QUESTION
X has applied to the Indian Institute of Corporate Affairs (IICA) for inclusion of his name in the data bank of independent directors. He is working as a director of X Ltd and Y Ltd, both are unlisted public companies having the paid-up share capital of Rs. 10 crores since last 7 years. X says that he is not required to pass the online proficiency self-assessment test as he is director of two unlisted companies with paid-up share capital of Rs. 10 crores since last 7 years. Explain whether the contention of X is correct.
ANSWER
As per Rule 6(4) of the Companies (Appointment and Qualification of Directors) Rules, 2014, every individual whose name is included in the data bank of independent directors of IICA shall pass an online proficiency self-assessment test conducted by the IICA within a period of two years 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.
Proviso to this sub-rule provides that the individual who has served for a period of not less than three years as on the date of inclusion of his name in the data bank 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 crores or more shall not be required to pass the online proficiency self-assessment test.
It is further provided that for the purpose of calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as a director or as a key managerial personnel in two or more companies or bodies corporate or statutory corporations at the same time shall be counted only once.
In view of this proviso, the contention of director is valid as the experience of director is 7 years.
RULES PERTAINING TO SELF-ASSESSMENT TEST
Every individual whose name is included in the databank under sub-rule (1) shall pass an Online Proficiency Self-Assessment test conducted by IICA within a period of two years from the date of inclusion of his name in the databank, failing which, his name shall stand removed from this databank.
Provided that an individual shall not be required to pass the online proficiency self-assessment test when he has served for a total period of not less than three years as on the date of inclusion of his name in the data bank:
A. as a director or key managerial Personnel as on the date of inclusion of his name in the databank, in one or more of the following, namely:
a. listed public company; or
b. unlisted public company having a paid-up share capital of rupees ten crore or more; or
c. body corporate listed on any recognized stock exchange or in a country which is a member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions; or
d. bodies corporate incorporated outside India having a paid-up share capital of US$ 2 million or more; or
e. statutory corporations set up under an Act of Parliament or any State Legislature carrying on commercial activities; or
B. in the pay scale of Director or equivalent or above in any Ministry or Department, of the Central Government or any State Government, and having experience in handling,-
i. the matters relating to commerce, corporate affairs, finance, industry or public enterprises; or
ii. the affairs related to Government companies or statutory corporations set up under an Act of Parliament or any State Act and carrying on commercial activities.
C. in the pay scale of Chief General Manager or above in the Securities and Exchange Board or the Reserve Bank of India or the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority and having experience in handling matters relating to corporate laws or securities laws or economic laws
Provided further that for the purpose of calculation of the period of three years referred to in the first proviso, any period during which an individual was acting as a director or as a KMP in two or more companies or body corporates or statutory corporations at the same time shall be counted only once.
Provided also that the following individuals, who are or have been, for at least ten years:-
1. an advocate of a court; or
2. in practice as a chartered accountant; or
3. in practice as a cost accountant; or
4. in practice as a company secretary
shall not be required to pass the online proficiency self-assessment test.
An individual who has obtained a score of not less than 50% in aggregate in the online proficiency self-assessment test shall be deemed to have passed such test.
There shall be no limit on the number of attempts an individual may take for passing the online proficiency self-assessment test.
There must be a gap of 1 day between 2 slots booked by an individual for attempting the online self-assessment test. If an individual fails to pass the test on a particular slot or misses the slot due to any reasons, the next slot can only be booked after 1 day from the previous booked slot date and time.
DISCLAIMER: The case study presented here is only for sharing information with readers. The views are personal, shall not be considered as professional advice. In case of necessity do consult with professionals.
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