NBFIs can appoint multiple foreign directors from an entity: BB

The Central Bank has given the opportunity to appoint multiple foreign directors from an entity to boost foreign investment in the Non-Bank Financial Institution (NBFIs) sector.

The central bank issued a circular addressing this matter on Wednesday (20 December).

According to the circular, the number of directors will be determined based on the amount of shares a foreign company holds in a financial institution.

The central bank, through the Finance Company Act 2023, stipulates the criteria for determining the number of foreign directors allowed in a financial institution. 

However, the regulations do not allow the appointment of more than one director from a single domestic company.

A senior official of the central bank said, "A non-bank financial institution can have one director irrespective of the number of shareholdings by the domestic institution. However, an exemption is granted concerning foreign directors, as the provision for multiple directors against shares will boost foreign investment."

As per the Finance Company Act 2023, non-bank financial institutions are permitted a maximum of 15 directors, including two independent directors.

The law dictates that the number of directors in a financial institution will be determined by considering both the number of directors and their shareholdings. 

However, individual directors themselves will not possess any shares; instead, they will provide supportive opinions for the betterment of the institution.

Under the new Finance Company Act, if an individual holds more than 5% of the shares, they can appoint up to two family members as directors.