MINISTRY OF CORPORATE AFFAIRS on 22nd November 2019 issued a notification which stated that from 1st December 2018 it shall maintain a data bank for independent directors at Indian Institute of Corporate Affairs. It shall be the duty of Indian Institute of Corporate Affairs to -
1. conduct an online proficiency self-assessment test.
2. prepare a basic study material and notes.
3. conduct and manage the exam.
An independent director is a non-executive director who does not have any kind of relationship with the company that may affect the independence of his/her judgment. An independent director should not have been a partner or executive director of the auditors/lawyers/consultants of the company in preceding three years or should not hold 2% or more of shares of the company. In this article, we look at the process for appointment of an independent director in a company.
Because of this step the appointment of independent directors will change as now to qualify as an independent director you have clear an additional exam. It is a great step my MCA as it will help the company choose independent director and now Independent Directors cannot be mute spectators in corporate boardrooms. They have to play an active role in corporate governance.
Independent Director whose name appears in the data bank, shall make changes in his particulars within thirty days of such change through web based framework made available by the institute for this purpose.
Topics covered in the Exam -
1. Companies Law
2. Securities Law
3. Basic Accountancy
4. any other topic the Institute may consider necessary.
The Amendment to Companies (Appointment and Qualification of Directors) Rules, 2014 says every individual, who has been appointed as an Independent Director in a Company shall within a period of 3 (three) months from the commencement of the said Rules, or who intends to get appointed as an Independent Director in a company after 01/12/2019 shall before such appointment, apply to the 'Indian Institute of Corporate Affairs (IICA) for inclusion of his name in the data bank for a period of 1 (one) year or 5 (five) years or for his lifetime as the case may be.
It also says every person whose name has been included in the data bank shall make an application for renewal within 30 days of the expiry of the above period of 1 year, 5 years or lifetime as the case may be. Every individual whose name is included in the data bank 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, failing which, his name shall stand removed from the databank of the institute.
The data bank shall contain certain details in respect of each person included in the data bank who are eligible and willing to be appointed to be independent director. The information available in the data bank shall be provided by the Institute only to the companies required to appoint independent directors. However, necessary due diligence has to be carried out by the Company before appointment of any such independent director.
A person whose name appears in the data bank may restrict his personal information to the institute, to be disclosed in the data bank and may change his particulars within 30 days from the date of any change . The appointment of independent director shall be approved by the company in general meeting and brought to the notice of the general meeting called to consider the said appointment shall indicate the justification for choosing the appointee for appointment as independent director.
Though there is no limit on the number of times a candidate can appear for this exam, officials said there is a new beginning on accountability and eligibility and will curb promoters placing their own ineligible candidates and family members on the listed companies boards which have public money also invested in the company.
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