Appointment & Re-Appointment of Independent Director

INDEPENDENT DIRECTOR-

An independent director is a non-executive director of a company who brings in objectivity and independence in the decision making by the Board of Directors of the company. As an independent director, he should not be related to the promoters of the company. He should not have any pecuniary interest in the company, its holding company, subsidiary company or associate company. The intention of having such kind of provisions is to ensure that such director remains completely independent and does not have any economic dependency on the company.

Pursuant to the provisions of Section 149 of the Companies Act, 2013 and the Rules made thereunder, an independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business. An independent director shall help in bringing an independent judgment to bear on the board’s deliberations especially on issues of strategy, performance, risk management, resources, key appointments and standards of conduct.

APPOINTMENT OF INDEPENDENT DIRECTORS: 

As per the provisions of Section 149(10) of the Companies Act, 2013 Independent Directors shall be appointed for a fixed term not exceeding a maximum term of 5 years at a time and shall be eligible for re-appointment on passing of a special resolution by the company in its Annual General Meeting and disclosure of the such appointment in the Board’s Report.Further, as per section 149(11) of the Companies Act, 2013 an independent Director can be appointed only for two consecutive terms of 5 years. After two consecutive terms he/ she can be reappointed only after a cooling off period of 3 years. During the cooling off period, the Director should not have any direct/ indirect relationship with the Company. In case the Director is appointed for a term shorter than 5 years at a time, it shall still be considered a complete term for determining two consecutive terms.

APPOINTMENT CRITERIA FOR INDEPENDENT DIRECTOR:

The Nomination and Remuneration Committee should undertake a process of due diligence to determine the suitability of the person for appointment / continuing to hold appointment as an Independent Director on the Board. The Company shall take into account following points while conducting such due diligence:

• Director must be ‘Fit and Proper’for appointment as an Independent Director on Board;
• Director must have relevant qualification and/ or expertise and/ or track record in Finance/ Law/ Management/ Sales/ Marketing/ Administration/ Research/ Corporate Governance/ Technical Operations or the other disciplines related to company’s business;
• Director should possess the highest personal and professional ethics, integrity and values;
• Director must be willing to devote sufficient time and energy in carrying out their duties and responsibilities;
• The Nomination and Remuneration Committee may demand for any more information as it may deem necessary to conduct the due diligence;
• Independent /Non-Executive Directors nominated to the Board of Company should be above 18 years of age.
• Independent Director should meet all criteria of Independence specified in Section 149(6) of the Companies Act, 2013 and rules made thereunder.

Thereafter it shall recommend to the Board of Directors of the company for its approval and for recommendation of the same to the shareholders of the company.

MANNER OF APPOINTMENT OF INDEPENDENT DIRECTOR:

1. Appointment process of independent directors shall be independent of the company management;

2. The appointment of independent director(s) of the company shall be approved at the meeting of the shareholders;

3. The explanatory statement attached to the notice of the meeting for approving the appointment of independent director shall include a statement that in the opinion of the Board, the independent director proposed to be appointed fulfils the conditions specified in the Act and the rules made thereunder and that the proposed director is independent of the management.

4. The appointment of independent directors shall be formalized through a letter of appointment, which shall set out:

(a) The term of appointment;

(b)The expectation of the Board from the appointed director; the Board-level committee(s) in which the director is expected to serve and its tasks;

(c) The fiduciary duties that come with such an appointment along with accompanying liabilities;

(d) Provision for Directors and Officers (D and O) insurance, if any;

(e) The Code of Business Ethics that the company expects its directors and employees to follow;

(f) The list of actions that a director should not do while functioning as such in the company; and

(g) The remuneration, mentioning periodic fees, reimbursement of expenses for participation in the Boards and other meetings and profit related commission,if any.

5. The terms and conditions of appointment of independent directors shall be open for inspection at the registered office of the company by any member during normal business hours.

6. The terms and conditions of appointment of independent directors shall also be posted on the company’s website.

7. Requisite disclosures shall be made in Board’s report regarding the appointment/ re-appointment/ remuneration of the independent directors.

RE-APPOINTMENT OF INDEPENDENT DIRECTOR:

• At the time of Re-appointment of a Director, the Nomination and Remuneration Committee shall conduct a due diligence again to determine the Director’s Suitability for continued employment
• The re-appointment of independent director shall be on the basis of report of performance evaluation.
• Evaluation of each Director shall be done by all the other Directors.
• The criteria for evaluation shall be determined by the Nomination and Remuneration Committee of the Board.

EVALUATION MECHANISM:

• There shall be a performance evaluation of every Director and of the Board as a whole. This performance evaluation shall be conducted annually and at the time of reappointment of a Director.
• The performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the director being evaluated.
• On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the independent director.