Independent directors: ‘Listed body corporates’ brought under proficiency test exemption criteria

The Centre has broad-based the exemption window for online proficiency self-assessment test mandated for directors and key managerial persons who have taken up the role of independent directors or looking to do so in companies.

It has amended rules to prescribe that services rendered by a director or key managerial persons in ‘body corporate listed in a recognised stock exchange’ would also be counted in the criteria for determining the 10-year experience rule brought out last year.

While mandating online self-assessment proficiency test for independent directors of companies, the Ministry of Corporate Affairs (MCA) had, in October last year, said those directors or key managerial personnel who had served over 10 years in a listed company or an unlisted company with over ₹10-crore paid-up capital need not take the online test.

The latest MCA move to bring ‘body corporate listed in a recognised stock exchange’ under the criteria would bring relief to senior bankers who had served the public sector bank system for several years, say banking industry experts.

Post their stint in the Boards of top notch PSBs, several banking industry stalwarts take up the role of ‘independent directors’ in Boards of private sector companies. After the MCA had stipulated online self-assessment proficiency tests for being nominated as independent directors, there was a view that several chief executives of public sector banks, although they had long stints at the top management level, would still need to go through the online proficiency test conducted by Indian Institute of Corporate Affairs (IICA). Now, the MCA has brought relief to these directors, say economy watchers.

Two more months

Meanwhile, the Ministry has allowed two more months for directors of companies to register themselves with the online data bank launched for directors. They can now enrol themselves in the data bank till end April.

Prior to this move, the MCA had only given three-months window, which is now being extended to five months beginning December 1.

It may be recalled that MCA had given existing directors one-year’s time — from the day they get into a IICA-maintained online databank of independent directors — to go through the online test.

After the concept of online assessment for independent directors was introduced last year, several economy watchers felt that this may not guarantee good governance and compliance.

Despite having a separate code of conduct for independent directors in the Companies Act 2013, there have been situations in recent days where their independence has had to be questioned.

Even prior to the MCA mandating the creation of data bank for independent directors by IICA, there have been few private bodies that had already come up with a database on independent directors and charged a specific listing fee.

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