Companies Act, 2013 section 150 introduces one to selection of independent director through a data bank maintained by any body, institute or association etc. Just now I passed with flying colors the self-assessment test conducted by Indian Institute of Corporate Affairs to join 1950 other qualified professionals who offer themselves as independent directors. The purpose of this article is to explain why you being a lawyer, CA, CMA or CS or a senior executive recently retired should appear for the examination based on Companies Law, Finance, Management or Corporate Governance, Audit, Secretarial law or Securities law and offer yourselves as an independent director.
Out of 15800 plus who have registered as independent directors, 2760 have registered as women independent directors while nearly 1300 companies have also registered themselves. Let us have the latest information on the same from the following web site of Indian Institute of Corporate Affairs. (IICA)
https://www.independentdirectorsdatabank.in/ and www.mca.gov.in
Why to register as an independent director?
It is a confirmed fact from recent raids, investigation of numerous corporate accounts, hundreds of corporates being managed by drivers, cooks or janitors as directors without their own knowledge and being paid nothing in their accounts, a large number of so called directors lost their position and hence your chance to be available at least.
In view of above state of our economy, it is very pleasing to hear that rules have been amended to conduct written examination by IICA at your own home after getting registered with Ministry of Corporate Affairs and making payment with IICA, get training by video lectures, read Companies Law thoroughly and appear for the written test after getting an online date approved at a slot available on that particular date.
Let me introduce yourselves with the actual facts. Yes, every thing from horse’s mouth. Actual information from web sites since I just used them and passed the test. I got 82% and among 94 percentiles. Not bad for a senior, I presume.
What are the videos which I am mentioning here?
Broadly classified as Board Essential Courses and Board Practice Courses, they are as under:
Board Essential Courses
1. Incorporation of Companies
2. Share Capital
3. General Meetings
4. Accounts of Companies
5. Debenture and Bonds
6. Acceptance of Deposits
7. Prospectus and Allotment of Shares
8. Related Party Transactions
9. Audit and Auditors
10. Mergers and Amalgamations
11. Institution of Directors
12. Duties of Directors
13. Liability of Directors and KMP
14. Oppression and Management
15. Safeguarding Directors
16. Penalties and Compounding of Offences
17. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2019(LODR)
18. Board Committees
19. Secretarial Audit and Compliances
20. Board Meetings
21. Secretarial Standard 2
22. Corporate Social Responsibility
23. How to read Balance Sheet
24. Decoding Financial Statement
25. Professional Ethics
Board Practice Courses
1. Due diligence before joining the Board
2. Exemplary Board
3. Board Effectiveness and Culture
4. Building resilient company and: Board’s role
5. Governance of Committees
6. Governance and Strategy
7. Managing CSR and Engaging stakeholders
8. Managing Trough financial ratios
9. Board evaluation
10. Evaluation of independent directors
11. Case study – World .com
12. Case study – Enron Corporation
13. Case study – Volkswagen
14. Case study – Olympus
15. Case study – Hydro One
16. Case study – Satyam Computers
17. Case study –Maruti Suzuki
These 42 videos have to be listened for hours together, some of them 30 minutes, some 40 minutes and others a very long ones with actual quotation of applicable laws, practical examples and quiz intermittently to awake you from your deep slumber if you happen to come across. Finally, you may be asked to answer 5-7 or 8 questions based totally on the lectures, applicable laws or your knowledge.
Yes, it was difficult to answer many of them borne out of deep experiences of the experts who prepared them with actual instances interspersed from professional life. Case studies build up the momentum to the top and drop you with the sad experiences of investors, management men, affected Board or orphaned employees who got cheated on account of greed of one or two top executives, lackadaisical Board and non-active regulatory authorities. It is difficult to believe those case studies which really happened in flesh and blood.
The case study of Maruti Suzuki was quite unexpected from its progressive management (that was the presumption among the investors).
Yes, you guessed properly that the question sessions offer deep thinking not only about the answer but also about the questions itself. Good experts only raise questions with answers to be found by you as managers.
Unless one gets immersed in the materials and listen attentively, it may be difficult to prepare oneself for the examination which will be very professional and uses actual experiences extensively.
For your stimulation of intellectual instincts, can I give you some brain storming questions? Ethically, as per international standards, none could give exact ones. (all imaginative ones only)
- You are a member of CSR committee, and given a budget of Rs 4.5 Cr and how would you spend among various options (4). But mind it, it is not a child’s play since almost all of them look innocent, eligible for help but the guidelines on CSR are specific.
- Yes, as member of an Audit Committee, would you permit purchase of a piece of land next to your house but owned by the relative of Managing Director and expectedly, strong pressure is on you.
- Due to recent “frauds eat bank accounts” scenario, all the members of risk committee, interestingly computer idiots, help the company’s web site to go hay wire. How do we help them, either by way of training, change the committee members or complete induction of experts?
- You are a Board member and get the agenda just one day before the meeting and you are away from your residence but the agenda speaks of sale of the subsidiary lock, stock and barrel to an unknown entity. Can you video your dissent and what is the procedure for this ultra-emergency situation?
- Expectedly in a Board meeting, members of Board start abusing themselves but are friendly with MD who conducts the Board Meeting. How to handle the dangerous situation?
- Being made the member to help in planning the borrowing needs of your company, what would you suggest either floating of bonds, convertible debentures or issue of rights issue of equity at a discount?
- Yes, you agreed to become the member of a Board of a reputed company, what do you get? Nice stock options, a decent remuneration, commission or bonus for you?
- What are your responsibilities particularly when recently you company indulged in some commercial activities not so friendly to the common law, particularly, during the recent Board meeting when you were busy in enjoying the conversation among the experts? Yes, you were a party to all decisions, taken unanimously.
- Can an individual auditor be accused of collusion in fraudulent activities of the company, when he is not in charge of finance but as per Board courtesy, he gave his consent for some motions, fully knowing his ignorance and having taken no steps to learn even A, B, C of finance? Why should he?
- I have never heard of Secretarial Audit or Cost Audit. Why to waste money? Spending money on experts for GST is a foolish activity, when our agents so far managed to get things done in sales tax department? I feel strongly about conservation of money, you may visualize. How far you are far away from commercial truth and will it affect you criminally?
- The questions will stimulate you to real situations, ask you to calculate various financial statement ratios which you never bothered to read even once while getting the financial statements from the most reputed Company which has been paying dividends since time immemorial but failed to keep pace recently in payment.
- History has not been helping those who invested in fixed return of companies who have performed wonderfully well in the past. Can the company where you herald new chapters in Board Governance, buy some properties in some other name, when plenty of money has been idling away in bank current account.
- What are the laws that affect the company which you intend to join as a Director? Does the past litigation haunt you in future though you have zero role in them?
- “Saltsburg Figments Limited” has been graceful enough to invite you to become an independent director. Every one knows that it has been pioneer in introduction of many products, and also 51% foreign owned. It is an honor to become one, as per common parlance. Is it so? How does one know about its history from the point of governance, adherence to rules and regulations and its responsibility as a responsible Company as per Companies Act 2013 or whatever?
- Will you be evaluated as an independent director and also, you can even evaluate the Company’s performance including the Board, its members excluding yourself and give a report by conducting a Board meeting only among all independent directors and that too in the premises of the company?
- “I feel embarrassed to be taught by a kid, nearly one third of my age and pointing out my ignorance on various matters in so called training programs and also asked to answer a test and give me my scores. I strongly object to it.” This is a common statement among seniors like myself who feel humiliated by the recent advances in education. Just imagine, my grandson of 4 years teaching me the drawing as an artist. But when you appear for the examination as an independent director, your approach in life will change for ever. Your family members would appreciate. Yes, you too will understand the intellectual heights of your grand kids.
How to get trained for the above examination?
- Luckily, a large number of brilliant Chartered Accountants, mostly young have left many videos, written materials or popular question and answers formatted information in the web, you tube or in many private company’s web site.
- CA institute, CS institute or CMA institute has left a large material for public consumption freely available in their web sites or as written articles. Factually speaking, the web site of IICA itself gives lead to many professional web sites for professional guidance.
- Written articles on Related party transactions, effective Board functioning, responsibilities of Board members, Secretarial/Financial statement audit/Cost audit and risk management, the buzz word among experts are available.
Many of the materials, some of them in hundreds of questions, in multiple choice format, haunt you for a long time by stimulation of knowledge. You will come to know that your ignorance has not been a bliss and you could have used your useful time with the latest knowledge and that age is only a number but youngsters march over you with adequate experience. Even a kid shows the way for learning.
Conclusion
My purpose of writing this article is to stimulate you, a brilliant professional but never thought of serving any Board as a member, a senior always condemned by family members of talking about the past or a brilliant woman executive who never had a chance to work face to face in a Board since it had been a male kingdom with long winding lectures from senior management. For professionals who never served the Board of any company, it is the new vista to professional kingdom.
I would recollect a meeting where the CMD of a leading Public sector bank wanted the Secretarial department to explain Ind AS in banks in two sentences for a lecture. While the whole world has adopted to Ind AS standards, PS banks in India always find a way to request RBI for postponement of implementation of its standards for ever. All due to ignorance and lack of real understanding of modern developments. My two articles on Ind AS bear witness to it in Taxguru.in.
Let us enroll as a member in the proper web site, pay the fees of Rs 5000 plus applicable GST, patiently listen to 42 videos several times, appear for the test multiple times to understand the questions itself thoroughly and ultimately serve the Board for the betterment of Board/Company governance of our nation. Bon Voyage! I am damn sure, you will enjoy your journey as a Board member in near future, particularly as an independent director.
Author Bio
Sir
I agree with your views.
I appreciate your zeal in writing exam.I also cleared test with some efforts since I was cs lateradvocate now arbitrator.
Sir can you kindly estimate or guess approx opportunity of ID position to aspirants listed in 16000.
Only personal views without any obligation sir
Regards
Dr. Vedula Gopinath
vgnath@gmail.com