‘the independent director’ - by cs makarand joshi - [email protected]
TRANSCRIPT
Coverage of this PPT
Independent Director
Eligibility
Max Limits
Max Tenure
Powers
Duties
Liabilities
Eligibility
Who is eligible to be Independent Director? Non executive director, not being a
nominee director A director who is not a promoter or related
to promoters or directors of the Company or its holding / subsidiary / associate company
A person who by himself or through his relatives is not having or had any material pecuniary relationship with Company / its holding / subsidiary / associate company / their promoters / directors during the 2 immediately preceding financial years or current year
Who is eligible to be Independent Director?A person who, in any of the 3 years
immediately preceding the financial year in which he is proposed to be appointed, has not, directly or through his relatives, had the following relationship with Company/holding / subsidiary / associate company:-
KMP or employee Employee / proprietor / partner of a firm of
auditors / company secretaries in practice or cost auditors
Any legal or consulting firm that has / had transaction with the above amounting to 10% or more of gross turnover of such firm
Who is eligible to be Independent Director? A person who does not hold together with his
relatives 2% or more of the total voting power of the Company
A person who is not a Chief Executive or director, by whatever name called, of any non profit organization that receives 25% or more of its receipts from the Company, promoters, directors or its holding, subsidiary or associate company or that holds 2% of the total voting power in that company
A person who is not a material supplier, service provider, or customer or a lessor or lessee of the Company
A person who is not less than 21 years of age
Code of Conduct
Code of Conduct
The duties of Independent Directors should be mentioned in the Code of Conduct of the Company
All Directors and senior management personnel should affirm compliance with Code of Conduct on annual basis
Code of Conduct to be posted on Company’s website
Maximum Directorships
Maximum Limit
He can be an Independent Director in max 7 listed companies
If he is a Whole Time Director in any listed company, then he can be an Independent director in max 3 listed companies
Maximum Tenure
Maximum Tenure
Max term of 5 consecutive years Eligible for reappointment on passing of a
special resolution by the company and disclosure of such appointment in the Directors Report.
Powers of Independent Director
Powers of Independent Director... To hold separate meetings without
attendance of non independent directors to review performance of non independent Directors and Board as a whole, Chairman, quality, quantity and timelines of flow of information, etc
Board meeting can be held at shorter notice only with the presence of at least 1 independent director
In case no independent director attends such Board meetings, decisions taken thereat must be ratified by at least 1 independent director
Powers of Independent Director... To report concerns about any unethical
behaviour, actual or suspected fraud or violation of Company’s code of conduct under the Whistle blower policy of the Company
To report any such concerns to the Chairman of the Audit Committee – who shall be an Independent Director, for further investigation
Duties of Independent Director
Duties as per Companies Act To act in accordance with Articles of
Association To ensure Company is operating to
promote objects of the Company for the benefit of shareholders, employees and in best interest of Company
To exercise independent judgement while approving decisions on behalf of Company
Not to involve in a situation in which he may have direct or indirect conflict with the interest of Company
Duties towards decision making To attend Board / Committee Meeting To discharge duties with diligence To discharge duties with care To discharge due skills To ensure agenda is sufficient and proper To ensure decisions are taken … and
executed
Duty towards stakeholders
Director
Share-holder
Employee
Supplier
CustomerLenders
Society
Govern-ment
Environ-ment
Duty .. Not to have conflict
To give disclosure of interest in first BM of FY
To give disclosure about change in interest (either as Director or Shareholder)
Not to involve in situation of conflict of interest
Not to deal in forward dealing in securities
No to deal in insider trading of shares of the Company
What is disclosure of interest? To disclose list of relatives To disclose list of companies / firms /
Trust in which Director is owner / director / shareholder
To disclose list of firms in which his relatives has interest
Disclosure to be given every year and whenever there is change
Format is MBP 1
What is conflict?
Not to involve ‘self’ or ‘self benefited entity’ as supplier or customer or in other nature
Not to have competing business with that of company
Duty towards laws ….
To ensure compliance with all applicable laws
To ensure proper system to ensure compliance with all laws
To ensure that compliance system is adequate
To ensure that compliance system efficiently functioning
Stake holders protection visa a vis compliance of laws
Ensure compliance of
all applicabl
e laws
SHs(Companies Act,
SEBI)
Customers
Contracts and
warranteeEnvironment
(Environmental Laws)
Employees
(Labour Laws)
Company
(Corporate
Laws)
Government
(Revenue
Laws)
Economy [Fema
& Customs laws]
Liabilities
Liabilities
Independent Directors are liable for acts / omissions occurred with his knowledge attributable through broad process
Penalties = monetary or imprisonment Insurance can be taken to cover
liabilities
Whether Director is liable for liabilities of the ‘Company’? Towards borrowed funds – yes, if
personal guarantee is given Towards commercial liabilities – No Towards contingent liabilities – No Towards legal / compliance liabilities –
Yes Towards criminal liabilities – Yes, if
involved either Directly or Indirectly
How to avoid liabilities ?
Discharge all duties diligently Ensure system is set to take care of
financial controls Ensure system is set to take care of
compliance Ensure that there is a system for
preparation of meaningful agenda Ensure that there is a system to identify
related parties and avoid any contract without board approval
Ensure Introduce doer .. Checker system
Thank you
We will be happy to help you
become successful Independent
Director
MMJC