Under SEBI corporate governance regulations (LODR), what are the mandatory independence requirements for the Board of Directors (with an Executive Chairman) and the Audit Committee of a listed company?

[ A ]The Board requires zero independent directors, and the Audit Committee must consist exclusively of the CEO's family members.

[ B ]The Board must consist of 100% government civil servants, and the Audit Committee is optional for listed companies.

[ C ]At least 10% of the Board must be independent, and the Audit Committee must have only 1 non-executive director.

[ D ]At least 50% of the Board of Directors must be independent directors (if Chairman is executive), and at least two-thirds (2/3rd) of the members of the Audit Committee must be independent directors.[ CORRECT ]

Takeaway

Option D is correct: At least 50% of the Board of Directors must be independent directors (if Chairman is executive), and at least two-thirds (2/3rd) of the members of the Audit Committee must be independent directors.

Derivation

Under SEBI Listing Obligations and Disclosure Requirements (LODR) regulations: (1) Where the Chairman of the Board is an executive director (or related to promoters), at least 50% (half) of the Board of Directors must comprise independent directors (1/3rd if non-executive non-promoter). (2) For the Audit Committee, at least two-thirds (2/3rd) of the members must be independent directors, and the committee chairman must be independent. Furthermore, for top 1,000 listed entities, the roles of Chairperson and MD/CEO must be separated. This tests statutory corporate governance ratios. The common error is confusing board independence (50%) with audit committee independence (2/3rd).

Why the others fail

A — The Board requires zero independent directors, and the Audit Committee must consist exclusively of the CEO's family members.

Staffing audit committees with executive family members violates basic corporate governance mandates and SEBI LODR rules.

B — The Board must consist of 100% government civil servants, and the Audit Committee is optional for listed companies.

Listed companies operate under commercial company law and must maintain an active, majority-independent audit committee.

C — At least 10% of the Board must be independent, and the Audit Committee must have only 1 non-executive director.

A 10% board independence level violates SEBI's minimum 50% independent director threshold for executive-led corporate boards.