Re-designation of Non Executive Director as an Independent Director

Can a person who is appointed as a Non Executive Director of a Company be re-designated as an Independent Director?

Independent Directors are non-executive Directors who do not have any material or pecuniary relationship with the Company. The Companies Act, 2013 (Act) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Regulations) lay down the criteria and qualifications for appointment of a person as an Independent Director. A brief summary of the provisions pertaining to Independent Directors can be read here: https://taxguru.in/company-law/independent-directors-companies-act-2013-sebi-lodr-regulations-2015.html

Pursuant to Section 149 of the Act, Rule 5 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and Regulation 16 of the SEBI Regulations, an Independent Director shall be a Non – Executive Director and shall mean a Director other than a Managing Director or Whole-Time Director or a Nominee Director and the provisions further proceed to prescribe criteria and qualifications for a person to be appointed as an Independent Director.

The provisions do not expressly prohibit  the re-designation of a Non Executive Non Independent Director as an Independent Director. However, a  Non – Executive Non Independent Director of a Company shall meet the criteria and qualifications as prescribed by the Act and the SEBI Regulations, to be considered for re-designation as an Independent Director of the Company.

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