FAQ - Independent Director
Ref. taken from :
1. Section 149(6)
2. Section 2(47)
3. Rule 4 and Rule 5 of the Companies (Appointment and Qualification of Director) Rules 2014
4. Section 197
5. Section 150
6. Section 161 – Alternate director para
7. Schedule IV - Code for Independent Director
Q-1: Independent Director provision apply to Private Company ?
Ans. No, as per Rule 4 of Companies (Appointment and qualification of Director) Rules 2014
The following class or class of companies shall have at least 2 director as independent director
- Public company - having paid up share capital of 10 crore or more ; or
- Public company – having turnover of 100 crore or more; or
- Public company – having agreegate outstanding loans, debentures and deposits exceeding 50 crore ruppes.
Q-2: Mr. X is Expert in field finance (M.com) and relative of Mr.A (Director of TM Ltd). Now TM ltd want to appoint Mr.X as independent Director. Comment
Ans. Section 149(6)(b)(ii) Independent Director is not related to promoter or director in the company, its holding subsidiary or associate company .
So , relative of director is not appointed as Independent director.
Q-3: Who appoint Independent Director ?
Ans.: BOD Appoint Independent director subject such appointment shall be approved by company in general meeting.
Q-4: How to select and appoint independent director ? can we give advertisement in News paper ?
Ans: No , as per section 150 , An independent director may be selected from a databank containing name, address and qualification of person who are eligible and willing to act as independent director.. Data bank is maintained by any body , institute, or association, as may be notified by CG.
Q-5: Can we pay Managerial Remuneration to Independent Director ?
Ans.: No, as per section 197, An independent director shall not be entitled to any stock option and may receive remuneration by way of fees provided under sub section (5), reimbursement of expenses for participation in the board and other profit and profit related commission as may be approved by the members.
Q-6: Can we rely on data bank to select independent director ?
Ans.: Before selecting a person as a independent director from the data bank , the responsibility of exercising due diligence lie with a company.
Q-7: How to fill up casual vacancy for independent director? Who will fill up casual vacancy ?
Ans. Board will fill up casual vacancy of independent director at earlier but not later than immediate next board meeting or 3 month from the date of such vacancy whichever is later.
Q-8: Is there any qualification provided to select independent director ?
Ans: As per Rule 5 of the companies (appointment and qualification of director rules) 2014 , an independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance , law , management, sales,, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company business.
DISCLAIMER
Above presenation is prepared only to cover topic in simple manner/way so that you understand the subject matter.. before making any professional decision you must refer suitatble rules, provision of the company Act, we are not responsible to any one for cause loss/damage arise due to decision taken on this article.
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