DRAFT LETTER OF
APPOINTMENT FOR INDEPENDENT DIRECTOR
-----------------ABC---------------LIMITED
Mr./ Ms.
...............................
..............................
Sub.:
Re-appointment as an Independent Director
---------------------Limited (the Company")
The Code for
Independent Directors contained in The Companies Act, 2013 provides that we
should issue a letter of appointment to the Independent Directors.
I am pleased to
inform you that the shareholders at the Annual General Meeting held on ----------------have
approved your reappointment as an Independent Director for a period of five
years up to the conclusion of the ---- Annual General Meeting. This letter of appointment sets out the terms and conditions covering your appointment which are as follows:
APPOINTMENT:
1. Your
appointment as a Non-Executive Independent Director on the Board of Directors
of the Company is subject to the provisions of the Companies Act, 2013.
2. In compliance with provisions of section 149(13) of the Companies Act, 2013,
your directorship is not subject to retirement by rotation.
3. Notwithstanding other provisions of this letter,
the appointment may be terminated in accordance with the provisions of the
Articles of Association of the Company or on failure to meet the parameters of
independence as defined in section
149(6) or on the occurrence of any event as defined in section 167 of the
Companies Act, 2013.
4. Upon termination or upon your resignation
for any reason, duly intimated to the Company, you will not be entitled to any
compensation for loss of office.
TIME COMMITMENT:
5. As a Non-Executive Independent Director
you are expected to bring objectivity and independence of view to the Board's
discussions and to help provide the Board with effective leadership in relation
to the Company's strategy, performance, and risk management as well as ensuring
high standards of financial probity and corporate governance. The Board generally
meets four times in a year. The Audit Committee generally meets atleast four times
in a year. Besides, there are other Committee meetings like Nomination and
Remuneration Committee, Corporate Social Responsibility Committee, Stakeholder
Relationship Committee, Finance Committee etc. meetings of which are ordinarily
convened as per requirements. You will be expected to attend Board and Board Committees
to which you may be appointed and Shareholders meetings and to devote such time
to your duties, as appropriate for you to discharge your duties effectively.
Ordinarily, all meetings are held in -----except the Annual General Meeting.
6. By accepting this appointment, you
confirm that you are able to allocate sufficient time to meet the expectations
from your role to the satisfaction of the Board.
ROLE AND DUTIES:
7. Your role and duties will be those
normally required of a Non-Executive Independent Director under the Companies
Act, 2013. There are certain duties prescribed for all Directors, both Executive
and Non- Executive, which are fiduciary in nature and are as under:
II. You shall act in good faith in order to promote the
objects of the Company for the benefit of its members as a whole, and in the best interest of the
Company.
III. You shall discharge your duties with due and
reasonable care, skill and
diligence.
IV. You shall not involve yourself in a
situation in which you may have a direct or indirect interest that conflicts,
or possibly may conflict, with the interest of the Company.
V. You shall not achieve or attempt to
achieve any undue gain or
advantage either to yourself or to your relatives, partners or associates.
VI. You shall not assign your office as
Director and any assignments so made shall be void.
In addition to
the above requirements the Board of Directors also expect you to perform the following
functions:
II. You should evaluate the performance of
management in meeting agreed goals and objectives.
III. You should satisfy yourself on the
integrity of financial information and that financial controls and systems of
risk management are effective and defensible.
IV. You are responsible for determining
appropriate levels of remuneration of Executive Directors and have a prime role
in appointing, and where necessary, removing Executive Directors and in
succession planning.
V. You will take responsibility for the
processes for accurately reporting on performance and the financial position of
the Company.
VI. You should keep governance and compliance
with the applicable legislation and regulations under review and the conformity
of Company's practices to accepted norms.
STATUS OF APPOINTMENT:
8. You will not be an employee of the Company and
this letter shall not constitute a contract of employment. You will be paid
such remuneration by way of sitting fees for meetings of the Board and its Committees
as may be decided by the Board. Further, you will also be paid remuneration by
way of commission as may be approved by the Board and the Shareholders from time
to time.
9. The sitting fees presently paid to the
Non-Executive Independent Director is Rs.------/- per meeting of the Board or a
Committee thereof (except in case of Stakeholder Relationship Committee, for
which sitting fee is Rs. ------/- per meeting attended)
10. You will have no entitlement to any bonus during the appointment and no
entitlement to participate in any employee stock option scheme operated by the
Company or any Group Company.
REIMBURSEMENT OF EXPENSES
11. In addition to the remuneration described
above, the Company will, for the period of your appointment, reimburse you for
travel, hotel and other incidental expenses incurred by you in the performance of
your role and duties.
INDEPENDENT PROFESSIONAL ADVICE
12. There may be occasions when you consider
that you need professional advice in furtherance of your duties as a Director
and it will be appropriate for you to consult independent advisers at the
Company's expense. The Company will reimburse full cost of expenditure incurred in accordance
with the Company's policy.
INSURANCE
13. The Company proposes to take Directors' and Officers' liability
insurance and it is intended that the Company will assume and maintain such cover for the full term of your
appointment.
CONFLICT OF INTEREST
14. It is accepted and acknowledged that you
may have business interests other than those
of the Company. As a condition to your appointment, you are required to
declare any such directorships, appointments and interests to the Board in
writing in the prescribed form at the time of your appointment.
15. In the event that your circumstances seem likely
to change and might give rise to a
conflict of interest or, when applicable, circumstances that might lead
the Board to revise its judgement that you are independent, this should be
disclosed to both the Chairman and the Company Secretary.
EVALUATION
16. The Board of Directors will carry out an evaluation of
the performance of the Board as a whole,
Board Committees and Directors on an annual basis as per Company's Policy. Your appointment and reappointment on
the Board shall be subject to the outcome of the yearly evaluation process.
DISCLOSURE OF INTEREST
17. Any material interest that a Director may
have in any transaction or arrangement that the Company has entered into should
be disclosed no later than when the transaction or arrangement comes up at a
Board meeting so that the minutes may record your interest appropriately and our records are
updated. A general notice that you are
interested in any contract with a particular person, firm or company is
acceptable.
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CODE OF CONDUCT
18. During the appointment you
are required to comply with regulations as contained in Schedule IV under
Companies Act, 2013, including the Code of Conduct.
CONFIDENTIALITY
19. All information acquired
during your appointment is confidential to the Company and should not be released, either during your
appointment or following termination (by
whatever means) to third parties
without prior clearance from the Chairman unless required by law or by the
rules of any stock exchange or regulatory body. On reasonable request, you shall
surrender any documents and other materials made available to you by the
Company.
20. Your attention is also
drawn to the requirements under the applicable regulations and the Company's
Insider Trading Code which concern the disclosure of price sensitive
information and dealing in the securities of the Company. Consequently you
should avoid making any statements or performing any transactions that might risk a
breach of these requirements without prior clearance from the Chairman or the Company Secretary.
PUBLICATION OF THE LETTER OF APPOINTMENT
21. In line with provision of
Clause IV sub clause 6 of Schedule IV, under Companies Act, 2013, the Company will make public the terms
and conditions of your appointment and
will also arrange for it to be displayed on the Company's website.
MEMBERSHIP OF COMMITTEES
22. The Board of Directors may
appoint you as Member I Chairman of one or more of its Committees which will
be covered in a separate communication setting out the relevant committee's terms
of reference and any specific responsibilities.
TERMINATION
23. You may resign from your position
at any time and should you wish to do so, you are requested to serve a reasonable written notice on
the Board. In terms of provisions of the Companies Act,
2013, you are required to file a copy of
your resignation letter with the Registrar of Companies, Mumbai.
24. Continuation of your
appointment is contingent on your getting re-elected by the shareholders in accordance
with provisions of Companies Act, 2013
and the Articles of Association
of the Company, from time to time in force. You will not be entitled to
compensation if the shareholders do not re-elect you at any time.
25. Your appointment may also
be terminated in accordance with the provisions of the Articles of Association
of the Company from time to time in force.
GENERAL
26. This Letter and any non-contractual
obligations arising out of or in connection with this Letter
are governed by, and shall be
construed in accordance with, the laws of India, and the parties agree to
submit to the exclusive
jurisdiction of the courts of
--------.
27. Please confirm
your agreement to the
above by signing
and returning the enclosed duplicate of this Letter.
Yours sincerely,
For ------------------LIMITED
Chairman & Managing Director
I have read and
agree to the above terms regarding my appointment as an Independent Director of
--------------Limited.
INDEPENDENT DIRECTOR Date:
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It is not mandatory to pay sitting fees to the Independent director and if the company do not want to pay any remuneration to independent director ,it is better to pass a board resolution and get the approval of the same in members' meeting.
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IS MANDATORY TO PAY SITTING FEES TO INDENPENDENT DIRECTOR ?
It is not mandatory to pay sitting fees to the Independent director and if the company do not want to pay any remuneration to independent director ,it is better to pass a board resolution and get the approval of the same in members' meeting.
Though the section 197(5) nowhere placed reliance
that it must be mandatorily paid. It’s the mutual understating/terms between
company and that (Independent Director) ID whilst the right of
receiving of fee for meeting or commission, if any, may be waived off
approving the same in meeting of shareholder and accordingly the same can be
captured in the clause of remuneration of appointment letter. Make sure
your company must receive written consent of that ID stating his right to waive
off the same.
Remuneration Clause example.
(It’s in common parlance I have drafted and you may as per your
convenience make relevant modifications)
1. REMUNARATION:-
1.1
Mr. X shall not be paid remuneration by way of sitting fees for
meetings of the Board and its Committees and remuneration by way of commission
as decided by the Board dated.............. and approved by the
the Shareholders in their meeting convened on........ Further, Mr.
X will have no entitlement to any bonus during the appointment and no entitlement
to participate in any employee stock option scheme announced by the
Company or any Group Company.
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