Appointment of independent director

This query is : Resolved

lakshmanan (Querist)
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05 August 2014 As per Listing Agreement half of board should consist of independent director.

As per recent circular issued by MCA
Non executive/Non independent director
( being appointed by Bank for loan taken by company ) shall not be considered as independent director.

Now my query is for composition(half of the board) of ID at time of appointing independent director, Non executive /Non independent should be taken in account

for example
Board consists of 8 members

2 Members (MD and Non executive directors)- Promoters

1 Members- ID

Balance 5 Members- Non Independent directors being appointed by bank in the board for loan taken by company)

In this situation whether existing ONE ID is enough in the board as ID ( as per Listing agreement )

or

Existing one ID +3 ID members to be appointed in the board as ID (8 -half of board)

or

Existing one ID + 5 to be appointed in the board as ID (Existing 8 +4 New ID- half of board)

kindly suggest suitable solution for the above.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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05 August 2014 As per Clause 49 of the Listing Agreement,

Where the Chairman of the Board is a non-executive director, at least 1/3rd of the Board should comprise of ID and in case he is an executive director, at least 1/2 Of
the Board should comprise of ID.

Provided that where the non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least 1/2 of the Board of the company shall consist of ID.

In your case, if chairman is executive director OR Non executive promoter director or non executive director related to promoter, 1/2 of the Board i.e 8/2 = 4 should be ID. OR

if chairman is non executive, 1/3rd of the board i.e 8/3 = 2.6 i.e 3 should be ID

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