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The Insolvency and Bankruptcy Board of India (IBBI) is making efforts to improve the governance structure of Registered Valuers’ Organisations ( RVO), the frontline organisations for the development and regulation of valuation professions.
It has now clarified that the promoter organisation of an RVO cannot appoint its own members — shareholder member in the case of a company, a trustee in case the promoter is a trust, and a professional member in case the promoter is a professional body — as independent directors in the RVO. The government had tasked the IBBI with the regulatory oversight of valuation professions.
Under the prevailing rules, the chairperson of an RVO is required to be an independent director, and a shareholder of an RVO is not allowed to be appointed as an independent director. The board of an RVO should comprise 50 per cent nominee directors and 50 per cent independent directors.
However, this was leading to situations where the promoters/shareholders of the RVO were appointing their own members as independent directors (and consequently chairperson) to retain control of the board. The IBBI has brought the latest clarification to ensure that the letter and spirit of the rules are followed, sources said.
Conflict of interest
To avoid conflict of interest, the IBBI has clarified that even a member of a promoter organisation of the RVO cannot be appointed as an independent director (and consequently cannot be a appointed as chairperson), said Aditya Nayyar, Partner, Ortis Law Offices, a law firm.
The move is expected to promote independence on the board of RVOs (which have the primary responsibility to admit, develop and monitor its members), he said.
It appears to be directed at ensuring greater transparency and better governance and management of the RVO, which, in the IBBI’s eyes, has been definitely lacking in the past, Nayyar said.
Manmeet Singh, Partner, L&L Partners, said that the latest clarification of the IBBI seems to be aimed at preventing potential conflict of interest situations.
IBBI has given RVOs who do not conform to this norm three months to reconstitute their boards.
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