ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP), Tuesday, declared that no company’s director shall be considered independent if he/she has served on the board for more than three consecutive terms from the date of his/her first appointment.
The SECP has clarified the issue of independent directors of the companies through the issuance of circular number 5 of 2023 on Tuesday.
According to the SECP, in the exercise of powers conferred by section 510 of the Companies Act, 2017 (“the Act”), the Commission is hereby clarified the word “term” used in section 166(2)(g) of the Companies Act.
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It is clarified that the Commission vide Guide Book on Corporate Governance dated June 05, 2020, and frequently asked questions (FAQs) has already explained that no director shall be considered as independent if he/she has served on the board for more than three consecutive terms from the date of his/her first appointment, however, such person may be deemed independent after a lapse of one term.
In order to remove any further ambiguity regarding the duration of the word “term”, it is clarified that in case of a director filling a casual vacancy for the remainder of term, shall be considered as appointed for a complete term.
All companies which are not in compliance with section I66(2)(g), shall comply with the aforementioned requirements and shall report such compliance to the Commission within sixty days of the date of this circular, the SECP added.
Copyright Business Recorder, 2024
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