The Ministry of Corporate Affairs (MCA) vide notification dated 22.10.2019 notifies Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019 (Amended Rules) to amend Companies (Appointment of Qualification of Directors) Rules, 2014 (Rules). The Amended Rules substituted Rule 6 of the Rules for addition of a new concept i.e. Registration on Independent Director’s Data Bank. The Amended Rules are effective from 1st December, 2019. The Amended Rules were further amended by Companies (Appointment and Qualification of Directors) Amendment Rules, 2020 Dated 28.02.2020, Companies (Appointment and Qualification of Directors) 2nd Amendment Rules 2020 Dated 29.04.2020, Companies (Appointment and Qualification of Directors) Third Amendment Rules,2020 Dated 23.06.2020, Companies (Appointment and Qualification of Directors) Fourth Amendment Rules,2020 Dated 28.09.2020 and Companies (Appointment and Qualification of Directors) Fifth Amendment Rules,2020 Dated 18.12.2020 (“Colly. known as Further Amendments).
In accordance with Amendment provisions of Rule 6 of the Companies (Appointment and qualification of Directors) Rules, 2014, following are the requirements:
Who needs Registration?
An Individual who has been appointed or intends to be appointed as an Independent Director has to get himself registered on data bank for a period of 1 (One) year or 5 (Five) years or lifetime. The time period for registration in such Data Bank for the person(s) who are already appointed as an Independent Director in a company is 13 (thirteen) months from the date of commencement of the Notification or for others it is before appointment. That means a person who is intending to be appointed as an Independent Director of a Company has to first register himself on the data bank.
Apart from this, any individual (including individual not having DIN) may apply voluntarily to the Indian Institute of Corporate Affairs, Manesar (“Institute”) for inclusion of his name in the data bank.
The proviso to clause (b) of sub-rule (1) of Rule 6 stated that any individual, including an individual not having DIN, may voluntarily apply to the institute for inclusion of his name in the data bank.
Renewal of Registration:
Any individual who has registered for one or five years can apply renewal of their registration for a further period of 1 year or 5 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. (Rule 6(2))
Thus, it can be concluded that a person who has paid life-time fees for inclusion of his name in the data bank does not require to apply for renewal. (Proviso to Rule 6(2)).
Compliance Requirement:
1. Every Independent Director has to submit a declaration along with the declaration of Section 149(7) stating the compliance of sub-rule (1) and sub-rule(2) of Rule 6 of the Companies (Appointment and Qualifications of Directors) Rules, 2014.
2. Every individual whose name is registered in the Data Bank shall pass an online Proficiency test within a period of Two (2) years from the date of inclusion of his name in the data bank.
3. The requirement to pass the online proficiency test is exempted for the individual who has served for a total period of 3(three) years as on the date of inclusion of his name in the databank, in one or more of the following, namely:
A. as a director or key managerial personnel (“KMP”), as on the date of inclusion of his name in the databank, in one or more of the following,:-
a) listed public company; or
b) unlisted public company having a paid-up share capital of Rupees 10 (Ten) crore or more; or
c) body corporate listed on any recognized stock exchange or in a country which is a member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions; or
d) bodies corporate incorporated outside India having a paid-up share capital of US$ 2 million or more; or
e) statutory corporations set up under an Act of Parliament or any State Legislature carrying on commercial activities; or
B. in the pay scale of Director or above in the Ministry of Corporate Affairs (“MCA”) or the Ministry of Finance (“MOF”) or Ministry of Commerce and Industry (“MOCI”) or the Ministry of Heavy Industries and Public Enterprises and having experience in handling the matters relating to corporate laws or securities laws or economic laws; or
C. in the pay scale of Chief General Manager or above in the Securities and Exchange Board (“SEBI”) or the Reserve Bank of India (“RBI”) or the Insurance Regulatory and Exchange Board or the Reserve Bank of India or the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority and having experience in handling the matters relating to corporate laws or securities laws or economic laws :
Few important points to be kept in mind:
Please note that:
1. the minimum percentage for passing the online proficiency test is 50% and one can attempt any number of times for passing the online proficiency self-assessment test.
2. the failure to pass the proficiency test within the prescribed time period will result in removal of name from the data bank.
3. for the purpose of calculation of the period of three years referred to in the first proviso to sub –rule (4) of Rule 6, ‘any period during which an individual was acting as a director or as a KMP in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.’
Procedural Requirements: The procedural requirements of the Registration process will be provided in the next article.
Disclaimer:
The contents of the article is the opinion of the author based on the interpretation of the applicable sections and Rules of the Companies Act, 2013. This may or may not vary from the opinion of others.
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Dear Etika,
Very Informative article. I have one query in this regard.
If Director is not renew his registration after expiry of One Year/Five Year then his name shall be removed by IICA. in such case, what will the consequence if such Director is holding position of ID in any Company? Whether he has to resigned?