The document discusses the role and requirements of independent directors under the Companies Bill 2012. It defines an independent director and outlines their qualifications. It requires listed companies to have at least one-third of their board comprised of independent directors. It also describes rules around appointment, term limits, duties and protections for independent directors.
The document discusses the role and requirements of independent directors under the Companies Bill 2012. It defines an independent director and outlines their qualifications. It requires listed companies to have at least one-third of their board comprised of independent directors. It also describes rules around appointment, term limits, duties and protections for independent directors.
Original Description:
List of sections in Companies Act 2013 governing Independent Directors
The document discusses the role and requirements of independent directors under the Companies Bill 2012. It defines an independent director and outlines their qualifications. It requires listed companies to have at least one-third of their board comprised of independent directors. It also describes rules around appointment, term limits, duties and protections for independent directors.
The document discusses the role and requirements of independent directors under the Companies Bill 2012. It defines an independent director and outlines their qualifications. It requires listed companies to have at least one-third of their board comprised of independent directors. It also describes rules around appointment, term limits, duties and protections for independent directors.
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Independent Directors under Companies Bill, 2012
Reference Content Short notes
2(47) Independent Director Referred to in 149(6) 134(3) Statement on declaration by Independent Director Directors' Report to include a statement on declaration given by Independent Directors under 149(7) 135(1) ID on CSR committee CSR Committee to consist of 3 or more directors, one of which shall be an ID 149(4) One-third of Board to comprise of IDs Listed companies shall have atleast one-third of the total number of directors as IDs 149(6) Definition of ID MD, WTD, Nominee Director are not IDs; 'In the opinion of the Board, to be a person of integrity possessing relevant experience and expertise; Is or was not a promoter of the Holding, Subsidiary or Associate company (HSA); Should not be related to promoter or director of the company or of HSA; Has or had no pecuniary relationship with company, HSA, or directors/promoters thereof in last 2 years; None of whose relatives have had pecuniary relationship with company, HSA or directors/promoters thereof in last 2 years subject to a limit of 2% of turnover OR Rs.50 lacs WIL; Should not have been a KMP or employee of the company, HSA in last 3 years; Should not have been employee or partner of Auditors, CS or Cost Auditor in last 3 years; Should not have been employee or partner of legal firm receiving 10% of turnover in last 3 years; Should not hold 2% of voting power, together with relatives; Possesses other qualifications as may be prescribed 149(7) Declaration by ID Every ID shall, at the first BM attended by him and in the first BM of each financial year thereafter, give a declaration that he meets the criteria of independence as in 149(6) 149(8) ID to abide by Schedule IV Company and ID shall abide by Schedule IV 149(9) ID not entitled to stock option ID shall not be entitled to stock options; ID is entitled to fee as specified in 197(5), reimbursement of expenses for attending meetings and profit related commission as may be approved by members 149(10) Term of ID's office ID may hold office for upto 5 consecutive years; but eligible for reappointment by special resolution by company and disclosure of such appointment in the Board's Report; subject to section 152 (appointment of directors) 149(11) No more than 2 terms ID shall not hold office for more than 2 consecutive terms; Eligible for appointment after expiration of 3 years of ceasing to be ID; provided that he is not associated with the company in any other capacity directly or indirectly during the 3 years 149(12) Protection to ID ID shall be held liable only in respect of acts of omission or commission by company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently 149(13) No retirement by rotation Provisions of 152(6) & (7) on retirement by rotation shall not apply to appointment of IDs Independent Directors under Companies Bill, 2012 Reference Content Short notes 150(1) Manner of selection of IDs IDs may be selected from the databank of IDs maintained by any notified body; Responsibility of diligence of selection lies with company 150(2) Appointment requires approval in GM Appointment of ID requires approval of company in GM; explanatory statement annexed to notice shall indicate justification for the choice 152(5) Board's opinion on ID to be annexed to notice For appointment of ID at general meeting, the explanatory statement annexed to the notice shall include a statement that in the opinion of the Board, the ID fulfils the conditions laid out for appointment 152(6) 'Total number of directors' for retirement by rotation Two-thirds of the total number of directors shall be liable for retirement by rotation. 'Total number of directors' shall not include IDs 161(2) ID cannot be appointed unless qualified No person shall be appointed as ID, unless qualified for appointment 173(3) Atleast 1 ID in BMs with short notice Board meetings can be called with shorter notice than 7 days, but one ID must be present in such meetings; If no IDs are present in such meetings, decisions have to circulated to all directors and shall be final only on ratification by atleast one ID 177(2) IDs to be majority in AC Audit Committee should comprise a minimum of 3 directors with IDs forming a majority 178(1) One-half of Remuneration Committee to be IDs Board of Directors of every listed company shall constitute a Nomination and Remuneration Committee, atleast one half of which shall be IDs 197(5) Ceiling on sitting fees for IDs Maximum fees paid for attending meetings may be prescribed, and may be prescribed differently for IDs 197(7) ID not entitled to stock option ID shall not be entitled to stock options; ID is entitled to fee as specified in 197(5), reimbursement of expenses for attending meetings and profit related commission as may be approved by members Note: Also see Schedule IV on Code for Indpendent Directors Salient points in Schedule IV Code I Guidelines for professional conduct Uphold ethical standards, exercise bona fide responsibility, etc.. Code II Roles and functions Scrutinise the performance of management in meeting agreed goals and objectives; Determine appropriate level of remuneration for Eds, KMPs and SMPs; etc.. Code III Duties Insisting to record their unresolved concerns in minutes of meetings; report concerns about suspected fraud....; etc.. Code IV Manner of appointment To issue an appointment letter with term, expectations, duties, etc. Code V Reappointment Reappointment shall be on the basis of report of performance evaluation Code VI Resignation and removal Same as for other directors as on 168 and 169 Code VII Separate meetings IDs to conduct atleast 1 meeting in a year without the non-IDs; In the meeting they shall review the performance of the non-IDs, Chairperson and assess the quality, quantity and timeliness of flow of information between management and Board Independent Directors under Companies Bill, 2012 Reference Content Short notes Code VIII Evaluation mechanism Performance evaluation of IDs shall be done by the entire Board, excluding the director being evaluated; Reappointment should be based on the report of performance evaluation