“Understanding Independent Directors”

Independent Directors: Applicability, Roles, and Duties

1. Definition: Non-executive directors aiding in corporate credibility and governance.
2. Applicability:
   • Listed Public Companies: At least one-third of directors must be independent.
   • Unlisted Public Companies: Need at least 2 independent directors if meeting specific criteria.
3. Qualifications:
   • Experience and expertise in fields relevant to the company.
   • No financial or familial ties compromising independence.
4. Roles:
   • Guide, coach, and mentor to improve corporate governance.
   • Ensure better governance through active involvement in committees.
   • Facilitate objective decision-making and risk management.
5. Conduct:
   • Uphold ethical standards and act objectively.
   • Devote sufficient time for informed decision-making.
   • Avoid conflicts of interest and maintain confidentiality.
6. Duties:
   • Continuous education and updating of skills.
   • Attend general and board meetings.
   • Report unethical behavior or fraud.
7. Other Provisions:
   • Mandatory formation of CSR Committee with at least one independent director.
   • Appointment process independent of company management.
   • Declaration of independence required at specified intervals.

     FAQs:

     • Practicing company secretaries can be appointed as independent directors.
     • Company secretaries working in a company cannot be appointed as independent directors in the same company.
     • Minimum age for appointment is 18 years as per company law.
     • Independent directors are liable for non-compliance only if they had knowledge or acted negligently.
     • Enrolment in Data Bank and passing an exam is mandatory for independent directors.
     • Independent directors can serve up to two consecutive terms of five years each.
     • They can serve as independent directors in up to seven companies simultaneously.