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Independent Directors and Data Bank

The concept of independent directors at the boards of companies are getting wide acceptance and momentum. This has happened due to the wholehearted acceptance and implementation of various rules and regulations in the concept.

Rule 6 of the Companies ( Appointment and Qualifications of Directors ) Rules 2020 Dated 28.09.2020 speaks about the requirements for the registration into the Independent Directors National Data Bank to be appointment as Independent Directors.

Registration to the data bank.

Any individual who is or want to get appointed as an Independent Director has to get registered in the data bank. The registration period can be either for one year, 5 years or life time. There is only one condition that the time limit for persons who already appointed as independent director in a company, it is thirteen months from the date of commencement of the notification and for others it is before appointment.

The rules made it clear that unless a person is registered with data bank, he cannot be appointed as an independent director. The data base is managed by Indian Institute of Corporate Affairs, Manesar. Any person even if he does not have Directors Identification number and want to get name included in the data base, may apply voluntarily.

Renewal process of limited Registration:

If an individual has registered for one or five years, then they need to get their registration renewed for continuance in the position. The time limit is 30 days from the date of expiry of the registered period. If the registration is not renewed in time, his/her name will be removed from the data base. The persons who have registered for lifetime need not apply for renewal, as the membership is for life time.

Compliance needs:

  1. Independent Director need to submit a declaration under Section 149(7) of Companies Act 2013, also a declaration stating the compliance of Rule 6 (1), (2) of Companies (Appointment and Qualifications of Directors ) Rules, 2020.

  2. Need to pass an online proficiency test within two years from the date of inclusion of his name in the data bank.

  3. The requirement of an online test is not required for persons who have served for a total period three years as on the date of inclusion of his name in the databank in any one or more of the following

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 :

Points to be kept in mind:

1. There is no limit on number of times of attempts in the online proficiency test but the minimum marks required is 50%.

2. If the person is not able to clear the online test within the specified time, his name will be removed from the data base.

3. If a person was acting as director or key managerial person in more than one company at the same time, it will be counted only once for the purpose of the calculation of three years.

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