Ministry of Corporate Affairs (MCA) vide its Notifications dated 22/10/2019 has introduced –

Companies (Appointment and Qualification of Director) Fifth Amendment Rules, 2019,

Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019 and

Companies (Accounts) Amendment Rules, 2019.

which shall come into force w.e.f. 01/12/2019.

Companies (Appointment and Qualification of Director) Fifth Amendment Rules, 2019 provides, inter alia, that –

  • Every individual,

– who has been appointed as an Independent Director in a Company shall within a period of 3 (three) months from the commencement of the said Rules, or

– an individual who intends to get appointed as an Independent Director in a company after 01/12/2019 shall before such appointment,

apply with such fees, as shall be prescribed, to the ‘Indian Institute of Corporate Affairs at Manesar’ (“the Institute”) for inclusion of his name in the data bank for a period of 1 (one) year or 5 (five) years or for his lifetime.

  • Further, every person whose name has been so included in the data bank [for 1 (one) year or 5 (five) years] shall file an application for renewal, with such fees as shall be prescribed by the Institute, for a further period of 1 (one) year or 5 (five) years or for his lifetime within a period of 30 (thirty) days from the date of expiry of the period upto which his name was included in the data bank failing which the name of such individual shall be removed from the data bank.
  • Person who has paid lifetime fees for inclusion of his name in the data bank, need not submit application for renewal.
  • Every Independent Director shall submit a Declaration of compliance of these Rules [sub-rule 1 and sub rule 2 of Rule 6 of Companies (Appointment and Qualification of Director) Rules, 2014, as amended] each time he submits the Declaration under sub-section 7 of Section 149 of the Companies Act, 2013 i.e. Declaration of Independence.
  • Every individual whose name is so included in the 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, failing which, his name shall stand removed from the databank of the institute.

However, an individual who has served for a period of not less than ten years as on the date of inclusion of his name in the databank as director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up share capital of rupees ten crore or more shall not be required to pass the online proficiency self-assessment test.

(For the purpose of calculation of the period of ten years, any period during which an individual was acting as a director or as a key managerial personnel in two or more companies at the same time shall be counted once.)

Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019, which shall come into force w.e.f. 01/12/2019 provides that the ‘Indian Institute of Corporate Affairs at Manesar’ shall create and maintain an online databank of persons willing and eligible to be appointed as independent directors, which shall be placed on the website of the Institute.

The data bank shall contain certain details in respect of each person included in the data bank who are eligible and willing to be appointed to be independent director. The information available in the data bank shall be provided by the Institute only to the companies required to appoint independent directors. However, necessary due diligence has to be carried out by the Company before appointment of any such independent director. A person whose name appears in the data bank may restrict his personal information to the institute, to be disclosed in the data bank and may change his particulars within 30 days from the date of any change through a web based mechanism as shall be made available by the Institute.

The institute, shall with the prior approval of the Central government, fix a reasonable fee to be charged from:-

(i) individuals for inclusion of their names in the data bank of independent directors; and

(ii) companies for providing the information on independent directors available on the data bank.

The institute shall –

(a) conduct an online proficiency self-assessment test covering companies law, securities law, basic accountancy, and such other areas relevant to the functioning of an individual acting as an independent director;

(b) prepare a basic study material, online lessons, including audio-visuals for easy reference of individuals taking the online proficiency self-assessment test;

(c) provide an option for individuals to take advanced tests in the areas specified in clause (a) and prepare the necessary advanced study material in this respect.

No separate fees shall be charged by the institute in respect of clause (a), (b) and (c).

As per clause (iiia) of sub-rule 3 of Rule 8 of Companies (Accounts) Rules 2014 as amended by MCA by Companies (Accounts) Amendment Rules, 2019, the Report of the Board as per section 134 of the Act, shall also contain a statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency as shall be ascertained from the online proficiency self-assessment test conducted by the Institute) of the independent directors appointed during the year.

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