An Independent Director in relation to a Company, means a director other than a Managing Director or a Whole-time Director or a Nominee Director who fulfils the qualification as mentioned under section 149 (6) and Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014.
- The individual who will be appointed as an Independent Director shall have an Active DIN. [Section 152(3)]
- A person shall not be eligible for appointment as an Independent Director of a Company, if he is disqualified from being appointed as a Director in the Company as per Section 164.
- The Company and Independent Directors shall abide by the provisions specified in Schedule IV.
- The total number of directorship of Independent Director shall not exceed the maximum limit as provided under section 165(1).
- Company may select Independent Director from the databank maintained by any association, body, institute or association, as may be notified by Central Government. [Section 150]
- Shareholder’s approval by passing special resolution ratifying the appointment of any independent director in a listed entity [As per SEBI (Listing Obligation and Disclosure Requirment) Regulation 2015]
- Furnish the shareholders with the following information [As per SEBI (Listing Obligation and Disclosure Requirment) Regulation 2015]
- Director’s brief resume along with the details on hs nature of expertise
- Relationships between directors inter-se
- Information on the listed entities where such person holds the directorship and the membership of Board Committees along with listed entities from where he/she has resigned in the past 03 years
- Shareholding of non-executive directors including the one as benefical owner in the listed entity
- In case of independent directors, the skills and capabilities required for the role and the manner in which the proposed person meets such requirements.
Following Procedure if to be followed
- Obtain Written Consent and Declaration from the Proposed Independent Director
The Proposed Independent Director has to submit Form DIR-2 (Consent to act as a Director) and Form DIR-8 (Intimation by Director about his disqualification) to the Company. Such person shall also give a declaration that he fulfils the conditions for appointment as an Independent Director.
- Obtain Form MBP-1 from the Proposed Independent Director
Company shall obtain a disclosure of interest in Form MBP-1 from the person who is proposed to be appointed as an Independent Director.
- Obtaining DIN and Digital Signature Certificate [Section 153]
- If the person does not have Digital Signature, he shall obtain Digital Signature from Certifying Authority in India.
- The person shall have a valid DIN allotted by the Ministry of Corporate Affairs. At present, application for allotment of DIN can be submitted to MCA only through the company where he/she is proposed to be appointed.
- The Application for DIN is required to be countersigned by a Director of the Company and a copy of resolution approving the proposal of appointment is also to be submitted by the person in Form DIR-3 with MCA with his ID Proof & Address proof, duly digitally signed by him and a director of the company in which the appointee is intended to be appointed as director.
- Documents for DIR-3 are as follows
- One Passport Size Photo in JPG/JPEG Format
- Board Resolution proposing his appointment as director in an existing company
- Specimen signature duly verified
- ID Proof- Driving License/Passport/Election Voter ID Card
- Residence Proof- Utility Bill (Electricity Bill/Telephone Bill)/Bank Statement/Mobile Bill
- Other Mandatory Attachments- Income Tax PAN (For Indian National), Passport (For Foreign Nationals)
- Other Attachments- Aadhaar Card
- Meeting of Nomination and Remuneration Committee
Where a Company is required to constitute a Nomination and Remuneration Committee under section 178, shall receive a recommendation from the committee for the appointment of Independent Director by the Board of Directors of the Company. [For convening meeting of Nomination and Remuneration Committee, Refer the Procedure for Conducting Nomination and Remuneration Committee Meeting].
- Convene a Meeting of Board of Directors [As per section 173 & SS-1]
- Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
- Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
- Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
- to consider the appointment of Independent Director as an Additional Director, subject to the approval of shareholders in the General Meeting.
- to decide the term of his office which shall be not more than 5 years.
- to take note of the disclosure of interest received from the Independent Director.
- to issue Letter of Appointment to the person appointed as an Independent Director.
- to authorize the Director or Company Secretary to sign and file requisite form and return with ROC.
- Listed Company shall submit the disclosure of such appointment within 24 hours from the conclusion of the Board Meeting and post the same on the website of the Company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
- Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
- Filing of Form DIR-12 with the ROC
After the Board Meeting, a Return of Appointment of Directorship (Form DIR-12) is required to be filed with Registrar within 30 days of appointment with copy of Board Resolution along with Consent to Act as Director and Declaration about his disqualifications. In case of Companies other than OPC and Small Company, the return is also to be certified by a Company Secretary/Chartered Accountant/Cost Accountant. Following documents will be required as an attachment with Form DIR-12:
- Certified True Copy of the Board Resolution passed
- DIR-2 Consent to Act as Director
- DIR-8 Declaration by Director
- Declaration of Independence under section 149(7)
- Details of interest in other entities in form MBP-1
- Letter of Appointment.
- Convene General Meeting [Section 96, 100 and SS-2]
- Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
- Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
- Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
- Hold the General Meeting of a Class of Shareholders on fixed day and pass Special Resolution for Appointment of Independent Director.
- Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
- Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
- Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
- File Form MGT-14 with ROC
File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments:
- Certified True Copies of the Special Resolution passed along with Explanatory Statement.
- Copy of the Notice of meeting sent to members along with all the annexure
- Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice.
- Copy of Attendance Sheet of General Meeting
- Any other attachment as may be applicable.
- Making Necessary entries in Register of Directors
Company should make necessary entries in the Register of Director and Key Managerial Personals and registers of contract and arrangements in which Directors are interested in Form MBP-4.
- Regularize the appointment of Additional Independent Director at Annual General Meeting
Company shall regularize the appointment of additional Independent Director in the next Annual General Meeting. [Refer the procedure for Conducting Annual General Meeting]
- File Form DIR-12 with ROC
After the General Meeting, a Return of Appointment of Directorship (Form DIR-12) is required to be filed with Registrar within 30 days of appointment with copy of Ordinary Resolution along with Consent to Act as Director and Declaration about his disqualifications. In case of Companies other than OPC and Small Company, the return is also to be certified by a Company Secretary/Chartered Accountant/Cost Accountant.
Following documents will be required as an attachment with Form DIR-12
- Certified True Copy of the Ordinary Resolution passed
- DIR-2 Consent to Act as Director
- DIR-8 Declaration by Director
- Letter of Appointment.
- Undertake Directors and Officers insurance
The top 1000 listed entities are obligated to undertake Directors and Officers insurance (D and O insurance) for all their independent directors of requisite quantum and covering risks as determined by its Board and computed on the basis of market capitalization as on March 31 of the preceding financial year.
- File Necessary Amendment Application under following Acts
- Goods and Services Act
- Shops & Establishment Act
- Factories Act
- Foreign Exchange Management Act
- Inter-State Migrant workmen Act
- Private Security Agency Act
- Other Labour Laws
- Industry Specific Laws