INDEPENDENT DIRECTORS NEEDS TO PASS MCA EXAM

S K & Associates

INDEPENDENT DIRECTORS NEEDS TO PASS MCA EXAM

The New norms sets out certain standards which a Person who is already acting as an Independent Director or wishes to be appointed as such of specified companies which falls under the category are required to adhere these norms.

A STEP TO CURB FAKE APPOINTMENTS 

It is observed sometimes that certain unethical companies follows the practice of appointing person as their Independent Directors who actually don't deserves to be appointed as Such.

The Provisions in brief are as follows: Amendment to Companies (Appointment and Qualification of Directors) Rules, 2014

 i) Every individual, 

• who has been appointed as an Independent Director in a Company shall within a period of 3 (three) months from the commencement of the said Rules, or

• who intends to get appointed as an Independent Director in a company after 01/12/2019 shall before such appointment, apply with such fees, as may be prescribed, to the 'Indian Institute of Corporate Affairs (IICA) for inclusion of his name in the data bank for a period of 1 (one) year or 5 (five) years or for his lifetime as the case may be, 

ii) Every person whose name has been included in the data bank shall make an application for renewal within 30 days of the expiry of the above period of 1 year, 5 years or lifetime as the case may be, else the name of individual shall stands removed from the data bank provided that Person who has paid lifetime fees for inclusion of his name in the data bank, need not submit application for renewal. 

iii) Every Independent Director is required to submit declaration of above Compliance along with declaration u/s 149(7) every time to the Board.

 iv) Every individual qualified in data bank of IICA shall also pass an online proficiency self-assessment test conducted by the institute within a period of one year from the date of inclusion of his name in the data bank, failing which, his name shall stand removed from the data bank of the institute. However there is no limit on number of attempt an individual may take to pass this online test within one year.

Exemption-This test is not applicable to an individual who has served for not less than ten years as directors or KMP in a listed public Company or unlisted Public Company having paid up share capital of Rs 10 Cr or more.

60% MARKS REQUIRED TO PASS ONLINE TEST 

The Government has made it mandatory to obtain at least 60% marks to pass the online self assessment proficiency test for an individual to act as an Independent Director. It will definitely help in curbing fake appointments made to play with the legal system. 

CONCLUSION

These new provisions relating to eligibility of an Independent Director by the Central Government seems to be a very bright step in the right direction. The exam test criteria will make only such individuals qualify as Independent Directors on the Board of Companies who actually deserve rather than non-deserving candidates occupying the seats of Independent Directors leading to lapses in Corporate Governance Practices provided the rules are also implemented in the right manner.