The Securities and Exchange Board of India (SEBI) has clarified that cousins of promoters or directors will not automatically be treated as related persons under listing regulations, potentially allowing such individuals to be considered for independent director positions, subject to meeting other statutory conditions. 

The clarification came in response to informal guidance sought by Maithan Alloys, which had sought regulatory interpretation on whether a promoter-group member’s cousin could qualify for appointment as an independent director under existing rules.

The issue arose after the company proposed appointing an individual related to a promoter-group member and sought clarity on whether such a relationship would violate independence requirements under SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations.

According to the market watchdog, the interpretation depends on the legal definition of relative under applicable laws.

It noted that the definition of relative under the Companies Act and SEBI’s LODR regulations is restricted to immediate family members such as spouse, parents, children and siblings and does not include cousins.

After examining the facts presented by the company, SEBI said cousins are not automatically regarded as related persons for 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.

However, the regulator clarified that companies must continue complying with all other independence requirements, including conditions relating to shareholding, financial interests, pecuniary relationships and other statutory tests.

In addition, the market regulator said the guidance is based solely on the facts submitted by the applicant and should not be treated as a binding decision of the regulator, adding that different facts or circumstances could lead to a different interpretation.