India’s proposed company law overhaul aims to tighten eligibility, disclosure, and independence standards for directors, amid ongoing scrutiny of corporate oversight after major scandals.
India’s proposed company law overhaul could reshape the role of independent directors at a time when boardrooms are already under pressure to prove they can spot trouble early and challenge management without fear or favour. The Bill, reported by Business Standard, would tighten eligibility rules, require directors to keep meeting independence standards throughout their tenure and strengthen disclosure requirements when they leave a board.
That comes against a backdrop of repeated scrutiny of independent directors after major corporate failures. The Satyam scandal in 2009 raised lasting questions over whether the board had challenged management robustly enough to detect fraud. Directors at IL&FS also came under the regulatory lens over alleged lapses in oversight, while governance concerns at Yes Bank intensified after a wave of resignations in 2018. Under India’s Companies Act, listed companies must already have at least one-third of their board made up of independent directors, whose purpose is to protect minority shareholders and provide an outside check on management.
The new Bill would add a three-year cooling-off period before someone can take up an independent directorship, although the Ministry of Corporate Affairs has told a parliamentary committee that this could be trimmed to two years. It would also bar candidates who have had links with the company’s auditors during the current financial year or the previous three years. In addition, independent directors would have to re-affirm their status at the first board meeting each year, or whenever circumstances change, and the Bill would cap overall board positions at 20 firms.
The draft law also introduces a “fit and proper” test for directors, but that provision has drawn concern from stakeholders who fear it could be used too broadly. The joint parliamentary committee said leaving the standard to subordinate legislation could amount to excessive delegation. The issue is especially sensitive because independent directors have already been required to pass a self-assessment qualifying exam since 2019, with exemptions for experienced chartered accountants, company secretaries, cost accountants and advocates. The Indian Institute of Corporate Affairs later introduced a dedicated course aimed at helping directors read financial statements more effectively, and it said 42,979 independent directors were registered as of 16 May 2026.
Opinion is divided on whether the Bill will make board roles more appealing or simply deepen directors’ reluctance to serve. Ashok Haldia, former secretary of the Institute of Chartered Accountants of India, said the draft leans on “objective, verifiable standards” and tougher exit disclosures. Sanjiv Sachar, an independent director on several companies, argued that stronger governance is not a barrier but an advantage when the right people are appointed. Others are less convinced. An unnamed senior industry executive said regulators appear to be shifting too much responsibility on to directors, while Haldia noted that statutory independence is limited because promoters and majority shareholders still control appointments. PwC India’s Anshul Jain said the decriminalisation push could reduce the fear of criminal liability that has made Indian boards defensive, but added that companies must treat the reform as a serious overhaul of oversight rather than a compliance exercise.
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