Appointment of Independent Director & a Women Independent Director:
1. Requirement to appoint Independent Director under the provisions of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014:
♦ Sec 149(1) – When is a Company required to appoint Independent Director on Board?
(a) Paid up share capital = or > 10 crores*
(b) Turnover = or > 100 crores*
(c) In aggregate o/s debts > 50 crores*
♦ Sec 149(4) – When is a Company required to appoint a Women Independent Director on Board?
(a) Paid up share capital = or > 100 crores*
(b) Turnover = or > 300 crores*
*Paid up share capital or turnover as on the last date of latest audited financial statements shall be taken into consideration
Further, in case a Company ceases to meet all the 3 conditions for 3 consecutive years it shall not be required to comply with these provisions unless the Company meets the criteria again.
2. Timeline for adherence of point 1 i.e. appointment of Independent Director & women Independent Director:
♦ Independent Director- Intermittent vacancy to be filled in in the immediate next Board meeting or within 3 months whichever is earlier
♦ Women Independent Director –
3. Tenure of appointment
The Independent director shall hold office for a term of up to 5 consecutive years and shall be eligible for reappointment by passing a special resolution by the company and disclosure of such appointment to be made in the Board’s report. No independent director shall hold office for more than two consecutive terms, but such independent director shall be eligible for appointment after the expiration of three years of ceasing to become an independent director (cooling- off period).
Provided that an independent director shall not, during the said period of three years, be appointed in or be associated with the company in any other capacity, either directly or indirectly.
4. Consequence of non-compliance:
Considering, no specific punishment / penalty has been provided in clause 149 (for independent director as well as women independent director) the generic / residual provision being Section 172 shall be applicable.
Sec 172 – if a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.
Note: 149 (8) The company and independent directors shall abide by the provisions specified in Schedule IV.