MCA vide Circular No. 01/2020 dated 02nd March, 2020 has issued the following Standard Operating Procedure (SOP) to all Registrars with respect to prosecutions or internal adjudication proceedings against Independent Directors (IDs), non-promoters and non-KMP non-executive directors (NEDs).
The Ministry has specifically laid emphasis that civil or criminal proceedings should not be unnecessarily initiated against the IDs or the NEDs, unless sufficient evidence exists to the contrary.
Officer in default u/s 2(60) Companies Act, 2013 –
Officer who is in default, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:—
(i) whole-time director;
(ii) key managerial personnel;
(iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;
(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorizes, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
(v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;
(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;
Liability of an Independent Director/ Non-Executive Director not being Promoter or Key Managerial Personnel u/s 149(12) Companies Act, 2013.
Notwithstanding anything contained in this Act,—
(i) an independent director;
(ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such 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.
Key takeaways of the said circular:
HOW JAYA SHARMA & ASSOCIATES CAN GUIDE?
We at JS&A provide one stop solution as a consultancy and compliance firm providing Corporate and Secretarial Services.
You can get in touch with our Compliance Manager/Associate at any point of time and get assistance on matters related to compliances of Directors and/or KMP of the Company.
For further details you can contact us at [email protected] or call us at 9757113889.
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Authors: Mehul Solanki and Neha Vaishya