Corporate governance under India’s capital markets framework rests heavily on the shoulders of the board—specifically, on how clearly individual directors understand what the law expects of them. The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR“) serves as the definitive operating manual for that expectation.
Director responsibilities under SEBI LODR may fall into two distinct buckets: those falling specifically on Independent Directors (IDs) and those that govern Executive Directors (EDs) / Whole-time Directors (WTD). We have flagged the specific Regulation numbers so your compliance and legal teams can map them directly to the source.
Board Composition: The Starting Point (Reg. 17, 17A)
Before delving into operational duties, SEBI LODR strictly mandates who sits on the board.
- Reg. 17(1)(b): If the chairperson is non-executive, at least one-third of the board must comprise independent directors.
- Promoter/Regular Chair Details: If there is no regular non-executive chairperson—or if the chairperson is a promoter or related to one—at least half of the board must be independent.
- Reg. 17A Caps: Limits the number of directorships an individual can concurrently hold to ensure leaders have the actual bandwidth to discharge their duties, rather than merely lending their names.
Sidebar:
Reg. 17A is not the only directorship cap a director must track — and the two regimes count different things, so compliance with one does not imply compliance with the other.
Sec 165 of The Companies Act, 2013 — a parallel track to be followed.
- Overall cap: 20 companies (including alternate directorships)
- Sub-cap: not more than 10 public companies — this includes private companies that are holding/subsidiary companies of a public company
- Dormant companies and Section 8 companies are excluded from the count
- No separate listed-entity or independent-director sub-limit exists under the Act itself
- A company may impose a stricter internal limit on its own directors by special resolution under Section 165(2)
- Breach attracts a penalty of ₹2,000/day, capped at ₹2,00,000
Why both matter at once A listed-company board seat is counted simultaneously under both regimes. There is no substitution logic; the more restrictive threshold binds first, which in practice is almost always LODR.
Concurrent compliance checklist for directors and their company secretaries
- Maintain one directorship register per individual, tagged by company type (private / public-unlisted / listed) and role (executive / non-executive / independent / alternate).
- Before accepting any new appointment, run it against both counters — total/public-company limits under Section 165, and listed-entity/independent-director limits under Reg. 17A.
- Check the appointing company’s own AOA or board policy for a tighter internal cap.
- File both sets of disclosures on time — Companies Act disclosures (Form MBP-1, DIR-12) are separate from the LODR Reg. 26(2) obligation to notify each listed entity of committee positions held elsewhere.
- Re-check after every new listed-entity appointment, not just at onboarding — a director comfortably within Section 165 limits can still breach Reg. 17A with one additional listed board seat.
Independent Director (ID) Responsibilities & Risks
Independence is a continuing obligation, not a static onboarding badge.
- The Independence Test (Reg. 16(1)(b)): Outlines rigorous tests, including zero pecuniary relationships beyond director’s remuneration, no material relationships held by relatives, and no KMP/employee history with the entity in the preceding three years.
- Veracity Assessments (Reg. 25(8) & 25(9)): IDs must file a declaration of independence at the first board meeting of each financial year (and upon any circumstance change). Crucially, the board carries a statutory verification duty to assess the veracity of this declaration before taking it on record.
- The Mandated Private ID Meeting (Reg. 25(3) & (4)): Mandates at least one annual meeting of independent directors alone, completely free of management or non-independent directors. During this session, IDs must review the performance of the board, non-independent directors, and the chairperson, while evaluating the quality and timeliness of management’s information flow. Skipping this is a stark, highly visible governance lapse.
- Committee-Level Oversight: IDs form the backbone of the Audit (Reg. 18), Nomination & Remuneration (Reg. 19), Stakeholders Relationship (Reg. 20), and Risk Management (Reg. 21) Committees. This is where real oversight occurs—scrutinizing related-party transactions, executive pay, whistle-blower mechanisms (Reg. 22), and enterprise risk.
- Performance Evaluations (Reg. 17(10)): The entire board (minus the director being evaluated) must formally assess each ID on individual performance and continued fulfillment of independence criteria.
- Familiarisation Programmes (Reg. 25(7)): Listed entities must formally familiarise IDs with the business, industry, and their roles. This safeguard implicitly establishes the legal standard against which an ID’s diligence will later be judged.
⚠️ The Reality of Liability Exposure (Reg. 25(5))
Reg. 25(5) limits an independent director’s liability to acts of omission or commission that occurred with their knowledge (attributable through board processes), consent, connivance, or where they failed to act diligently.
The Takeaway: The defense of “I wasn’t involved in day-to-day operations” only holds up if the ID was actively diligent—attending meetings, interrogating board papers, asking hard questions, and utilizing the private ID meeting mechanism. Passive, disengaged IDs lose the very statutory protection the regulation was designed to provide.
To buffer real-world risks, Reg. 25(10) requires the top 1,000 listed entities by market capitalization to maintain Directors & Officers (D&O) insurance for their IDs. Furthermore, Reg. 25(11) enforces a post-resignation cooling-off period, barring a resigned ID from joining the same group as an executive/whole-time director for one year to prevent retrospective dilution of independence.
Executive Director (ED) Responsibilities
While general board stewardship duties apply to all directors, operational and financial certification duties land heaviest on executive leaders.
- Operational Discipline (Reg. 17(3) & 17(4)): Mandates quarterly board meetings (with gaps not exceeding 120 days) and requires the board to formally satisfy itself regarding succession planning.
- Risk Management Frameworks (Reg. 17(9)): Holds the executive leadership practically responsible for framing, implementing, and monitoring the company’s risk management plan.
- Personal Certification Accountability (Reg. 17(8)): Read with Schedule II Part B, the CEO and CFO must personally certify the accuracy of financial statements and the efficacy of internal controls to the board. This direct line of personal accountability does not extend to non-executive or independent directors.
- Vacancy Discipline (Reg. 26A): Any vacancy in the office of the CEO, MD, WTD, or CFO must be filled within three months (or six months if regulatory approvals are pending)—highlighting an uncompromising mandate for executive continuity.
- Conflict and Related-Party Disclosures (Reg. 26(5)): Senior management and executive directors must proactively disclose material financial or commercial transactions where they hold a personal interest that could conflict with the entity’s interests.
Remuneration Governance: SEBI LODR vs. Companies Act
Executive remuneration faces distinct hurdles depending on promoter status and regulatory frameworks.
SEBI LODR (Reg. 17(6)(e))
- Target: Promoter-Executive Directors
- Trigger: Remuneration exceeds ₹5 Crore or 2.5% of net profits (5% aggregate for multiple such directors)
- Requirement: Shareholder approval via Special Resolution
Companies Act, 2013 (Sec 198 / Schedule V)
- Target: Total Managerial Remuneration (All directors, MD, WTD, and managers combined)
- Trigger: Total pay exceeds 11% of public company net profits
- Requirement: Special resolution subject to Schedule V conditions if exceeding limits
Obligations Common to All Directors
Regardless of independence status, every director must adhere to the following baseline provisions:
- Committee Limits (Reg. 26(1)-(2)): No director can sit on more than ten committees or chair more than five committees across listed entities.
- Code of Conduct (Reg. 26(3)): Requires a formal, annual affirmation of the company’s code of conduct.
- Shareholder Re-approval (Reg. 17(1D)): Mandates shareholder re-approval at least once every five years for continuing directors.
- Disclosure Principles (Reg. 4): Dictates an over-arching duty for every board member to ensure that all information reaching shareholders is accurate, timely, and non-misleading.
The Practical Takeaway for IPO-Bound & Newly Listed Companies
For pre-IPO companies and newly listed entities, compliance under Reg. 17 and committee structures under Regulations 18–21 cannot be treated as a last-minute scramble. They must be fully functional well before filing the Draft Red Herring Prospectus (DRHP).
In our IPO readiness engagements at Omnifin, board construction is a primary focus area. We work with pre-IPO companies to identify the right independent directors for their specific sector and stage, sequence appointments against the listing timeline, and ensure the committee composition stands up to rigorous regulatory scrutiny.
The most common gap we observe is that directors are frequently appointed against a legal checklist but never actually trained against it—which is exactly where liability exposure under Reg. 25(5) begins to creep in. Our structured board training and upskilling workshops focus less on merely reciting regulations and more on building the pragmatic judgment and process discipline required to keep your liability shield firmly intact.
Need assistance with Board Construction, Director Upskilling, or SEBI LODR Compliance? We are happy to assist.
Author: Dr. Vikash Goel
Connect with us at Omnifin.in