Provisions regarding Independent Directors appointment further relaxed

Provisions regarding Independent Directors appointment further relaxed by MCA

Further relaxations by the Ministry of Corporate Affairs till 1st December 2021 for inclusion of the name of Independent Directors in the Independent Directors Data Bank.

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 18th December, 2020

G.S.R. 774(E).—In exercise of the powers conferred by section 149 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014, namely:-

1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2020.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 6,-

(a) in sub-rule (4),-

(i) for the words “one year from” the words “two years from” shall be substituted;

(ii) for the first and second proviso, the following provisos shall be substituted, namely :-

“Provided that an individual shall not be required to pass the online proficiency self-assessment test when he has served for a total period of not less than three years as on the date of inclusion of his name in the data bank,-

(A) as a director or key managerial personnel, as on the date of inclusion of his name in the databank, in one or more of the following, namely:-

(a) listed public company; or

(b) unlisted public company having a paid-up share capital of rupees ten crore or more; or

(c) body corporate listed on any recognized stock exchange or in a country which is a member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions; or

(d) bodies corporate incorporated outside India having a paid-up share capital of US$ 2 million or more; or

(e) statutory corporations set up under an Act of Parliament or any State Legislature carrying on commercial activities; or

(B) in the pay scale of Director or above in the Ministry of Corporate Affairs or the Ministry of Finance or Ministry of Commerce and Industry or the Ministry of Heavy Industries and Public Enterprises and having experience in handling the matters relating to corporate laws or securities laws or economic laws; or

(C) in the pay scale of Chief General Manager or above in the Securities and Exchange Board or the Reserve Bank of India or the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority and having experience in handling the matters relating to corporate laws or securities laws or economic laws :

Provided further that for the purpose of calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as a director or as a key managerial personnel in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.”;

(b) in the Explanation, in item (b), for the words “sixty percent”, the words “fifty percent” shall be substituted.

[F. No. 8/4/2018-CL-I- Part I]

K. V. R. MURTY, Jt. Secy.

Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification number G.S.R. 259(E), dated the 31^st March, 2014 and were last amended vide notification number G.S.R. 589 (E), dated the 28^th September, 2020.

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Summary of the Relaxation given is as under:

A further relaxation has been given in registration for inclusion of the name of Independent Directors in the Independent Directors Data Bank up to 1st December, 2021. Also, the registration criteria has been relaxed and the period of ten years directorship has been reduced to three years and passing marks criteria has been reduced from 60% to 50%.

Individual who have been appointed as an independent director in a company can now required to register their name in the database within a period of two years from such commencement i.e., up to 30th November, 2021.

Further, one who intends to get so appointed as an independent director in a company, shall before such appointment, apply to the institute for inclusion of his name in the data bank. The process is online.

An individual shall not be required to pass the online proficiency self-assessment test, if he has served, for a total period of not less than three years, as on the date of inclusion of his name in the databank:-

(i) As a director or key managerial personnel, as on the date of inclusion of his name in the databank, in one or more of the following, namely:-

a. listed public company; or

b. unlisted public company having a paid-up share capital of rupees ten crore or more; or

c. body corporate listed on any recognized stock exchange or in a country which is a member State of Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organisation for Securities Commissions; or

d. bodies corporate incorporated outside India having a paid up share capital of US $2 million or more; or

e. Statutory Corporations set up under an Act of Parliament or any State Legislature carrying on commercial activities; or

(ii) In the pay Scale of Director or above in the Ministry of Corporate Affairs or the Ministry of Finance or the Ministry of Commerce or Industry or the Ministry of Heavy Industries and Public Enterprises and having experience in handling matters relating to corporate laws or securities laws or economic laws; or

(iii) In the pay Scale of Chief General Manager or above in the Securities Exchange Board of India or Reserve Bank of India or the Pension Fund Regulatory and Development Authority of India and having experience in handling matters relating to corporate laws or securities laws or economic laws;

For the purpose of calculation of the period of three years period during which an individual was acting as a director or as key managerial personnel in two or more companies or bodies corporate at the same time shall be counted only once.

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