The Ministry of Corporate Affairs vide a notification dated 2nd October 2019 has notified the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019. The Companies Act 2013 lays down the criteria for the person to be appointed as independent director. To increase transparency in relation to appointment of independent director, this notification inserts some other conditions to be followed by a person is willing to be or appointed as an independent director. These amended provisions shall come into force on 1st December 2019. The provisions of the amendment are as follows-
- All existing Independent directors are required to apply online to the institute for inclusion of his name in the data bank for 1 year or 5 years or for lifetime, within 3 months of commencement i.e. within 29th February 2020.
- All existing Independent directors are required to apply online to the institute for renew of his name in the data bank for 1 year or 5 years or for lifetime, within 3 months from the date of expiry of the period of inclusion of his name in data bank. If he fails to renew, his name shall be removed from the data bank.
- Every individual who intends to get appointed as an independent director, shall apply online to the institute for inclusion of his/her name in the data bank, before appointment.
- An individual not having DIN, may also voluntarily apply to the institute for inclusion of his name in the data bank.
- Every individual included in the data bank is required to pass an online proficiency self-assessment test conducted by the institute within a period of one year from the date of such inclusion. A minimum of 60% score is required to pass the test and there is no limit on the number of attempts taken by an individual to pass. If he fails to do so, his name shall be removed from the data bank.
- Individual who have served as director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up share capital of Rs 10 crore or more, for a period of not less than 10 years, are exempted from the requirement of passing the test.
- Every independent director shall submit a declaration that his/her name is included in the databank to the Board, along with the declaration required under Section 149(7) of the Companies Act 2013.