Policy

MCA extends timeline for independent directors to register themselves

K.R.Srivats New Delhi | Updated on May 08, 2020

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Online registrations allowed till June end

The Corporate Affairs Ministry (MCA) has given two more months for independent directors to register in the online databank launched in December last year.

Independent directors of companies had to register by April 30 this year, but can now do so till end of June, official sources said.

It may be recalled that the independent directors databank was jointly launched by MCA and Indian Institute of Corporate Affairs (IICA) on December 2 last year. This databank aims to strengthen the institution of independent directors, create a pool of skilled professionals and build an ecosystem for serving the existing independent directors, aspiring professionals and the companies.

Initially, the MCA wanted independent directors to register within three months, i.e, by February, but later extended it by two months, till end of April. Now this timeline has been again extended by two more months.

After registration with the databank, the independent directors are required to take an online proficiency self assessment test conducted by IICA. The test is based on relevant topics on functioning of an individual acting as an independent director, such as companies law, securities law, basic accountancy and corporate governance.

Timely move, says expert

Harish Kumar, Partner, L&L, said that any unforeseen delay in completing enrolment of independent directors and qualifying relevant test within earlier prescribed timeline, would have resulted in vacation of independent directors, which in turn would have impacted the board composition of not only listed companies, but also certain prescribed class of unlisted public companies which are made required to appoint independent directors.

This surely is a timely move by MCA amidst ongoing Covid-19 outbreak, he added.

Unhappy with tests

Sonam Chandwani, Managing Partner, KS Legal & Associates, a law firm, said that MCA has through the latest extension sought to rope in more independent directors to register in the online databank.

She highlighted that a lot of independent directors in NSE-listed companies have resigned post the government move requiring independent directors to register with the new databank. “As many as 170 such independent directors have resigned because they were not happy with the new regime stipulated by government. They were all feeling the heat of the new regulations, which were making them accountable. If they were registering, they had to undergo the proficiency test.”

 

“Many qualified professionals serving corporate boards as independent directors were not willing to take this test just to prove themselves. It hurt their ego to take an examination given that they had proved their capability by running their companies for several years,” Chandwani told BusinessLine.

She felt that professionals with certain minimum qualifications like CA or a CS or a MBA from should not be required to undergo this proficiency test for independent directors.

 

While mandating online self-assessment proficiency test for independent directors of companies, the 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.

Published on May 08, 2020

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