SEBI has clarified that cousins of promoters or directors will not be treated as 'related' persons under listing rules, allowing such individuals to be considered for appointment as independent directors.
The guidance came in response to a request from Maithan Alloys, which sought clarity on whether a promoter-group member's cousin would fall foul of independence rules under Regulation 16 of the LODR framework.
SEBI said the answer depends on how "relative" is defined in law. Under the Companies Act and LODR regulations, the definition is limited to immediate family such as spouse, parents, children and siblings, and does not include cousins.
As a result, a cousin is not automatically treated as "related" to a promoter or director for the purpose of independent director eligibility.
Based on the facts presented, SEBI said the proposed candidate "may be eligible" to be appointed as an independent director, subject to meeting other conditions prescribed under law.
The clarification means companies can appoint individuals with extended family links to promoters as independent directors, provided those links do not fall within the legal definition of "relative".
However, companies must still ensure compliance with all other independence criteria, including limits on shareholding and absence of pecuniary relationships.
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