Can an Independent Director of a listed company also consult for its foreign subsidiary without compromising her independence under Indian regulations?

That’s the question InfoBeans Technologies Limited recently posed to SEBI in a formal request for interpretive guidance — and the regulator’s response offers some thoughtful (albeit cautious) insights.

The Background

InfoBeans, a listed technology firm, had appointed Ms. Opal Perry as an Independent Director, paying her the standard sitting fees and commission under the Companies Act. Later, the company proposed engaging her as a consultant for its U.S.-based subsidiary, InfoBeans INC., where she would provide strategic guidance — not assume any executive role or day-to-day responsibilities.

Crucially, they noted that the compensation for this consulting role would not exceed 10% of Ms. Perry’s total annual income. Still, they wanted clarity: would this arrangement violate the independence criteria defined under Regulation 16(1)(b)(iv) of SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations?

SEBI’s Response: A Principles-First Approach

SEBI’s letter, dated May 14, 2025, did not offer a definitive yes or no. Instead, the regulator underscored that:

• The term “material pecuniary relationship” remains intentionally undefined in numerical terms within the LODR Regulations.
• It is the responsibility of the company’s Board of Directors and Nomination & Remuneration Committee (NRC) to ensure the director truly qualifies as "independent."
• The director must make an annual declaration of independence, and the Board must verify and record the same after “due assessment of veracity.”

Additionally, SEBI reminded InfoBeans of Section 149(6) of the Companies Act, 2013, which limits any pecuniary relationship (beyond remuneration) to 10% of the director's total income or another prescribed threshold — reinforcing the importance of cross-regulatory compliance.

The Bigger Picture: Independence Beyond Numbers

While SEBI’s response was not prescriptive, it subtly reinforces an important principle: Independence is not just about meeting a numerical threshold — it’s about maintaining objectivity, integrity, and a clear line of separation from executive or commercial influence.

SEBI’s measured stance reflects its broader regulatory philosophy: avoid micromanagement, allow context-specific judgment, and uphold the spirit of governance over rigid rule-making.

However, this also leaves companies in a delicate position. Without clear-cut benchmarks, legal and compliance teams must weigh risk, substance, and optics — and ensure every decision involving an Independent Director can stand the test of scrutiny.

Our Take

InfoBeans should be lauded for proactively seeking clarity — a hallmark of responsible governance. But the takeaway for all listed companies is this:

When it comes to Independent Directors, the burden of proving independence rests firmly with the company, not the regulator.

As board roles continue to evolve — especially with global expansion and cross-border operations — companies must be vigilant. SEBI may not always draw the line for you, but it expects you to know exactly where it lies.