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The Companies Act, 2013 has taken the concept Board independent director to another level. Considering the governance factors into mind the role and duty of the independent directors as defined under the Act. In this article, we will understand the details of Independent Director.
As per Section 149 of the Companies Act[1], Independent Director means a director who is not managing director or whole-time director or nominee director of the Company. Also, an Independent Director shall fulfill the following conditions:
All listed Company
All public limited company who fulfill the below requirement:
MCA vide its notification in companies ((Appointment and Qualification of Directors) Amendment Rules, 2017) dated 5th July 2017 gave some public company an exemption. The following class of unlisted public Company is exempted to have mandatory Independent Directors to its Board:
Every listed Company shall have at least 1/3rd of total Director as an independent director. Central Government may ask such a higher number of Independent Director as he thinks fit
In the above prescribed public company shall have at least 2 independent directors on its Board.
Read More: Role of the Independent Directors in India.
One meeting of independent directors shall be held in each financial year. The meeting shall only have independent director presence. In the meeting of the Company shall review the performance of the non-independent director or board as a whole or review the performance of the chairperson of the company.
An Independent Directors shall hold office for the term of five (5) consecutive years. After termination of a term, he/she can re-appoint by the board by passing a special resolution on the basis of his/her performance. Kindly note that independent director can appoint for the 2 terms then after the expiry of 3 years he can reappoint in the Company.
An independent director shall give declaration before the appointment or at the first meeting of a board about his status as independent under the format prescribed. Whenever there is any change in the status of director he shall intimate such change to the Board of the Company.
Any director will not be entitled to receive any kind of remuneration from the Company except the sitting fees for attending meetings of the Company. Director will also not entitled to any stock option.
Also, Read: All you Need to Know About the Appointment of Independent Director.
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