NEW DELHI: Independent directors should exercise special care in issues of conflict of interests in related party transactions as well as those related to managerial remuneration as they are the watchdogs of companies, Union Minister P P Chaudhary said today.

Amid persisting concerns over corporate governance practices, the minister stressed the need to further strengthen the institution of independent directors, adding that they are required to play a critical role in establishing internal financial controls.

“In the best interest of the company, the issue of conflict of interest in related party transactions needs to be looked at judiciously. Independent directors have to exercise special care while looking into such related party transactions,” the Minister of State for Corporate Affairs said.

Further, he noted that caution must be exercised by independent directors while evaluating issues related to remuneration of the management.

He was speaking at the inaugural function of the two-day orientation programme for independent directors organised by the Indian Institute of Corporate Affairs (IICA) at its campus in Manesar, Gurugram.

As it continues efforts to curb illicit fund flows, the corporate affairs ministry has already deregistered more than 2.26 lakh companies for being inactive for long apart from disqualifying over 3 lakh directors.

While noting that many of these companies were into illegal activities, Chaudhary said, “if the independent directors with respect to public companies… if they are vigilant then such type of happenings will not be there”.

In recent past, there have been instances that raised concerns about overall corporate governance practices, including about the role of independent directors.

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