Independent Director

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Bidesh kumar Roy (Querist)
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13 January 2011 Can an independent Director of a holding company become an independent director of its 100% subsidiary company?
CS Bidesh Kumar Roy

udit sharma

udit sharma (Expert)
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13 January 2011 Hi Bidesh

If an Independent Director of a Holding Company is appointed as Director of its 1005 Wholly Owned subsidiary and is drawing remuneration from the subsidiary company as well then as per the provisions of sction 314 of the Companies Act, 1956 such a Director is said to hold an office or place of profit in the Subsidiary company.

If the remueration is not drawn or is refunded to the Holding Company, he cant be said to be holding an office or place of profit in the subsidiary company.

As per the definition of the term'Independent Director' provided in Clause 49 of the Listing Agreement, an Independent Director means a Non - Executive Director who apart from receiving Director's remuneration has no other material pecuniary transaction/relationship with the Company, its promoters, Directors, senior management personnel, its Holding Company, its subsidiaries or associate companies. Hence, if the Independent Director on the Board of Diretors of a Listed Holding Company is appointed as Director on the Board of its wholly owned subsidiary and draws remuenration as such, he is said to be having material pecuniary transcation/relationship with the Subsidiary Company and hence cant be considered as Independent.

From the point of Companies Act, 1956 Independent Director has not been defined under the Act and in my opinion if he draws any remuneration as Director of Subsidiary company, he cant be treated as ID but in case he is notdrawing any remuneration, he may be considered as ID....

I admit this is a gud query and let us wait for the views of eminent experts on this....

God Bless

CS Udit Sharma