In a move to bolster corporate governance, govt plans exams for individuals looking to become independent directors
At a time when the government is making efforts to make its role minimal in the affairs of corporates, the role of independent directors is more vital.
New Delhi: The government plans to have examinations for individuals who want to become independent directors as part of bolstering the corporate governance framework, according to Union minister PP Chaudhary.
While there are stringent provisions under the Companies Act, 2013 to ensure good governance standards, the roles of independent directors has come under the scanner in certain instances of corporate misdoings.
Also, at a time when the government is making efforts to make its role minimal in the affairs of corporates, the role of independent directors is more vital.
Asserting that the government is committed to improve the fabric of corporate governance in the country, Chaudhary said strengthening the role of independent directors in the affairs of companies is one of the steps in that direction.
The Minister of State for Corporate Affairs said that a person should have certain qualifications to become an independent director on the boards of companies.
"The requirement with respect to independent directors to have minimum reasonable qualifications and a certification course/ exam are also being considered," Chaudhary told PTI in an interview.
He said the ministry is "very seriously" considering the proposal and stakeholders would be consulted before a final decision is taken, he added.
The minister also made it clear that the proposal is to have an examination for individuals who want to become independent directors and not for existing people who already have independent directorship.
"With respect to existing independent directors, there could be orientation programmes," he added.
Independent directors have both advisory and monitoring role in the context of governance practices at the companies.
The ministry is also planning to allow the Indian Institute of Corporate Affairs (IICA) to create and maintain a data bank of independent directors.
Under Section 150 of the Companies Act, 2013, the ministry can notify an institution or an agency to maintain an independent directors' data bank. However, the same is yet to be notified.
"The government proposes to amend the Companies (Appointment and Qualification of Directors) Rules, 2014 to allow the IICA as an agency to create and maintain a data bank of independent directors," Chaudhary said.
He said the proposal is expected to be implemented "very soon".
Earlier this month, the government-appointed committee to review offences under the Act suggested capping of remuneration of independent directors, among other measures.
Yes Bank independent director Uttam Agarwal quits; lender says he was under 'fit and proper' status review
Yes Bank's independent director Uttam Prakash Agarwal has resigned citing "serious concerns" on "deteriorating practices" and the state of affairs at the private sector lender
Recently, a senior industry leader said Sebi was becoming like a dragon for the corporate world, while similar comments have been made in the past also including those accusing Sebi of acting like an activist.<br />
Sebi chief said that in many cases, independent directors are appointed and removed at whims and fancies of promoters of companies