The discussion paper has proposed that once minority investors reject a proposal for appointment of an MD or WTD, the Board and the Nomination and Remuneration Committee (NRC) can't reappoint the same person without giving detailed justification and recording specific reasons and submitting the same to stock exchanges within 24 hours. Further, any such decision must get shareholders' approval in the immediate next general meeting or within three months from the date of appointment of such persons.

In the case of shareholders rejecting the candidature again of the person/s rejected by them earlier and yet reappointed by the board and its NRC, such a person cannot be considered for appointment as director, or for continuing as a director of that particular listed entity, for a period of two years from the date of rejection by the shareholders.

This proposal of Sebi seeks to remove the infirmities in the Companies Act, 2013 that don't directly prohibit the appointment of such persons as MD or WTD as those rejected by shareholders in general meetings. Because of these infirmities, majority shareholders, who controlled boards, got away with totally unacceptable decisions smacking of favoritism and nepotism.