Regulation 25: Independent Directors of a Listed Entity

Regulation 25 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Independent directors are the one category of director whose appointment, reappointment and removal all require a special resolution — a design choice that makes them harder to remove than the executives they are meant to hold to account.

Regulation 25 sets out the rest of the architecture around them, and several of its requirements are ones companies discover only when a director resigns.

Appointment, reappointment or removal of an independent director requires a special resolution. An alternate director cannot be appointed for an independent director. A vacancy must be filled within three months. Independent directors meet at least once a year on their own, without management. Each gives a declaration of independence at the first board meeting and on any change. The top 1000 entities must take D&O insurance. A resignation letter with detailed reasons becomes public.

Appointment, tenure and removal

Special resolution both ways. Appointment or reappointment requires a special resolution of shareholders, and so does removal — with the notice giving the justification.

The removal rule is the significant one. An independent director who is asking uncomfortable questions cannot be quietly dropped by an ordinary majority; the promoter group has to carry a three-fourths vote and explain itself in the explanatory statement. That is the protection the role depends on.

Tenure follows the Companies Act: up to five consecutive years at a time, and a maximum of two consecutive terms, after which a cooling-off period of three years applies before reappointment, during which the person must not be associated with the company in any capacity.

Reappointment for a second term rests on a performance evaluation and a recommendation from the nomination and remuneration committee. A second-term resolution proposed without that trail behind it is exactly what proxy advisers flag. Nomination and Remuneration Committee →

No alternate director. A person cannot be appointed as an alternate director for an independent director. The independence attaches to the individual and cannot be delegated to a stand-in.

Vacancies get three months. A vacancy created by the resignation or removal of an independent director must be filled by the board within three months from the date of the vacancy — or by the immediately next board meeting, whichever is later. A board sitting below its required independence complement for two quarters is in continuing breach, and the composition table in the governance report shows it.

The meeting without management

Independent directors must hold at least one meeting in a financial year, without the presence of non-independent directors and members of management.

Its agenda is prescribed in substance:

• review the performance of non-independent directors and the board as a whole;
• review the performance of the chairperson, taking into account the views of executive and non-executive directors;
• assess the quality, quantity and timeliness of the flow of information between management and the board — specifically, whether it is sufficient for the board to perform its duties.

That third item is the one to take seriously. Board papers circulated the night before a meeting are the standard complaint of independent directors everywhere, and this is the forum in which the point is meant to be recorded.

Declarations, familiarisation and insurance

Declaration of independence. Each independent director gives a declaration at the first board meeting in which they participate as a director, and thereafter at the first board meeting of every financial year, and whenever there is a change in circumstances that may affect their independence. The board takes the declaration on record after assessing the veracity of it — assessing, not merely receiving.

Familiarisation programme. The entity must familiarise independent directors with the company — its business model, the industry, their roles, rights and responsibilities — and disclose the details on its website, including the cumulative hours spent. That disclosure is a comparably reliable indicator of whether the programme exists.

D&O insurance. The top 1000 listed entities by market capitalisation must take directors and officers insurance for all their independent directors, of such quantum and for such risks as the board determines.

The board determines the quantum. That is a decision to minute with reasoning, because a nominal policy taken to satisfy the letter of the requirement is visible for what it is.

Resignation, and what becomes public

This is the provision companies meet at the worst moment.

When an independent director resigns, the listed entity must disclose to the exchange the resignation letter along with the detailed reasons given by the director, together with a confirmation from the director that there is no other material reason other than those provided.

Three consequences:

The letter is published as written. A director who sets out disagreements with management in a resignation letter is publishing them.

A bare letter invites the question it avoids. "Personal reasons" with no more, from a director who resigned mid-controversy, tells the market something the company would rather it did not conclude.

The confirmation is the director's own. It is not the company's statement about the resignation, and the company cannot soften it.

Resignation of an independent director is also a deemed material event under Schedule III, so the disclosure timeline applies to it. Material events under Regulation 30 →

Key takeaways

• Special resolution to appoint, reappoint and remove.
• No alternate director for an independent director.
• Three months to fill a vacancy — a board below complement is in continuing breach.
• One meeting a year without management, with a prescribed agenda.
• Declarations are assessed by the board, not merely filed.
• D&O insurance for the top 1000, with the quantum a reasoned board decision.
• Resignation letters with detailed reasons are published.

Read next

• Regulation 17: Board of Directors of a Listed Entity
• Regulation 19: Nomination and Remuneration Committee
• Regulation 26: Directorship and Committee Limits
• Regulation 30: Disclosing Material Events and Information

Disclaimer: Positions stated as on 5 September 2026. Requirements keyed to market capitalisation rank are revised periodically — verify the current position on sebi.gov.in before relying on it.