Clarification of Registration of Independent Director in Data Bank

Ministry of Corporate Affairs (MCA) has notified, Companies (Creation and Maintenance of databank of Independent Directors) Amendment, Rules 2021 on 18th June 2021. These Rules came into effect from 18th June 2021.

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.

Provisions before Amendment: {Rule 6(1)}

MCA introduce ID Data Bank rules on 20^th October 2019. As per those Rules:

I. Inclusion of Name in Data Bank:

• If a person was continuing as independent Director as on 20^th October 2019 such person was required to add his name in Data Bank with in 10 [1]month from publication of these rules (i.e. 20^th August 2020)
• If a person wanted to appointed ID after 20^th October 2019, then before appointment such person have to add his name in Data Bank.

II. Passing of Examination: {[2]Rule 6(4)}

Every individual whose name is so included in the data bank under sub-rule (1) shall pass an online proficiency self-assessment test conducted by the institute within  period of [3]two year from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the databank of the institute.

III. Renewal of Name in Data Bank: (Rule 2)

Registration under data Bank could be One year, Five year or 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 [4]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.

As per above mentioned provisions,

• If an individual fails to apply for registration in Data Bank such individual was not allowed to appoint as Director.
• If individual fails to renewal its registration, his name shall be remove from the data bank.

[5]Extract of Amendment:

(a) in sub-rule (7), in clause (a), after the words “for inclusion”, the words “or renewal” shall be inserted;

(b) after sub-rule (7), before explanation, the following sub-rule shall be inserted, namely:- “(8) In case of delay on the part of an individual in applying to the institute under sub-rule (7) for inclusion of his name in the data bank or in case of delay in filing an application for renewal thereof, the institute shall allow such inclusion or renewal, as the case may be, under rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 after charging a further fees of one thousand rupees on account of such delay.”

Effect of Amendment:

Now, after this amendment MCA allowed that:

• if an individual has not applied for entrance of his name in data bank, still such person can be appoint as Independent Director and such person can apply for inclusion of his name later on by paying extra fees of Rs. 1,000/-.
• if an individual fails to renew his registration in data bank within 30 days of expiry of registration, still such person can continue as Independent Director & his name shall not remove from the record of data bank. Only condition such person have to apply for renewal by paying extra fees of Rs. 1,000/-.

Notes:-

[1] https://taxguru.in/company-law/companies-appointment-and-qualification-of-directors-third-amendment-rules-2020.html

[2] https://taxguru.in/company-law/companies-appointment-qualification-directors-fifth-amendment-rules-2019.html

[3] https://taxguru.in/company-law/companies-appointment-qualification-directors-fifth-amendment-rules-2020.html

[4] https://taxguru.in/company-law/companies-appointment-qualification-directors-fifth-amendment-rules-2019.html

[5] https://taxguru.in/company-law/companies-creation-maintenance-data-bank-independent-directors-amendment-rules-2021.html

CONCLUSION:

Even if a person not applied for registration of his name with Data Bank, he can appoint as Independent Director.

Such person has to clear the proficiency test within 2 year of entrance of his name in Data Bank.

Even registration in data bank expired, he can continue as Independent director and have to pay extra fees of Rs. 1,000/- for renewal.

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

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