The Hindu Business Line : CII seeks protection for non-executive directors against criminal liability

The Confederation of Indian Industry (CII) wants the liabilities of independent directors to be “distinguished and made less onerous than liabilities of the executive and non-independent directors”. As independent directors are not involved in the day-to-day management of the company, explains a CII release.

It also wants protection for non-executive directors against criminal liability under other laws, quoting the cardinal principle of criminal jurisprudence - a person cannot be held vicariously liable for a criminal offence.

Today, large companies operate in several jurisdictions and are required to comply with various legal and regulatory requirements, says CII.

This view has been endorsed in several judicial decisions including those by the Supreme Court and also recommended by the Naresh Chandra Committee, says CII recommending codification of this principle in the statute.

Acknowledging that it would be impracticable to amend all such statutes which create vicarious criminal liability, it suggests “a non-obstante clause having over-riding effect to be incorporated in the Companies Bill”.

“There is a shortage of good independent directors in the country and the new Companies Bill needs to act as an enabler for capable people to come forward to assume duties of independent directors on boards of companies,” adds CII.

In its recommendation of the Companies Bill 2008, to the Parliamentary Standing Committee to which the bill has been referred to, the CII described the Bill “as one of the most significant economic legislations”. It recommends for “a paradigm shift from Government approval-based regime to shareholder approval-based regime coupled with adequate disclosures”.

The CII wants ‘relative’ defined, since different personal laws govern the concept of lineal ascendants and descendants, the definition proposed under the Bill it believes would extend the scope to persons beyond the set of 24 relations currently provided under the Companies Act, 1956.

To ensure legitimate compliance by a company of the provisions and enforcement thereof, it recommends that a definitive list of relations be provided to include only the ‘spouse and dependent children’.