Vide PIB release dated 12th August, 2014, a portal exclusively devoted to independent directors has been created at http://independentdirector.in
Vide section 149(4) of the Companies act, 2013, every listed company shall have at least one third of its Board of Directors as independent director.
Other categories of companies which are required to have at least two independent directors on its Board are
(i) the Public Companies having paid up share capital of ten crore rupees or more; or
(ii) the Public Companies having turnover of one hundred crore rupees or more; or
(iii) the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees:
Now persons who are interested in becoming independent directors can register themselves at the above site. But they will be required to have a Director Identification Number before applying themselves.
Salient features of the concept of independent director (ID) under the Act are as follows:
(1) An ID has to give his consent for being appointed as a director of the company.
(2) At least one ID will be on the Corporate Social Responsibility Committee wherever such a Committee is required to be appointed;
(3) An ID cannot be the Managing Director, Whole-time Director or Nominee Director of the company.
(4) An ID is required to give a declaration of independence at the first meeting of the Board where he is appointed as also at the first meeting of the Board in every financial year;
(5) The ID is required to abide by the Code of Conduct specified in Schedule IV of the Companies act, 2013;
(6) The ID is not entitled to receive any stock options from the company;
(7) The ID may be remunerated by way of sitting fees, reimbursement of expenses involved in participation in Board and other meetings and profit related commission, if the members approve of it;
(8) The ID shall be eligible for appointment for two terms of 5 years each in succession, but can be considered for appointment after a grace period of three years. Term shall mean any term less than but not more than 5 years at a stretch;
(9) During the grace period of three years, he should not be associated with the company in any capacity;
(10) An ID shall be held liable, only in respect of such acts of omission or commission by a company which has occurred with his knowledge, attributable through Board process and with his consent or connivance or where he has not acted diligently;
(11) An ID shall not retire by rotation;
(12) No person shall be appointed as an alternate director for an independent director unless he fulfils the criteria and condition for appointment as independent director;
QUALIFICATIONS FOR BEING AN INDEPENDENT DIRECTOR ARE AS FOLLOWS:
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;
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(e) who, neither himself nor any of his relatives—
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;
(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any non-profit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate
company or that holds two per cent. or more of the total voting power of the company; or
(f) who possesses such other qualifications as may be prescribed.
Vide section 149(4) of the Companies act, 2013, every listed company shall have at least one third of its Board of Directors as independent director.
Other categories of companies which are required to have at least two independent directors on its Board are
(i) the Public Companies having paid up share capital of ten crore rupees or more; or
(ii) the Public Companies having turnover of one hundred crore rupees or more; or
(iii) the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees:
Now persons who are interested in becoming independent directors can register themselves at the above site. But they will be required to have a Director Identification Number before applying themselves.
Salient features of the concept of independent director (ID) under the Act are as follows:
(1) An ID has to give his consent for being appointed as a director of the company.
(2) At least one ID will be on the Corporate Social Responsibility Committee wherever such a Committee is required to be appointed;
(3) An ID cannot be the Managing Director, Whole-time Director or Nominee Director of the company.
(4) An ID is required to give a declaration of independence at the first meeting of the Board where he is appointed as also at the first meeting of the Board in every financial year;
(5) The ID is required to abide by the Code of Conduct specified in Schedule IV of the Companies act, 2013;
(6) The ID is not entitled to receive any stock options from the company;
(7) The ID may be remunerated by way of sitting fees, reimbursement of expenses involved in participation in Board and other meetings and profit related commission, if the members approve of it;
(8) The ID shall be eligible for appointment for two terms of 5 years each in succession, but can be considered for appointment after a grace period of three years. Term shall mean any term less than but not more than 5 years at a stretch;
(9) During the grace period of three years, he should not be associated with the company in any capacity;
(10) An ID shall be held liable, only in respect of such acts of omission or commission by a company which has occurred with his knowledge, attributable through Board process and with his consent or connivance or where he has not acted diligently;
(11) An ID shall not retire by rotation;
(12) No person shall be appointed as an alternate director for an independent director unless he fulfils the criteria and condition for appointment as independent director;
QUALIFICATIONS FOR BEING AN INDEPENDENT DIRECTOR ARE AS FOLLOWS:
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;
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(e) who, neither himself nor any of his relatives—
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;
(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any non-profit organisation that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate
company or that holds two per cent. or more of the total voting power of the company; or
(f) who possesses such other qualifications as may be prescribed.
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