Data Bank registration & Online Proficiency test for Independent Directors

Brief note on Data Bank registration and Online Proficiency test for Independent Directors

Ministry of Corporate Affairs (MCA) has issued  an Online Proficiency Self-Assessment test  for Independent Directors vide notification dated 22.10.2019.

MCA has also notified Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019 which has created Data bank by Indian Institute of Corporate Affairs. (IICA).

1. Purpose of Online Proficiency Self-Assessment test for Independent Directors

To control the malpractice that are taking place for the appointment of those Independent Directors whose appointment is not worthy for the interest of the stakeholders of the Company.

2. Registration of Independent Director or the Director want to appointed as Independent Director in Data Bank  

Every individual –

(a) who has been appointed as an independent director in a company, on the date of commencement of the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019, shall within a period of three months from 1^st December, 2019 ie on or before 29^th February, 2020; or

(b) who intends to get appointed as an independent director in a company after such commencement, shall before such appointment,

apply online to the institute for inclusion of his name in the data bank for a period of one year or five years or for his life-time, and from time to time take  for renewal, till he continues to hold the office of an independent director in any company:

Provided that any individual, including an individual not having DIN, may voluntarily apply to the institute for inclusion of his name in the data bank.

3. Renewal of Independent Director name in the Data Bank  

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 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.

Provided that no application for renewal shall be filed by an individual who has paid life-time fees for inclusion of his name in the data bank.

4. How an Individual can Empanel on Data bank Created by  IICA:

5. How a Corporate can Empanel on Data bank Created by  IICA:

6. Rules pertaining to Self-Assessment Test for Independent Directors

• Every individual whose name is included in the databank under sub-rule (1) shall pass an Online Proficiency Self-Assessment test conducted by Indian Institute of Corporate Affairs within a period of one year from the date of inclusion of his name in the databank, failing which, his name shall stand removed from this databank;
• Provided that the 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 (KMP) in a listed company or in an unlisted public company having a paid-up share capital of 10 crore or more shall not be required to pass the online proficiency self-assessment test;
• Provided further that for the purpose of calculation of the period of ten years referred to in the first proviso, an period during which an individual was acting as a director or as a KMP in two or more companies at the same time shall be counted only once;
• An individual who has obtained a score of not less than 60% in aggregate in the online proficiency self-assessment test shall be deemed to have passed such test;
• There shall be no limit on the number of attempts an individual may take for passing the online proficiency self-assessment test;

7. Topics for Test of Independent Director

This test will be based on all relevant topics on functioning of an individual acting as an Independent Director, such as:

> Companies Law;

> Securities Law;

> Basic Accountancy;

> Corporate Governance.

Important Note: Presently the mock test is available, you can take a mock test to familiarize yourself with test environment. Actual Online Proficiency Self-Assessment Test will be available from March 01, 2020. However, you can start booking the slot now. If you need help on how to take this test, go to your dashboard from My Account menu and read self-assessment guide or watch a self-help video.

8. Steps for attempting Online Proficiency Self-Assessment Test for Independent Director

Steps for attempting Online Proficiency Self-Assessment Test (Before attempting test Person’s name must be included in the Data Bank):

1. Login into the Databank;

2. Go to the dashboard;

3. Select the slot as per your convenience for attempting the test;

4. Attempt the test as per the slot booked;

5. Get test result and reports published;

6. There is no limit on the number of attempts to pass the test.

9. Some Important matters to be kept in mind related to appointment of Independent Director

> Every independent director shall submit a declaration of compliance of inclusion of name in Data Bank and renewal if any to the Board, each time he submits the declaration required under sub-section (7) of section 149 of the Act

> a statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year”.

Shall be included in the Board’s Report to be prepared for the Financial year ended 31st march 2020 .

Explanation.—For the purposes of this clause, the expression “proficiency” means the proficiency of the independent director as ascertained from the online proficiency self-assessment test conducted by the institute notified under sub-section (1) of section 150.