How to become an Independent Director

How to become an Independent Director

Applicable section, Rule & Schedule to Independent Directors

(a) Section 149 of the Companies Act, 2013,

(b) Rule 4 & Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014

(c) Schedule-IV.

Non-applicability of Provisions related to Independent Directors – Private company, OPC, Small Companies, Wholly Owned subsidiary, Dormant Companies evenif they meet the threshold criteria.

Appointment of Independent Director– By shareholders in general meeting by passing Ordinary resolution .

Re-appointment of Independent Director– By passing Special Resolution. The re-appointment of independent director shall be on the basis of report of performance evaluation.

Status of Independent Directors in a Company – Non-executive Director

Tenure of Independent Directors in a Company – Maximum term of 5 years and maximum 2 consecutive terms thereafter a Gap of 3 years is compulsory for reappointment.

Director's Report - in the Directors’ Report a Statement shall be included by the Companies which shall declare that the ID on the Board have cleared the online proficiency self­ assessment conducted by the IICA unless they are otherwise exempted from the same.

A statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year.

the expression “proficiency” means the proficiency of the independent director as ascertained from the online proficiency self­ assessment test conducted by the IICA.

Conclusion: Independent directors perform functions that are critical to good corporate governance. It is necessary that qualified independent directors are on the boards for the development of our Companies.  This process of examination and maintenance of databank will be a single-window platform where the companies looking for independent directors can meet those willing to serve on their boards. These are progressive steps that would enhance corporate governance standards across the Boards of the Companies in India.

Inclusion in the data bank & ONLINE Examination

The new norms applicable to below Category only:-

·        Those who are already serving as “ Independent Director” in the Board of a company

·        Those professional who are intending to be appointed as “ Independent Director”

·        The companies which are required to appoint “ Independent Directors”

Shall mandatorily apply ONLINE to the institute (IICA) for inclusion of his name in the data bank of ID to be maintained by IICA.

Steps to be followed after the inclusion of name in the Online Database:

Every individual shall pass an online proficiency self-assessment test conducted by the institute within a period of one year from the date of inclusion of his name in the data bank.

PASSING MARKS:  Individual shall have to score not less than sixty percent. in aggregate to pass the examination. The Number of attempt to clear such exam is not limited.

Non-Compliance: failing to pass such test his name shall stand removed from the databank of the institute.

The name may be included for a period of: ONE YEAR or FIVE YEARS or FOR HIS LIFE-TIME.

Renewal of the Information shared at Databank:

BY: Every individual whose name has been so included in the data bank

Process of Renewal: By Filing an application for renewal to IICA

Period of Renewal : The Individual may renew his information in the databank for a further period of one year or five years or for his life-time, within a period of thirty days from the date of expiry of the period upto which the name of the individual was applied for inclusion in the data bank.

If not renewed: The name of such individual shall stand removed from the data bank of the institute:

Exemption: No application for renewal shall be filed by an individual who has paid life-time fees for inclusion of his name in the data bank.

EXEMPTION FROM THE ONLINE ASSESSMENT TEST:

Individual who has served for a period of not less than ten years as on the date of inclusion of his name in the databank as director or key managerial personnel of:

A. listed public company

B. unlisted public company having a paid-up share capital of rupees ten crore or more is not required to pass the online proficiency self-assessment test. However registration on the IICA shall remain to be compulsory for such persons also.

Condition: for the purpose of calculation of the period of ten years, any period during which an individual was acting as a director or as a key managerial personnel in two or more companies at the same time shall be counted only once.

Maintenance of Databank of Individuals who are willing and eligible to be appointed as independent directors in an online manner by the IICA on its website.

Databank to have following details:

A. DIN (Is applicable) – A person can get his name included in the databank even without having a DIN.

B. Income Tax PAN

C. the name and surname in full

D. the father’s name

E. the date of Birth

F. gender

G. the nationality

H. the occupation

I. full Address with PIN Code (present and permanent)

J. phone number

K. e-mail id

L. the educational and professional qualifications

M. experience or expertise, if any

N. any pending criminal proceedings as specified in clause (d) of sub-section (1) of section 164

O. the list of limited liability partnerships in which he is or was a designated partner along with –

i. the name of the limited liability partnership;

ii. the nature of industry; and

iii. the duration- with dates;

P. the list of companies in which he is or was director along with ­

a. the name of the company;

b. the nature of industry;

c. the nature of directorship – Executive or Non-executive or Managing Director or Independent Director or Nominee Director; and

d. duration – with date

Privacy clause: Individual may restrict his personal information to the institute, to be disclosed in the data bank.

Changes to the Information shared on Databank by the Individual: Any Changes in the information shared by the individual to the data bank shall be done by him in 30 DAYS.

Fees for the individuals: The Individuals for inclusion of their names in the data bank of independent directors are required to pay a certain amount of fees to the IICA and that fees shall again be paid at the time of renewal after the completion of the period for which the name was included except in cases of life time validity.

Fees for the Companies: The Companies willing to appoint Independent Director can access such information ONLY AFTER PAYING A REQUIRED FEES TO THE IICA.

Duties of the institute (IICA):

• The institute shall conduct an online proficiency self-assessment test covering companies law, securities law, basic accountancy, and such other areas relevant to the functioning of an individual acting as an independent director
• prepare a basic study material, online lessons, including audio­ visuals for easy reference of individuals taking the online proficiency self-assessment test
• provide an option for individuals to take advanced tests in the areas specified in clause (a) and prepare the necessary advanced study material in this respect

Note:

1. No separate fees shall be charged by the institute in respect of its above 3 duties.

2. The Details of the Name included, applications rejected and names removed shall be shared by IICA with the MCA.

3. The Course shall be structured by panel of not more than ten members nominated by the Central Government.

Compiled by :

CA IP Mukesh Mittal

B.Com., FCA

Insolvency Professional

Independent Director

Certified Concurrent Auditor

9215536951, 9813340495

ca.mukeshmittal@gmail.com

https://camukeshmittal.blogspot.com

DISCLAIMER: The Author have taken utmost care while drafting the article but it may occur that certain error creeps in. This article is for academic purpose and should not be treated as a professional advice. The readers are advised to refer the Bare Acts and Rules before making any judgment.