Ministry of Corporate Affairs (“MCA”) has made it mandatory for Independent directors to take up an online proficiency self-assessment test to be conducted by the Indian Institute of Corporate Affairs (“IICA”). MCA has published new Rules, Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019, by notification dated 22nd October, 2019. The Rules shall be effective from 1st December. Companies (Appointment and Qualification of Directors) Rules, 2014 has also been amended by notification dated 22nd October, 2019.
Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019
Following are the highlights of the Rules:
- IICA shall create and maintain an online data bank of persons willing and eligible to be appointed as independent directors. The databank shall contain data on the individual as well as on the companies he/she is or was a director. The data is made available only to companies for the purpose of appointing a director, after paying the fixed fee.
- IICA shall conduct an online proficiency self-assessment test covering companies law, securities law, basic accountancy, and such other areas relevant to the functioning of an individual acting as an independent director.
- IICA shall also prepare a basic study material, online lessons, including audio- visuals on the specified subjects, approved by a panel nominated by the Central Government.
Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019
Rule 6 which deals with Databank of Independent Directors, has been amended to give effect to the mandate of proficiency test. Following are the highlights of the Rules:
- All existing Independent directors are required to apply online to the institute for inclusion of his name in the data bank , within 3 months of commencement i.e. 29th February, 2020.
- Every individual who intends to get appointed as an independent director, shall apply online to the institute for inclusion of his/her name in the data bank, before appointment.
- An individual not having DIN, may also voluntarily apply to the institute for inclusion of his name in the data bank.
- Inclusion of name in the data bank can be done for a period of one year or five years or for his life-time.
- Application for renewal for a further period of one year or five years or for his life-time must be filed within a period of thirty days from the date of expiry, failing which, the name of such individual shall be removed.
- Every individual included in the data bank is required to pass an online proficiency self-assessment test conducted by the institute within a period of one year from the date of such inclusion.
- Individual who have served as director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up share capital of Rs 10 crore or more, for a period of not less than 10 years, are exempted from the requirement of passing the test.
- A minimum of 60% score is required to pass the test and there is no limit on the number of attempts taken by an individual to pass.
- Every independent director shall submit a declaration that his/her name is included in the databank to the Board, along with the declaration required under Section 149(7) of the Act.
The changes will be effective from 1st December, 2019.
Click here to read Rules.
Click here to read amendment.
