Independent Director is Director other than a managing director or a Whole time Director or a nominee Director who fulfils all criteria as given in Section 149(6) along with Rule 4 and Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

In general sense, an independent director is a non-executive director of a company who helps the company in improving corporate credibility and governance standards. He does not have any kind of relationship with the company that may affect the independence of his judgement.

Independent Director


For Listed Public Company:

Every listed public company shall have

> at least one-third of a total number of directors as independent directors.

(Any fraction contained in that one-third shall be rounded off as one)

For Unlisted Public Company:

As per Rule 4 of The Companies (Appointment and Qualification of Directors) Rules, 2014,the following classes of companies shall have at least 2 directors as independent directors.

> Public Companies with paid-up share capital of Rs. 10 crores or more; or

> Public Companies with turnover of Rs. 100 crore or more; or

> Public Companies with aggregate outstanding loans, debentures, and deposits, exceeding Rs. 50 crores.


  • The provisions of independent director are not applicable to private company.
  • Where a company ceases to fulfil any of the conditions as mentioned above and laid down in Rule 4 of Companies (Appointment & Qualification of Directors) Rules 2014 for consecutive 3 years, it shall not be required to comply with these provisions until it meets any of such conditions.  It was further clarified that the amount existing on the last date of latest audited financial statements shall be taken into account for calculating the paid-up share capital or turnover or outstanding loans, debentures and deposits. (Third proviso to Rule 4 of Companies (Appointment & Qualification of Directors) Rules 2014
  • A joint venture, wholly owned subsidiary and dormant company are exempted from the requirement to appoint Independent Director even if they fulfil the eligibility criteria.


Independent Director acts as a guide, coach, and mentor to the Company. The role includes improving corporate credibility and governance standards by working as a watchdog and help in managing risk. Independent directors are responsible for ensuring better governance by actively involving in various committees set up by company.

The independent directors are required to perform the following role:

> facilitate withstanding and countering pressures from owners;

> 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;

> bring an objective view in the evaluation of the performance of board and management;

> scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;

> satisfy themselves on the integrity of financial information and that financial controls and the systems of risk management are robust and defensible;

> safeguard the interests of all stakeholders, particularly the minority shareholders;

> balance the conflicting interest of the stakeholders;

> determine appropriate levels of remuneration of executive directors, key managerial personnel and senior management and have a prime role in appointing and where necessary recommend removal of executive directors, key managerial personnel and senior management;

> moderate and arbitrate in the interest of the company as a whole, in situations of conflict between management and shareholder’s interest.


The independent directors shall:

> undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company;

> seek appropriate clarification or amplification of information and, where necessary, take and follow appropriate professional advice and opinion of outside experts at the expense of the company;

> strive to attend all meetings of the Board of Directors and of the Board committees of which he is a member;

> participate constructively and actively in the committees of the Board in which they are chairpersons or members;

> strive to attend the general meetings of the company;

> where they have concerns about the running of the company or a proposed action, ensure that these are addressed by the Board and, to the extent that they are not resolved, insist that their concerns are recorded in the minutes of the Board meeting;

> keep themselves well informed about the company and the external environment in which it operates;

> not to unfairly obstruct the functioning of an otherwise proper Board or committee of the Board;

> pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure themselves that the same are in the interest of the company;

> ascertain and ensure that the company has an adequate and functional vigil mechanism and to ensure that the interests of a person who uses such mechanism are not prejudicially affected on account of such use;

> report concerns about unethical behaviour, actual or suspected fraud or violation of the company’s code of conduct or ethics policy;

> acting within his authority, assist in protecting the legitimate interests of the company, shareholders and its employees;

> not disclose confidential information, including commercial secrets, technologies, advertising and sales promotion plans, unpublished price sensitive information, unless such disclosure is expressly approved by the Board or required by law.


> Subject to the provisions of section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board’s report. [Sec 149(10)]

> 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: 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.[Sec 149(11)]


1) Appointment process of independent directors shall be independent of the company management; while selecting independent directors the Board shall ensure that there is an appropriate balance of skills, experience and knowledge in the Board so as to enable the Board to discharge its functions and duties effectively.

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 specified conditions. The explanatory statement shall mention that the proposed director is independent of the management.

4) The appointment of independent directors shall be formalised through a letter of appointment,

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.


ü  Firstly, diligently select a person proposed to be appointed as an independent director and ensure that he possesses appropriate balance of skills, experience and knowledge in the Board. The proposed person may be selected from the database of Independent directors maintained by any body, institute or association authorized by CG. (Rule 6 of Companies (appointment and qualification of Directors) Rules, 2014)

ü  Ensure the proposed person to be appointed as Independent director in the company fulfils the conditions specified in Sec 149(6) and Rule 5 (Companies (appointment and qualification of Directors) Rules, 2014)

ü  Ensure that the proposed director is not disqualified under Sec 164 and Sec 165 of the Companies Act 2013.

ü  Ensure the individual proposed to be appointed as Independent Director has furnished his DIN to the company and a declaration in Form DIR-8 stating he is not disqualified to become director under the provisions of this Act. (Sec 152(4) and Rule 14 of (Companies (appointment and qualification of Directors) Rules, 2014

ü  Before appointment of individual as Independent Director obtain consent to act as Director in Form DIR-2.

ü  Issue Notice and agenda of Board meeting or a shorter notice in case of urgent business, in writing to every director of the company at his registered address with company. [Sec 173(3)]

ü  Hold a board meeting and ascertain the quorum required under Sec 174 is present and pass the following resolution:

1. Resolution for appointment of Independent Director to hold office up to a period of 5 years, subject to approval of Shareholders in the general meeting of the company.

2. To authorize the Company Secretary or Director of the company to sign, fill the relevant Form and to do such acts, deeds and things as may be necessary to give effect to the resolution.

3. To Fix day, date time, venue for holding general meeting of shareholders of the company.

4. To Approve the draft notice of the meeting along the explanatory Statement annexed with notice as per the requirement laid down in Sec 102 of the act.

5. To authorize the Director or the Company Secretary of the company to sign and issue the notice of the general meeting.

ü  Hold the general meeting on the day fixed and pass the ordinary resolution for the appointment of Independent director.

ü  As per Schedule IV(IV)(4) to the Companies Act, 2013 the Company will have to issue the appointment letter to Independent Director. Also, the terms and conditions of Independent Director’s appointment have to be posted on the company’s website.

ü  Obtain the declaration of the appointed Director regarding his interest in other entities in Form MBP-1 within 30 days of appointment or at the first Board meeting in which he participates as a director., whichever is earlier. [Sec 182(1) read with Sec 182(2)]

ü  File Form DIR-12 containing the particulars of the appointment of Director within 30 days of his/her appointment. (Sec 170 (2) and Rule 8 and 18 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

ü  The Independent Director has to submit a declaration of independence as per Section 149(6) of the Companies Act, 2013 before his/her appointment. Such declaration has to be placed before the 1st Board Meeting in which he/ she participates as a director and the subsequent first board meeting in each financial year.

ü   In case of resolution passed as Special resolution for re-appointment of Independent Director, file a certified copy of special resolution in Form MGT-14 within 30 days of the date of general meeting.

ü  Make necessary entries in the register of Directors and key managerial personnel and their shareholding.


An independent director shall not be entitled to any stock option. An independent director may receive remuneration by way of sitting fees. Sitting fees to be paid to Independent Directors for attending the Board Meetings pursuant to Section 197(5) which is maximum of Rs.1,00,000/- per meeting is to be decided by the Board. The independent director shall be entitled to the reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.


> An Independent Director may resign from his/her office by giving a notice in writing to the Company.

> Within 30 days from the date of receipt of such notice the Board shall file same with Registrar of Companies in Form DIR- 12.

> The director shall also forward a copy of resignation along with detailed reasons for the resignation to the Registrar of Companies within 30 days of resignation.


> A Company may, by ordinary resolution, remove a director, before the expiry of his period after giving a reasonable opportunity of being heard.

> A special notice is required for any resolution, to remove a director under this section, or to appoint somebody in place of a director so removed.

> The vacancy shall be filled within a period of not more than 180 days.


Any intermittent vacancy in the office of an independent director shall be filled up by the Board in the immediately next board meeting or within three months from the date of such vacancy, whichever is earlier. (Second Proviso to Rule 4 of Companies (Appointment & Qualification of Directors) Rules 2014.


The Companies Act, 2013 restricts and limits the liability of Independent Directors only in respect of acts of omission or commission by a company which had occurred with his knowledge, attributable through board processes, and with his consent or connivance or where he had not acted diligently.


ü  A person must be an independent director in not more than seven listed companies at a time.

ü  An independent director shall not retire by rotation and shall not be included in “total number of directors’ for the purpose of computation of rotational directors.

ü  A person can be appointed as an alternate director. But he must be qualified to be appointed as an independent director.

ü  A small shareholder director shall be considered as an independent director, if-

  • he is eligible for appointment as an independent director u/s 149 (6),
  • he gives a declaration of his independent u/s 149(7).

ü  If the Board meeting is called at shorter notice so as to transact some urgent business, then the presence of at least 1 independent director is mandatory. In absence of any independent director, a decision shall be circulated to all the directors and later approved by at least 1 independent director.

ü  The Nomination committee shall consist of three or more non-executive directors out of which not less than one-half shall be independent directors.

ü  The Audit Committee shall consist of a minimum of three directors with independent directors forming a majority.

ü  Remuneration Committee shall consist of three or more non-executive directors out of which not less than one-half shall be independent directors.

ü  Corporate Social Responsibility Committee shall consist of three or more non-executive directors out of which at least one should be an independent director.

ü  The independent directors of the company shall hold at least one  meeting in a year, without the attendance of  Non-Independent directors and Members of the management.

Author Bio

More Under Company Law


  1. ajay jindal says:

    For reappointment of independent director, we need to file DIR-12 or MGT-14 to file Special Resolution?…pls confirm.
    thanks & regards
    ajay jindal

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

April 2021