What do We Mean by The Term “Independent Director Company”?

Narendra Kumar

04 Dec, 2020

According to NASDAQ^[1]– An independent director is a person other than the employee or officer of the company or any individual who is having a relationship which is in the opinion of the board of directors deemed to interfere with the independent judgment while carrying out the roles as well as responsibilities of a director in the company.

A person who has not any particular relationship associated with the company. And even relatives or family members should not have a peculiar relationship or transaction with the company. With the help o,f the points mentioned below, we are going to discuss the functions, roles, duties, and qualities of a company director.

The legal requirement for an Independent Director:

All public limited company is mandatory to have at least one of the third director as a director. If the company has not been listed on any stock exchange, then it should have at least two directors, but only if the company meets the following conditions:

• When the paid-up (share) capital crosses of Rs. Ten Crores.
• When the turn over crosses INR 100 Crores.
• When the outstanding deposits and loan cross INR 50 Crores.

Independent Director roles and Responsibilities:

The main role is to protect the interest of minority stakeholders. The independent director’s role is to analyze the performance of the management and make prudent and unbiased judgments.

A person who is a whole-time director in a listed company, not serving as an independent director more than three listed company.

How are Independent Directors Appointed?

One-third of directors of the public limited company should be appointed as an independent director. The securities and SEBI also require same directors, where the chairman is a non-executive director. If a company does not have non-executive. the director should mediate the situation like the conflict between management and stakeholder’s interest.

Independent Director Tenure and Remuneration:

The maximum tenure will be five years. It can extend up to ten years depending upon the special resolution by the company.

Sitting fee will be INR 1 lakhs. The independent director will get a profit commission if it is approved by the company stakeholders.

The qualities of an Independent director:

the director should have experience and expertise in financial, law, marketing and other experience related to the business. Independent directors should possess loyalty, decision making, and impartiality qualities.

Databank of Independent Director Contains:

The company appointment and qualification is authorized by the central government to set up and maintain the independent director data bank

Independent Director of Data Bank Contains the Following Information:

Fathers name, Date of birth, name and surname, gender, DIN, Nationality, Occupation, Address, Pin code, Phone number, Experience if any, Education qualification.

Listed below is the information about the director when he is the partner of Limited Liability Company

Name of the Limited liability Company, Nature of the industry, duration of the appointment.

Listed below is the information about the director when he is the director of another company

Company name, Nature of the industry, duration of the appointment, specify which type of director he is.