Can a Promoter's Cousin Be Appointed as Independent Director? SEBI Clarifies Under LODR Regulations
Background and Context
A significant question around the eligibility of a cousin of a promoter-group member to serve as an Independent Director on a listed company's board was recently addressed by the Securities and Exchange Board of India (SEBI) through its Informal Guidance mechanism. The guidance, issued under the Securities and Exchange Board of India (Informal Guidance) Scheme, 2025, was sought by Maithan Alloys Limited and pertained to the interpretation of Regulation 16(1)(b)(iii) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations").
The central issue was whether a cousin of a promoter-group member who also holds directorial positions in subsidiary companies could be disqualified from being appointed as an Independent Director on the grounds of being "related to promoters or directors" within the meaning of the said regulation.
About the Company and the Proposed Appointment
Maithan Alloys Limited is a Kolkata-based listed entity incorporated on 19th September, 1985, with its equity shares listed on the Calcutta Stock Exchange Limited and the National Stock Exchange of India Limited. The company is principally engaged in the manufacture of ferro alloys products used in the iron and steel sector, alongside real estate business operations.
The promoter of the company is Mr. Subhas Chandra Agarwalla, who also serves as its Chairman and Managing Director. The promoter group includes several individuals who are also employees of the company and receive remuneration:
- Mr. Subhas Chandra Agarwalla – Chairman and Managing Director
- Mr. Subodh Agarwalla – Whole-time Director and CEO
- Mr. Sudhanshu Agarwalla – President and CFO
- Mr. Siddhartha Shankar Agarwalla – Vice President
Mr. Siddhartha Shankar Agarwalla is the son of a cousin of Mr. Subhas Chandra Agarwalla. He forms part of the promoter group, with his shareholding aggregated under "Shareholding of Promoter Group" as per sub-clause (v) of Regulation 2(1)(pp) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. He also acts in concert with the promoter, Mr. Subhas Chandra Agarwalla. His wife, Mrs. Sonam Agarwalla, is likewise a promoter-group member. Together, Mr. Siddhartha Shankar Agarwalla and Mrs. Sonam Agarwalla hold 18.07% of the company's shares. Notably, none of Mr. Siddhartha Shankar Agarwalla's other family members hold any shares in the company. Additionally, Mr. Siddhartha Shankar Agarwalla serves as a Director in two subsidiaries of the company, though he does not hold any position on the Board of Directors of Maithan Alloys Limited itself.
The Proposed Candidate's Profile
The company sought to appoint a cousin of Mr. Siddhartha Shankar Agarwalla as an Independent Director. The proposed candidate is the daughter of Mr. Siddhartha Shankar Agarwalla's Father's Sister — in other words, his first cousin (father's sister's daughter).
The candidate holds an impressive academic profile: