The board of market regulator Sebi, on Thursday, approved proposals to tighten the corporate governance norms for all listed entities. It has restricted independent directors to serve as directors on a maximum of seven listed companies and limited their total tenure to two terms of five years each.

The board also approved the long-term policy for mutual funds where it has recommended the government to provide additional tax incentive on investment of Rs 50,000 in mutual fund-linked retirement plan.

The Sebi board took several decisions in a bid to align the listing agreement norms with the Companies Act 2013 as there were several gaps. The announcements will come into effect from October 1, 2014. While it prohibited independent directors from taking stock options in the companies, the Securities and Exchange Board of India also directed them to hold a separate meeting among themselves.

“One can serve in seven companies as independent directors, however, if someone is an ED in a listed company then he can be independent director in only three companies,” said Sebi chairman UK Sinha, while speaking to reporters.

Sinha also told that while two terms of five years is the maximum that one can have, if someone has been a director on the board of any company for five years or more, he can be appointed for only one more term of five years.

The capital markets regulator also approved the long-term policy for mutual funds in India where the minimum capital requirement for asset management companies (AMC) has been raised from Rs 10 crore to Rs 50 crore.

“There are 19 AMCs who have capital of less than Rs 50 crore. They have given a three-year time frame to do that,” said Sinha.

Sebi has also recommended the implementation of several measures to the government, including additional tax sops on investment in long term MF plans. It has proposed to the government to either provide an additional tax incentive on investment of Rs 50,000 in mutual fund-linked retirement plan under section 80C of Income Tax Act or enhance the investment limit under Section 80C from Rs 1 lakh to Rs 2 lakh to make mutual funds as priority for investors.

“Tax related recommendations are on the premise that any long-term investment instrument should get a similar treatment, whether one is investing through pension, insurance or long-term MF policy,” said Sinha.

Sinha said that mutual funds miss out as they do not have a clear space among various investment options.

Sebi also recommended the government to allow EPFOs to invest 15 per cent of their corpus in equities and mutual funds.

In a bid to improve transparency in the working of mutual funds, the regulator has increased the disclosure requirement by mutual funds. While fund houses will be required to disclose on AUM from different categories, they will also have to disclose break up of AUM from top 15 cities and below top 15 cities.

Fund houses will also be required to disclose the investment made by group companies into the mutual fund schemes run by the fund house. Last week, Reliance Mutual Fund came out with such disclosure becoming the first one to do that.

Among other decisions, Sebi also mandated that all companies must have at least one woman director on the board and has also included a provision for a board policy on succession planning in a company. (Indian Express)