Securities and Exchange Board of India (SEBI) has asked the government to amend the Companies Act to ensure that a director declared by the regulator as a disqualified person should immediately vacate the position, a plea triggered by defaulter businessman Vijay Mallya’s reluctance to do so.
Under the Act, the office of a director becomes vacant in case of he or she being disqualified by an order of a court or a tribunal, among other reasons, but there is no explicit mention of an order by the SEBI.
In a proposal, SEBI has now proposed that the Companies Act should also clearly mention that a person should vacate the office of a director if it orders his or her disqualification.
Officials said the Finance Ministry is in agreement with the SEBI on the proposed amendment and has asked the regulator to get it approved by its board and then forward it to the Corporate Affairs Ministry.
SEBI, in its proposal, has referred to its interim order dated January 25, 2017, through which the regulator had barred Mr. Mallya and six others from holding directorship in any listed company till further directions. The SEBI order followed a probe into alleged illegal fund diversions at United Spirits, an erstwhile firm of business group headed by Mr. Mallya, which he later sold to global liquor giant Diageo.
However, Mr. Mallya did not comply with the order as he did not step down as a director of United Breweries Ltd. for months.