CA Loan Bajaj Finserv
CA Final Online Classes
CA Classes

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Critical issues under provisions of Section 149 of Companies Act, Independent Directors

APARNA.R 
on 07 February 2015

LinkedIn


Applicability:

- All listed Companies

- Every other public Company having

a. Paid up share Capital of Rs.10 crore or more Or

b. Turnover of Rs.100 crore or more Or

c. Outstanding loan or deposit exceeding 50 crore

Section 149 (6) contains that –

An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;

(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;

(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;

(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;

(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;

(e) who, neither himself nor any of his relatives—

(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;

(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—

(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or

(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent. or more of the gross turnover of such firm;

(iii) holds together with his relatives two per cent. or more of the total voting power of the company; or

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organization that receives twenty-five per cent. or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent. or more of the total voting power of the company; or

(f) who possesses such other qualifications as prescribed below:

An independent director shall possess appropriate balance of skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business.

Selection of Independent Directors

a. Selection and appointment-Transparent basis

b. Nomination Committee-To evaluate the candidates and suggest to the board

c. Criteria-Independence to the management both in fact and in perception by the public.

d. Independent Directors must not only be independent according to the legislative standards but also in thought and action.

Procedure for appointment

a. Should be approved by the Company in the General Meeting.

b. Explanatory statement should be annexed to the notice of General Meeting.

c. The explanatory statement shall indicate the jurisdiction for choosing the appointee for appointment as Independent Director.

Term of Appointment

Maximum-5 Years. And the term shall not be more than two consecutive terms. Reappointment only through special resolution.

Remuneration

 

May receive remuneration by the way of fee. Reimbursement of expenses for participation in board and committee meetings.

Disclosure by Independent Directors

Every Independent Director at the first meeting of the Board in which he participates as a Director and thereafter at the first board meeting of every financial year shall disclose their status.

Duties of Independent Directors

a. Regular Updation

b. Seek appropropriate clarification

c. Attend all board and Committee meetings.

d. Participate actively in all Committee meetings.

e. Strive to attend general meetings

f. Keep themselves well informed about the Company

g. Pay sufficient attention to Related Party Transactions.

h. Make sure all the policies are being placed.

i. Not to disclose confidential information.

Presence of Independent Directors in Committee

a. CSR Committee: Quorum requirement is of at least 3 directors out of which 1 should be the independent director.

b. Audit Committee: In every audit committee the quorum of 3 directors is must with independent director forming the majority.

c. Nomination and Remuneration Committee: For Nomination and Remuneration Committee, the quorum required is 3 or more non-executive directors out of which not less than one half shall be the Independent Directors.

Term of office

a. An independent director shall hold office for a term up to 5 consecutive years on the Board of a company, but shall be eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Board’s report.

b. No independent director shall hold office for more than 2 consecutive terms, but such independent director shall be eligible for appointment after the expiration of 3 years of ceasing to become an independent director provided that he shall not, during the said period of 3 years, be appointed in or be associated with the company in any other capacity, either directly or indirectly.

c. Any tenure of an independent director on the date of commencement of this Act shall not be counted as a term under the above provisions.

Resignation:

Resignation shall be as per Section 168:

a. By giving notice in writing to the company.

b. Intimate Registrar within 30 days from the date of Resignation.

c. File DIR-12 with the Register of Companies.

d. File DIR 11 with the Register of Companies.

e. Place the fact of Resignation at the next Annual General Meeting.

Removal

Removal shall be as per Section 169:

a. A company may remove a director by ordinary resolution before expiry of the period.

b. Opportunity of being heard has to be given.

c. A special notice shall be required of any resolution

d. Vacancy should be filed within 3 months

Separate Meetings

a. The independent Directors should hold at least 1 meeting in the absence of Non-executive directors.

b. All independent Directors should strive to be present at the meeting

c. Review the performance of non-independent Directors.

d. Review performance of Chairperson of the Company.

e. Assess the quality, quantity and timeliness of flow of information between the Company Management and the Board.


Tags :



Category Corporate Law
Other Articles by -
APARNA.R 

Report Abuse

LinkedIn



Comments


update

X

Do you have any Tax Queries

Submit