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SEBI had constituted a Committee on Corporate Governance under the Chairmanship of Shri N. R. Narayana Murthy.

Based on the recommendations of the Committee and public comments received, certain amendments ere made in Clause !" of the #istin$ %$reement, vide circular dated %u$ust &', &((). SEBI convened another meetin$ of the Narayana Murthy committee on Corporate Governance be convened on November *+, &(() for deliberatin$ the su$$estions and representations received after the issuance of the aforesaid circular. ,he committee has since submitted its report to SEBI. ,he report proposes certain amendments in the revised clause !" hich as issued vide circular dated &'th %u$ust &((). ,he report is reproduced belo for see-in$ public comments. Issues under clause 49 and proposed amendments Issue 1 Definition of independent director Existing language Explanation (i)(e) to clause I.A E.planation /i01 2or the purpose of this clause, the e.pression 3independent director4 shall mean non5e.ecutive director of the company ho1 a. apart from receivin$ director4s remuneration, does not have any material pecuniary relationships or transactions ith the company, its promoters, its senior mana$ement or its holdin$ company, its subsidiaries and associated companies6 b. is not related to promoters or mana$ement at the board level or at one level belo the board6 c. has not been an e.ecutive of the company in the immediately precedin$ three financial years6 d. is not a partner or an e.ecutive of the statutory audit firm or the internal audit firm that is associated ith the company, and has not been a partner or an e.ecutive of any such firm for the last three years. ,his ill also apply to le$al firm/s0 and consultin$ firm/s0 that have a material association ith the entity. e. is not a supplier, service provider or customer of the company. ,his should include lessor5lessee type relationships also6 and f. is not a substantial shareholder of the company, i.e. o nin$ t o percent or more of the bloc- of votin$ shares. Discussion E.planation /i0/e0 restricts any supplier, service provider or customer of the company from bein$ an independent director on the board of the company. ,his clause should ideally only bar persons ho are material suppliers, service providers or customers and not e.tend it to any and all suppliers, service providers or customers. ,his vie is further supported by the fact that E.planation /i0/a0 does not dis7ualify a non5 e.ecutive director ho has an immaterial pecuniary relationship or transaction ith the company, its promoters, its senior mana$ement or its holdin$ company, its subsidiaries and associated companies from servin$ as an independent director. It is therefore proposed that the ord 8material8 be inserted before supplier, in E.planation /i0