Director category

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BISWAJIT (Querist)
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16 March 2018 please tell me what are the difference between Promoter Director , Professional Director and Independent Director

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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16 March 2018 The Companies Act, 2013 does not define promoter director but define promoter.

According to Section 2(69), promoter” means a person—
(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;
Unless a person is a promoter as per this definition or representing a promoter, it may not be called as promoter director. A promoter director should be a member of promoter group or nominated to the board by promoters to represent them.
Professional Director
This term “professional director” or “professional” does not define in the Companies Act, 2013. However, Proviso to subsection (4) of Section 197 of the Companies Act, 2013 has reference to professional services by a director. Section 200 has reference to the professional qualification in relation to managerial remuneration.
The dictionary defines word “professional” as a person competent or skilled in a particular activity. Accordingly, a person having some competence or skill relating to a particular activity to contribute decision making of the board may be appointed under the category of the professional director. A doctor may be a professional director in a hospital company.

Independent Director
Section 149(6) of the Companies Act, 2013 defines Independent Directors. An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—
(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company;
(ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
(c) who has or had no pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year;
(d) none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two percent or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
(e) who, neither himself nor any of his relatives—
(i) holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
(ii) is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—
(A) a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
(B) any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten percent or more of the gross turnover of such firm;
(iii) holds together with his relatives two percent or more of the total voting power of the company; or
(iv) is a Chief Executive or director, by whatever name called, of any non-profit organization that receives twenty-five percent or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two percent or more of the total voting power of the company; or
(f) who possesses such other qualifications as may be prescribed.