Want to become independent director of a company? Modi government plans an exam for you

Want to become independent director of a company? Modi government plans an exam for you

INDIVIDUALS HAVE TO PASS EXAMINATION TO ACT AS AN INDEPENDENT DIRECTOR

The government plans to have examinations for individuals who want to become independent directors as part of bolstering the corporate governance framework, according to Union Minister P P Chaudhary.

ROLE OF INDEPENDENT DIRECTORS IS MORE VITAL

While there are stringent provisions under the Companies Act, 2013 to ensure good governance standards, the roles of independent directors has come under the scanner in certain instances of corporate misdoings. Also, at a time when the government is making efforts to make its role minimal in the affairs of corporates, the role of independent directors is more vital.

STRENGTHENING THE ROLE OF INDEPENDENT DIRECTORS

Asserting that the government is committed to improve the fabric of corporate governance in the country, Chaudhary said strengthening the role of independent directors in the affairs of companies is one of the steps in that direction.

MINIMUM QUALIFICATION TO ACT AS AN INDEPENDENT DIRECTOR

The Minister of State for Corporate Affairs said that a person should have certain qualifications to become an independent director on the boards of companies.

 "The requirement with respect to independent directors to have minimum reasonable qualifications and a certification course/ exam are also being considered," Chaudhary told PTI in an interview.

ENTRANCE EXAMINATION FOR INDEPENDENT DIRECTOR

He said the ministry is "very seriously" consconsidering the proposal and stakeholders would be consulted before a final decision is taken, he added. The minister also made it clear that the proposal is to have examination for individuals who want to become independent directors and not for existing people who already have independent directorship.

ORIENTATION FOR EXISTING INDEPENDENT DIRECTORS

"With respect to existing independent directors, there could be orientation programmes," he added. Independent directors have both advisory and monitoring role in the context of governance practices at the companies.

IICA TO MAINTAIN DATA BANK OF IDs

The ministry is also planning to allow the Indian Institute of Corporate Affairs (IICA) to create and maintain a data bank of independent directors.

Under Section 150 of the Companies Act, 2013, the ministry can notify an institution or an agency to maintain an independent directors' data bank.

Proposed Amendment in the Companies (Appointment and Qualification of Directors) Rules, 2014

However, the same is yet to be notified. "The government proposes to amend the Companies (Appointment and Qualification of Directors) Rules, 2014 to allow the IICA as an agency to create and maintain a data bank of independent directors," Chaudhary said.

PLAN TO CAP THE REMUNERATION OF INDEPENDENT DIRECTORS

He said the proposal is expected to be implemented "very soon". Earlier this month, the government-appointed committee to review offences under the Act suggested capping of remuneration of independent directors, among other measures.

WHO IS AN INDEPENDENT DIRECTOR ?

An independent director is a non-executive director of a company who helps the company in improving corporate credibility and governance standards. He/ She does not have any kind of relationship with the company that may affect the independence of his/ her judgment.

DEFINITION OF INDEPENDENT DIRECTOR

As per Section 2(47), “independent director” means an independent director referred to in sub-section (5) of section 149;

Section 149 (6) contains that –

An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;

WHO HAS TO BE APPOINTED AS AN INDEPENDENT DIRECTOR

Listed Public Company

Every listed public company shall have

• at least one-third of a total number of directors as independent directors.

Any fraction contained in that one-third shall be rounded off as one.

Unlisted Public Company

The Central Government may prescribe the minimum number of independent directors in case of any class(es) of public companies.

As per Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014, the following classes of companies shall have at least 2 directors as independent directors.

• Public Companies with paid-up share capital of  Rs. 10 crores or more.
• Public Companies with turnover of  Rs. 100 crore or more.
• Public Companies with aggregate outstanding loans, debentures, and deposits, exceeding  Rs. 50 crore

COURTESY : ZEEBIZ.COM