In a partial relief, the Ministry of Corporate Affairs (MCA) has directed Registrar of Companies and official liquidators not to hound independent directors, non-promoters and non-executive directors on prosecution against the company.

Issuing a standard operating procedure, the MCA in a circular said the liability of an independent director or a non-executive director not being a promoter or key managerial personal would be limited to such acts of omission or commission by a company which had occurred with his knowledge, attributable through board process and with his consent or he has not acted diligently. Hence, independent directors and non-executive directors should not be arrayed in criminal or civil proceedings unless there is breach on their part, it added.

This apart, the responsibilities of directors appointed by the government and the National Company Law Tribunal (NCLT) should be looked into before filing cases of breach on their role of companies board, it said. If lapses are attributable to the decision taken by the board, it should be ensured that civil and criminal proceedings are not unnecessarily initiated against independent directors and non-executive directors, unless sufficient evidence exists to the contrary, it said.

Makarand Joshi, partner, MMJC and Associates LLP, a corporate compliance firm, said the circular provides a soothing effect to the independent directors, who have been at the receiving end of show-cause notices from RoC, RD (regional directors) for any non-compliance discrepancies by the company.

However, he added, it does not provide complete immunity as the circular is not addressed to investigative agencies and remains restricted and relevant only for prosecutions launched by RoC, RD. Prosecution launched by agencies in case of IL&FS or Amrapali or any other such cases will not be impacted by the circular, he added.

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