SEBI clarifies cousins of promoters are not barred from independent director roles
Synopsis
SEBI has drawn a clear line: cousins of promoters are not 'relatives' under the Companies Act or LODR rules, meaning they aren't automatically disqualified from independent director roles. The ruling, triggered by a query from Maithan Alloys, narrows a long-standing grey area in boardroom appointment law — but SEBI's caveat that it isn't binding keeps the door open for case-by-case scrutiny.
Key Takeaways
SEBI clarified that cousins of promoters or directors are not automatically classified as related persons under LODR Regulations .
The ruling was issued in response to an informal guidance request from Maithan Alloys .
The definition of 'relative' under the Companies Act and SEBI's LODR covers only spouse, parents, children, and siblings — not cousins.
All other independence conditions — including shareholding, pecuniary relationships, and financial interests — must still be satisfied.
SEBI cautioned that the guidance is not a binding decision and different facts could yield a different outcome.
The Securities and Exchange Board of India (SEBI) has clarified that cousins of promoters or directors do not automatically qualify as related persons under listing regulations, opening the door for such individuals to be considered for independent director appointments — provided they satisfy all other statutory requirements. The clarification, issued in response to an informal guidance request, carries significant implications for corporate governance practices across listed companies.
What Prompted the Clarification
Maithan Alloys had approached SEBI seeking a regulatory interpretation on whether a cousin of a promoter-group member would be disqualified from serving as an independent director under existing rules. The query arose after the company proposed appointing an individual with such a familial connection and needed clarity on whether the relationship would breach independence norms under SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations.
What SEBI Said
The market regulator examined the legal definition of 'relative' under both the Companies Act and SEBI's LODR framework. It noted that the definition is restricted to immediate family members — specifically spouse, parents, children, and siblings — and does not extend to cousins. On that basis, SEBI concluded that cousins are not automatically treated as related persons for the purpose of determining independent director eligibility.
'Based on the facts presented, the proposed candidate may be eligible to be appointed as an independent director of the company,' SEBI said in its guidance.
Other Conditions Still Apply
SEBI was explicit that the clarification does not provide a blanket exemption. Companies must continue to satisfy all remaining independence requirements, including conditions relating to shareholding, financial interests, pecuniary relationships, and other statutory tests prescribed under applicable law. The regulator stressed that full compliance with the broader independence framework remains non-negotiable.
Scope and Limitations of the Guidance
Importantly, SEBI cautioned that the guidance is based solely on the specific facts submitted by Maithan Alloys and does not constitute a binding regulatory decision. The regulator noted that different facts or circumstances could lead to a different interpretation, meaning companies in analogous situations cannot treat this clarification as a universal precedent without independent legal assessment.
This guidance adds a layer of regulatory certainty to a grey area in corporate law, where extended family relationships have historically created ambiguity in boardroom appointments. As listed companies continue to navigate increasingly stringent governance standards, SEBI's position here is likely to be referenced widely in future appointment decisions.
Point of View
But its 'non-binding' caveat is a double-edged sword — it resolves Maithan Alloys' specific query while leaving every other company in a similar position to seek its own legal opinion. The deeper issue is that India's related-party and independence frameworks were designed for nuclear-family structures and have struggled to keep pace with the complex, often opaque ownership webs of Indian promoter groups. A cousin today, a business associate tomorrow — without a codified, exhaustive definition of 'related person', governance gaps will persist. SEBI may eventually need to move beyond case-by-case informal guidance and issue a comprehensive amendment to the LODR definition itself.
NationPress
12 Aug 2026
Frequently Asked Questions
What did SEBI clarify about cousins of promoters and independent directors?
SEBI clarified that cousins of promoters or directors are not automatically treated as related persons under its LODR Regulations or the Companies Act, meaning they are not disqualified from being considered for independent director roles on that basis alone. However, all other statutory independence conditions must still be met.
Why did SEBI issue this clarification?
The clarification came in response to an informal guidance request from Maithan Alloys, which sought regulatory interpretation on whether a cousin of a promoter-group member could be appointed as an independent director without violating SEBI's independence requirements.
Who qualifies as a 'relative' under SEBI's LODR and the Companies Act?
Under both the Companies Act and SEBI's LODR Regulations, the definition of 'relative' is limited to immediate family members — spouse, parents, children, and siblings. Cousins fall outside this definition, according to SEBI's clarification.
Is SEBI's guidance binding on all listed companies?
No. SEBI explicitly stated that the guidance is based solely on the facts submitted by Maithan Alloys and does not constitute a binding regulatory decision. Different facts or circumstances could lead to a different interpretation, so companies in similar situations should seek independent legal advice.
What other conditions must an independent director still satisfy?
Even where a cousin relationship does not trigger automatic disqualification, the candidate must comply with all remaining independence requirements under applicable law, including conditions related to shareholding, financial interests, pecuniary relationships, and other statutory tests prescribed under SEBI's LODR framework.
