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Independent director

Shridhi Jain (Company Secretary) (1678 Points)

16 December 2010

frnds,

Pls tell me that an independent director, drawing the commission above Rs.24 lacs per annum, is to be included in employees u/s 217 (2A) ???

Rgds,

Shridhi jain

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Jaideep (Service) (1368 Points)
Replied 16 December 2010

Expression ‘independent director’ means a non-executive director of the company who:

a. apart from receiving director’s remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and associates which may affect independence of the director;

b. is not related to promoters or persons occupying management positions at the board level or at one level below the board;

c. has not been an executive of the company in the immediately preceding three financial years;

d. is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following:

i) the statutory audit firm or the internal audit firm that is associated with the company, and

ii) the legal firm(s) and consulting firm(s) that have a material association with the company.

e. is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the director.

a. is not a substantial shareholder of the company i.e. owning two percent or more of the block of voting shares.

b. Is not less than 21 years of age.

Whereas non-executive director means director who is not in whole time employment of the company.

Section 217 (2A) clearly says, "employees who are drawing...............". Accordingly Independent director should not be included for the purpose.

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Ajay Mishra (Company Secretary) (74342 Points)
Replied 16 December 2010

Agreed with Mr. Jaideep................

Syam kamal (Company Secretary) (156 Points)
Replied 16 December 2010

Whether an “Independent Director” drawing commission of 24 lakhs per annum be considered as “Independent” not having material pecuniary relations with the company????

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 16 December 2010

Independent Director is not an employee of the company. Hence Section 217(2A) will not be applicable.

As regards "independant Director" drawing commission, it would definitely fall under related parted transations attracting privisions of Section 297, 299, 300, 301, etc.

Jaideep (Service) (1368 Points)
Replied 16 December 2010

Originally posted by : Syam kamal
	Whether an “Independent Director” drawing commission of 24 lakhs per annum be considered as “Independent” not having material pecuniary relations with the company????

Good Point.

...........depends upon facts.

Prima facie commission express some sort of relationship with performance of company. However, to consider one as in-eligible to hold position as independent it has to be proved that such relationship affect independence of director.