Section 150 of the Companies Act, 2013 has provided for the maintenance of Databank of Independent Directors and for the selection of Independent Directors.
The Ministry of Corporate Affairs has thusvid its notification dated 22nd October 2019 set forth Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019 as substituted on 01st December 2019.
This rule has two major elementsunderneath it:
- Online registration of Independent Directors on the databank
- Online proficiency self-assessment test
For appointing a person as an Independent Director of Company, the Indian Institute of Corporate Affairs has to maintain person’s willing and eligibility in a databank.
Any person who is willing to register himself on this Data Bank has to pay fees to the Institute.The fees can be paid for one year, five years, or for his lifetime.Also, Membership is required to be renewed within 30 days from the date of expiry of the period upto which the name of the individual was applied for inclusion in the data bank.
By this online Databank uphold with IICA, the companies can straight away appoint Independent Directors. Therefore, if the person is not registered in the databank, the company is not allowed to appoint that person as Independent Director.
Post-registration in Independent Directors’ Databank, the registered person has to give an Online proficiency self-assessment test. The person is eligible to be appointed as an Independent Director only after clearing the test conducted by IICA.
Any person with aggregate score of sixty percent in online proficiency self-assessment test shall be considered to have passed the test.
Thus, these two are the prerequisites that need to comply before the appointment of any person as an Independent Director.
APPOINTMENT OF INDEPENDENT DIRECTORS BY COMPANIES
The companies who want to appoint Independent Directors upon their Board can look up the profiles of Independent Directors maintained on the Databank and can conduct internal duediligence before their appointment.
For availing the services of the databank, the Companies also have to pay some nominal fees to the Institute.
Now the big question arises who can enrol himself as an Independent Director?
- Any person who has already been appointed as an Independent Director.
- Any person who intends to get appointed as an Independent Director.
- Any person who is not holding DIN at the time of registering as Independent Director can also enrol himself as an Independent Director.
Thus, these rules can be seen as a quantum leap made by the Ministry of Corporate Affairs towards possession of relevant expertise and experience by the Independent Director of any Company.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by: CA Neetu Saini