Independent director- New Era of Data Bank & Online Proficiency test

INDEPENDENT DIRECTOR –

NEW ERA- BY AMENDMENT IN ACT

Data Bank of ID/ IICA/ Online Proficiency test/ Self-assessment test/

Compliance with right to ID and Companies

Independent directors have a crucial role to play for keeping good governance practices. In order to ensure the basic literacy of company law, securities law and accountancy among Independent directors and to boost Corporate Governance standards in India, the Govt. has decided to introduce online proficiency self-assessment test for Independent directors.

Subsequently, MCA has notified the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019, and the Companies (Accounts) Amendment Rules, 2019. The notifications shall come into force with effective from Dec 01, 2019.

Applicability:

The new norms shall be applicable to

• Existing Independent directors and
• Individual who are willing to be appointed as independent director and
• The Companies which are required to appoint Independent directors under the Companies Act 2013.

This Rules shall came into effect from 1^st December, 2019.

Compliance – by a person Eligible and willing to be appointed as Independent Director:

♦ IF A PERSON IS ALREADY INDEPENDENT DIRECTOR:

a) Submission of Application with Institute:

If a person is already appointed as ID in a Company, on 01.12.2019 (the commencement of these rules) shall within period of three month from such commencement i.e. 29^th February, 2020 apply online to the institute for inclusion of his name in the data bank.

Due Date for filing of application with institute is 29^th February, 2019

b) Passing of examination conducted by Institute:

Above after inclusion of his name in 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, (i.e. 1 year from 29^th February, 2020 or any other date of inclusion of name in data bank)

Failing which, his name shall stand removed from the databank of the institute:

c) Submission of declaration with Board of Director:

Every independent director shall submit a declaration of compliance of sub-rule (1) [i.e. submission of application with institute] and sub-rule (2) [i.e. submission of application with institute for renewal] to the Board, each time he submits the declaration required under sub-section (7) of section 149 of the Act.

d) EXEMPTION:

Individuals who have served for a period of 10 years as on date of inclusion of his name in databank as director or Key Managerial Personnel (KMP) in listed public company or unlisted public company having paid up capital of Rs. 10 crore or more shall not be required to pass online proficiency self-assessment test.

For purpose of calculation of 10 years, if a person is acting as director or KMP in two or more companies shall be counted only once.

♦ Time period for reservation of name in Data Bank:

• Name shall be include in data bank for a period of one year or five years or for his life-time;
• Every individual whose name has been so included in the data bank shall file an application for renewal for a further period of one year or five years or for his life-time, within a period of thirty days from the date of expiry of the period upto which the name of the individual was applied for inclusion in the data bank,
• Failing which, the name of such individual shall stand removed from the data bank of the institute.
• No application for renewal shall be filed by an individual who has paid life-time fees for inclusion of his name in the data bank

♦ IF A PERSON IS ALREADY INDEPENDENT DIRECTOR:

♦ Submission of Application with Institute:

If a person shall appoint as ID in a Company, on or after 01.12.2019 (the commencement of these rules) shall before such appointment apply online to the institute for inclusion of his name in the data bank.

(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).