What independent directors ask before they sign off.

A board can be comfortable or careful. Comfortable boards approve what management brings. Careful boards can show, afterwards, what they asked and what they were told. This piece lists the questions we think separate the two, and links each to the duty in Indian law that sits behind it. It is a discussion aid, not a compliance checklist.

The legal frame

Schedule IV of the Companies Act, 2013 sets out the role of independent directors. Among other things, they are expected to "satisfy themselves on the integrity of financial information and that financial controls and the systems of risk management are robust and defensible", to "safeguard the interests of all stakeholders, particularly the minority shareholders", and to "pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions". They must also report concerns about unethical behaviour or suspected fraud and ensure the vigil mechanism is adequate and functional.

Section 149(12) limits how far liability reaches. An independent director is liable only for acts of omission or commission that occurred with the director's knowledge, attributable through board processes, and with the director's consent or connivance, or where the director had not acted diligently. Our reading is that the board process, meaning what was circulated, discussed and minuted, is the director's main evidence of diligence.

For listed companies, the SEBI Listing Regulations add structure. Where the chair is non-executive, at least one-third of the board must be independent; where the chair is executive or promoter-related, at least half. The audit committee needs at least three directors, two-thirds of them independent, an independent chair, and members who are financially literate. Regulation 23 requires related party transactions to be approved by the audit committee, and only its independent members vote.

Seven questions

1. How reliable are the numbers? What did the auditors flag, including in limited reviews? Have accounting policies or estimates changed, and who decided?
2. Who is the counterparty? For any related party transaction, who is on the other side, how is the relationship defined, and what is the pricing basis? What evidence supports arm's length terms?
3. What did the board not receive? Was the information sent early enough to read? Is anything material missing, such as a regulatory notice, a covenant issue or a pending claim?
4. Who benefits, and who bears the risk? Would minority shareholders, lenders or employees read this proposal the same way management does?
5. What are the controls? How would an error or misconduct be found, and has the vigil mechanism been tested?
6. What is the range of outcomes? What does the downside case look like, and who owns the assumptions?
7. What would the minutes show? If this decision were questioned later, would the record show the question, the answer and the follow-up?

Where boards go quiet

Some subjects draw fewer questions than they should. Related party approvals can become routine, especially where an omnibus approval covers repeat transactions. The audit committee may grant omnibus approval subject to conditions, including a one-year validity and quarterly review of what was executed. A director who has not seen the quarterly review has not, in substance, reviewed it.

Rules also move. The Listing Regulations were amended in December 2024, and reports describe further changes to related party materiality thresholds in November 2025. We have not tested those changes against each company's position. Confirm the current text before applying any threshold.

What to do with this

These are considerations for directors and the executives who support them, not advice for any individual.

• Ask for board papers early enough that reading time is realistic, and say so when it is not.
• Keep a short list of standing questions for related parties, auditor observations and subsequent events, and use it consistently.
• Where an answer is unclear, ask for the follow-up in writing and have it recorded.
• Make sure independent directors have a separate session without management at least occasionally, if the company's practice allows.
• Review the current Listing Regulations, and any recent SEBI circulars, with the company secretary before each cycle.

This article is general information, not legal, tax or investment advice.