Section 149 of Companies Act 2013 deals with Appointment and Qualification of Directors. Same Section also contains Provisions related to Appointment of Independent Directors.
1. Applicability of Independent Directors (“IDs”):
- All Listed Companies
- All Public Companies having
a. Turnover is Rs. 100 cr or more
b. Aggregate Outstanding loans, debentures and deposits exceeds Rs. 50 cr
2. Number of Independent Directors required in a Company:
- Listed Companies : Atleast 1/3rd of total Directors
- Unlisted Public Companies : Atleast 2 Directors as IDs
3. Separate Meetings of IDs:
- Hold atleast one meeting in a financial year with no any other Directors being
4. Disclosures to be made by Independent Directors (IDs):
- At very first Board Meeting as an ID participant
- At every first Board Meeting in every financial year
- Or whenever there is any material change, which may affect his/her status as ID.
5. Inclusions of IDs’Meeting’s Agenda:
- Review of the performance of Non-Independent Directors
- Review of the performance of the Chairperson of the company
- Assess the quality, quantity and timeliness of flow of information b/w the Board and the Company Management
- IDs not entitled to any stock options
- Receive the remuneration by way of sitting fees
- Or by way of reimbursement of expenses for participation in the meeting(s)
- Profit related commission as may be approved by the Members
7. Provisions related to Appointment / Re-appointment of IDs:
- Appointment for a term upto 5 consecutive years, however can be appointed for less than 5 years.
- Eligible for re-appointment by way of passing Special Resolution and its disclosure to be made in the Board’s report
- However, IDs cannot hold office for more than 2 consecutive terms.*
*One term can be of less than 5 years but appointment cannot be of more than 2 consecutive terms.
8. Provisions related to Vacancy :
- To be filled up by the Board at the earliest.
- Not later than immediate next BM or three months from the date of Vacancy.
9. Where one can look for IDs?
- May be selected from ID data bank having names, address and qualification of persons who are willing / eligible to act as ID
- Data bank is maintained by the Indian Institute of Corporate Affairs at Manesar, Gurugram.
- Data bank includes the names for a period of one / five years or for life time, it depends upon the payment done by such persons.
- Any individual (having DIN or not) may voluntarily apply to the Institute for inclusion of his/her name in the data bank.
For any further queries related to this topic, please contact undersigned !!
Author – ACS Shampa Juneja
Proprietor, Shampa Juneja & Associates
Associate, HRP Accounting & Advisory Services Private Limited
Mail ID: [email protected]