The Ministry of Corporate Affairs (MCA) has, vide notification dated 22nd October, 2019, notified the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019 which shall substitute Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

The amendment rules shall come into force w.e.f. 1st December, 2019.

Given below is the list of actionable(s) arising out of the said amendment rules:

Rule No. Provisions Remarks
6(1) Compliance required by a person eligible and willing to be appointed as Independent Director (ID)

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 3 (three) months from such commencement; 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 1 (one) year or 5 (five) years or for his life-time, and from time to time take steps as specified in sub-rule (2), 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.

The MCA now requires a person who is already appointed as an Independent Director to get his name included in the data bank maintained by the ‘Indian Institute of Corporate Affairs at Manesar’ (‘Institute’) within a period of 3 (three) months from the date of commencement of the amended rules i.e. 01.12.2019. Accordingly, the ID shall be required to get his / her name included in the data bank latest by 29.02.2020.

A person desirous of being appointed as an ID shall, before getting appointed as ID by any Company, must get his name included in the data bank maintained by the Institute.

The application, as aforesaid, shall be made through online mode only.

Further, a person not having a DIN may also get his name entered in the data bank of the Institute.

The aforesaid entry in the data bank of the Institute shall be made for a period of 1 (one) year or 5 (five) years or for the life-time on payment of such fees as may be fixed by the Institute.

6(2) Every individual whose name has been so included in the data bank shall file an application for renewal for a further period of 1 (one) year or 5 (five) years or for his life-time, within a period of 30 (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.

The entry of name in the data bank of the Institute shall be made for a period of 1 (one) year or 5 (five) years or for life-time.

However, in case other than life-time entry, an application for renewal shall be required to be filed with the Institute within a period of 30 (thirty) days from the date of expiry of the initial period i.e. 1 year or 5 year.

No renewal application shall be required to be made by person who has initially made application for entry of name in data bank for life-time.

 

6(3) Every independent director shall submit a declaration of compliance of sub-rule (1) and sub-rule (2) to the Board, each time he submits the declaration required under sub-section (7) of section 149 of the Act. Section 149(7) of the Companies act, 2013 reads as under:

Every independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence as provided in sub-section (6).

 

Accordingly, the Independent Directors shall submit a declaration to the effect that his / her name is entered in the data bank maintained by the Institute at the first meeting in which he / she participates after being appointed as ID and subsequently at the first board meeting held in every financial year.

The declaration shall be in addition to the declaration of independence which is required under Section 149(7) of the Act.

 

6(4) Every individual whose name is so included in the data bank under sub-rule (1) shall pass an online proficiency self-assessment test conducted by the institute within a period of 1 (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:

Provided that the individual who has served for a period of not less than 10 (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:

 

Provided further that for the purpose of calculation of the period of ten years referred to in first proviso, any period during which an individual was acting as a director or as a key managerial personnel in 2 (two) or more companies at the same time shall be counted only once.

Subsequent to entry of the name in the data bank of the Institute the ID or person who desires to be appointed as ID, must pass an online proficiency self-assessment test conducted by the institute within a period of 1 (one) year from the date of inclusion of his / her name in the data bank by securing not less than 60% (sixty percent) in aggregate, failing which, the name shall stand removed from the databank of the Institute.

There is no ceiling on the number of attempts that may be taken for clearing the online proficiency self-assessment test. However, the same needs to be cleared within 1 (one) year.

The Ministry has provided exemption, from undergoing the online proficiency self-assessment test, to person who has served 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 for a period of not less than 10 (ten) years as on the date of inclusion of name in the data bank.

Further, in case a person has acted as a director or key managerial personnel in 2 (two) or more companies at the same time, then for the purpose of ascertaining the period of 10 years provided aforesaid, the period of directorship or holding the position of key managerial personnel shall be counted once only.

The aforesaid is explained with the help of any example:

Mr. A is an Independent Director of Company X (Listed) w.e.f. 1st April, 2011 and Company Y (unlisted public Company) w.e.f. 1st April, 2014. For calculating the period of 10 years in order to determine whether Mr. A is required to undergo online proficiency self-assessment test or not, Mr. A’s overlapping tenure as Director of both Company X and Y shall be counted only once.

Accordingly, since Mr. A has served as an Independent Director of a period of 8 years (since 2011), he would be required to pass the online proficiency self-assessment test of the institute.

The Article has been Co-authored alongwith CS Raju Shaw, Asstt. Company Secretary, Ramakrishna Forgings Limited.

Disclaimer: The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation by the Author(s). The Author(s) of this Article do not constitute any sort of professional advice or a formal recommendation. The Author(s) has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify and confirm the updates from the genuine sources before acting on any of the information’s provided hereinabove.

Author Bio

Qualification: CS
Company: Haldia Petrochemicals Limited
Location: Kolkata, West Bengal, IN
Member Since: 18 Sep 2019 | Total Posts: 3

My Published Posts

More Under Company Law

One Comment

  1. KeshavSadani says:

    Dear Readers,

    There has been a typographical error in the first para of remarks column, the last date for inclusion of the name in the data bank has been mentioned as 31.03.2019, the same may please be read as 29.02.2020.

    We are trying to get the same corrected in the Article itself with the help of TaxGuru team.

Leave a Comment

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