INDEPENDENT DIRECTORS

Sec 2(47) & 149(6)

Section 149 (6) contains that-

· An Independent Director is a Director other than a managing director or a whole- time director or a nominee director and who:-

o in the opinion of the Board, is a person of integrity and possessing relevant expertise and experience;

o is or has not been a promoter of the company or its holding, subsidiary or associate company and is not related to promoters or directors of the company, its holding, subsidiary or associate company;

o has or had no pecuniary relation 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;

o none of the relatives of such person must have pecuniary relationship or transaction 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;

o neither Independent Director  nor his relatives:-

§ is or had been a key managerial personnel or 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;

o 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 — i) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; ii) or any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to 10% or more of the gross turnover of such firm;

o holds together with his relatives 2% or more of the total voting power of the company; or

o is a Chief Executive or Director, by whatever name called, of any non-profit organization that receives 25% or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds 2% or more of the total voting power of the company

· Such Databank shall be placed on the website of Ministry of Corporate Affairs

· Any person desirous to become Independent Director may apply to Databank in Form DIR-1

· Any change in the particulars of Independent Director shall be intimated by him to Databank within 15 days of such change.

· Ultimate responsibility on Board to do a proper due diligence in order to ascertain the independence of Director. Company should not blindly rely upon the information supplied by these Databanks

· As per Sec 149(7) every Independent Director shall provide a declaration in the form of certificate of independence at every first board meeting of each financial year or whenever there is any change.

· Appointment of Independent Director shall be made in General Meeting by passing Special Resolution.

· Explanatory Statement shall provide the justification for appointing person as Independent Director

· Companies shall within one year from the date of commencement of Act comply with the provisions related to Independent Director

· The second term will be approved by shareholders in the General Meeting and the same shall be duly disclosed in the Board Report

· Independent Director shall be eligible for reappointment after gap of at least 3 years from the date of ceasing to be an Independent Director

· Independent Directors shall not be liable to retire by rotation

· Independent Directors may receive remuneration by way of fee, reimbursement of expenses for participation in Board Meetings

· Independent Director can also get commission on profit as approved by the Shareholders

· Independent Director can get maximum sitting fee up to Rs. 1.00 Lac per meeting subject to approval of Remuneration Committee or Board of Directors

· As per Sec 149(12) Independent Directors are liable to such acts of omission or commission by company that had only occurred with his knowledge and consent or connivance

· As per Sec 149(8) Independent Directors are liable to follow Code of Conduct as specified in Schedule IV of the Companies Act, 2013

· Apart from receiving remuneration, Independent Director shall not have any pecuniary relationship with the company or its holding or subsidiary or associate company or their promoters or directors, during the 2 immediately preceding financial years or during the current financial year

· Independent Director should not be related to promoters or senior management or one level below board

· The Independent Director should be at least 21 years of age in addition to requisite qualification

· The enterprises are also covered under the definition of Associate Company

· Non – Independent Directors and other members of management cannot participate in such meeting of Independent Directors

· Independent Directors will have to evaluate their own and board’s performance.

· Such performance evaluation report will be part of Board Report.