Compliance | Regulation Breached |
| 1 | SBI Bank | Less than 50% Independent Directors | Regulation 17(1)(b) |
| 2 | ONGC | Shortfall of one Independent Director | Regulation 17(1)(b) |
| 3 | Power Grid Corporation | Less than 50% Independent Directors; No Independent Woman Director | Regulation 17(1), 17(1)(a) |
| 4 | Coal India | No Independent Woman Director for full FY 2023-24 | Regulation 17(1)(a) |
| 5 | Adani Green Energy | Board composition & NRC not compliant; Penalty imposed | Regulation 17(1), 19 |
| 6 | Bharat Electronics | Board not having required number of Independent Directors due to change in composition | Regulation 17(1)(b) |
| 7 | Indian Oil Corporation | No Independent Woman Director; Less than 50% Independent Directors during specific periods | Regulation 17(1)(a), 17(1)(b) |
| 8 | IRFC | Less than 50% Independent Directors | Regulation 17(1) |
| 9 | Power Finance Corporation | Less than 50% Independent Directors; No director performance evaluation | Regulation 17(1)(b), 17(10) |
| 10 | Max Healthcare Institute | Delay in appointment of Independent Woman Director | Regulation 17(1), Section 149 |
| 11 | Dalmia Bharat | Violation of Board composition requirements; Fine imposed | Regulation 17(1) |
| 12 | Lloyds Metals | Appointment of Director aged 75+ without special resolution | Regulation 17(1A) |
| 13 | HUDCO | Less than 50% Independent Directors; Govt. appointment delay | Regulation 17(1)(b) |
| 14 | Container Corporation of India | Less than 50% Independent Directors | Regulation 17(1) |
| 15 | NMDC Ltd | Less than 50% Independent Directors; Heavy fines imposed | Regulation 17(1) |
*Reference: Secretarial Audit Reports of the Companies
Insight
One of the most underestimated risks in corporate governance is board composition inertia. The data shows that even leading listed entities—including PSUs—struggle with maintaining the required number and category of directors, especially independent and woman directors. These delays—whether due to procedural hurdles or dependency on government appointments—can trigger penalties, damage investor confidence, and reflect poorly in Secretarial Audit Reports. Proactively maintaining a Board Compliance Matrix, pre-scheduling shareholder approvals, and engaging with nominating authorities in advance can help avoid these chronic lapses.
CS Suresh Pandey
Practising Company Secretary
SPG AND ASSOCIATES
9968300649
Coming Up in Edition 02:
SBO Compliance: The Invisible Shareholder That Costs Real Penalties
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