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  • 2021
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      • Are you making SIPs to improve your Emotional Intelligence
      • Corporate Governance needs a Moral Compass – Ethics in Indian Boardrooms!
    • August (9)
      • Grow with Governance: ESG is the umbrella for CSR, says Vedanta's Roma Balwani
      • Grow with Governance: PadUp Ventures' Rajat Jain Demystifies Correlation of Governance and Economic Growth
      • Grow with Governance: Family governance impacts the culture of a family-run business, says Equations Advisors' Mita Dixit
      • Entrepreneurial Board
      • NEW REGULATORY PROVISIONS RELATED TO INDEPENDENT DIRECTORS
      • ESG & ITS IMPORTANCE FROM THE POINT OF VIEW OF BOARD MEETING
      • Start early, don't wait till retirement to become an Independent Director, says Increate Value Advisors' Milind Sarwate
      • The winding road of leadership coaching in the post-pandemic era
      • Challenges of Organizational Culture Change
    • February (4)
      • Re-examination of Purpose by the Boards in Post -Pandemic Era
      • What Makes Great Boards Great! Performance Evaluation by Boards and Role of Independent Directors
      • Promoter Director – Time to become Custodian of Governance!
      • Diversity and Inclusion – The Board Perspective!
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      • New Directors - Have you done your due diligence
      • Cyber Security Insurance and Boards
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      • Why Advisory Boards Are Important for Indian Business Corporates?
      • Grow with Governance: ESG essential to repair the damage economic activities caused to the earth, says CA Shailesh Haribhakti
      • Top 10 areas to contribute in Boards as Independent Directors
      • Top 10 Questions to Ask in Boardrooms!
      • Essential HOWs of Boardroom!
      • Kindness is key
      • How to Brand Yourself as a Leader of the Company?
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      • Leading from the Boardroom
      • Are you hesitant to speak in the Boardroom!
      • The Neem Project a Leadership case study
      • Directors Liability in India
      • Why do promoters need Independent Directors?
      • Corporate Governance Deviation – Infosys Case Study
    • March (4)
      • Board Refreshment: Finding the Right Balance for your Board!
      • HR Governance and Board – How Important Is It?
      • Agility and Compassion: Two Pillars for Boards in the Post Pandemic Era!
      • Modernizing Governance: The Board’s Role in ESG!
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      • Restructuring appraisals in 2021 – Gratitude, Purpose & Meritocracy
      • How do you make your personal Brand?
      • Leadership Coaching: How does it help Leaders
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      • Are Independent Director’s required on the Board?
      • 'Ethics & Governance' lesson should start from school, says Federal Bank's Independent Director, Sankarshan Basu
    • September (3)
      • Grow with Governance: As an Independent Director ensure your voice is heard, says Apurva Purohit
      • Grow with Governance: Push for ESG agenda; pool CSR funds to maximise impact, says Ranganath NK, former MD of Grundfos Pumps
      • Grow with Governance: Boards should prepare companies for different risks, says National Insurance Academy's G Srinivasan
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      • WOMEN DIRECTOR-An Emerge
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      • BOARD MEMBER SELECTION- A TASK OF PERFECTION
      • SME IPO – AN OPPORTUNITY TO CAPITALIZE YOUR BUSINESS
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      • Good or bad, Salary Increments always cause a heartburn among employees
      • Is Economic Progress Enough?
      • Emotional Intelligence
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      • Tips for Aspiring Independent Directors
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    • August (1)
      • Liability of Independent Directors – An Important Aspect of Corporate Governance
    • February (4)
      • A Hero's Farewell: How to handle employee exits with dignity
      • Green Bonds: An Instrument for Financing a Sustainable Future
      • Tool for effectiveness of Board Committees - Ask Right Questions
      • Russia-Ukraine war and India’s Business Implication
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      • Stagnation or Evolution – Mindset Shifts of Boards when Company sees Stagnated Growth
      • Risk Assessment and Minimization Procedures – Role of Board
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      • A study on Sustainability Report of Container Shipping Companies.
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      • Independent Directors liability under GST
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Independent Director

Independent Director

By Deepali Nirmal, CS
Calendar

Sep 22 nd 2020

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The concept of Independent Director


is become matter of debate after corporate frauds came into light right from the universally famous Satyam fiasco to the recent Nirav Modi scam. It was found in every corporate fraud that failure of the board of directors to detect internal crisis at early stage and act in effective and timely manner to put the organisation back on track. Due to various scams it is being observed that a person having independent judgement, objectivity and rational perspective can be brought on board in a form of independent director who can ensure transparency and accountability of the board and he/she is expected to enhance the standards of corporate governance.


Post Satyam scam, the Government of India felt the need for comprehensive and strong legislation relating to Independent Director became vital and eventually leads to enactment of the Companies Act, 2013 (the Act). The Act aims to overhaul the provisions relating to Independent Director completely by conferring greater power and responsibility on them in the governance of a company. The one of the intention behind introducing the position of Independent Director was to highlight irregularities going on within the company and to ensure that such a scandal will not be repeated in future. 


Therefore, one can say that one of the salient features of the Act was that it brought clarity on the functions, liabilities and duties of independent directors. Prior thereto, there was uncertainty because the Companies Act, 1956 did not envisage the concept of Independent Director. The concept of Independent Director was introduced in India for the first time in the year 2000 as a part of Good Corporate Governance and later the said concept has been reflected in the listing agreements formulated by Securities Exchange Board of India (SEBI).


However some of the lacunae which limit Independent Directors from effectively discharging their duties as most them are having lack of financial literacy and reluctant to disturb the cordiality of collective decision-making of board. This could have been another contributory factor in the Satyam scam.


Who are the Independent Directors?


Independent Directors are those who are not charged with day to day affairs and management of the company but are usually involved in the planning, strategies and decision making activities. They are entitled to attend the Board and General Meetings and share their expertise knowledge in the benefit of the company and various stakeholders. Further, they are also entitled to evaluate the performance of other directors on the board of the Company. Independent Directors expected to play a crucial role in maintaining a transparent working environment in the corporate regime.


Basically, we can say that an Independent Director is a non-executive director of a company who helps the company in improving corporate credibility and governance standards. He/ She should not have any kind of relationship with the company that may affect the independence of his/ her judgment.


What are the qualitative requirements to become an Independent Director?


The person should be of integrity with relevant expertise and experience. He/she should possess an appropriate balance of skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations and other disciplines related to company’s business.


Broadly one who wishes to qualify as an Independent Director has to possess unwritten qualities such as Loyalty, Judgement or decision making, professional repute, impartiality etc.


Which companies must appoint an Independent Director?

 

At present, the role and functions of Independent Directors are primarily governed by the Act and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

 

In case of a listed company, where the Chairperson of the Board of Directors is a non-executive director, at least one-third of the Board of Directors shall comprise of independent directors and where the listed entity does not have a non-executive Chairperson, at least half of the Board of Directors shall comprise of independent directors. Further, through the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, SEBI has mandated that the Board of Directors of the top 500 listed entities shall have at least one independent woman director by April 01, 2019 and the Board of Directors of the top 1000 listed entities shall have at least one independent woman director by April 01, 2020.


Apart from listed companies, following class of companies are required to appoint at least two persons as Independent Directors:  

·        Public Companies having paid up share capital of ten crore rupees or more; or

·        Public Companies having turnover of one hundred crore rupees or more;

·        Public Companies which have, in aggregate, outstanding loans or borrowings or debentures or deposits, exceeding fifty crore rupees.


For further updates on this space of Independent Directors, keep reading our forthcoming blogs.

For any queries, assistance, write to us at info@mentormyboard.com


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Category

  • All
  • Boardrooms
  • BOARDROOMS
  • Independent Directors
  • Role of Board
  • Mindset Shifts of Boards
  • Independent Directors and Promoters
  • Sustainability / ESG
  • business implication
  • employee exits
  • COMMITTEE MEETINGS
  • Union Budget
  • Independent Director
  • Grow with Governance
  • Grow with Governance
  • INDEPENDENT DIRECTOR
  • Entrepreneurial Board
  • ESG & ITS IMPORTANCE
  • leadership coaching
  • Change Management
  • Advisory Boards
  • Boards
  • Boardroom
  • Brand Yourself as a Leader of the Company
  • Kindness
  • Are you hesitant to speak in the Boardroom!
  • Governance & ESG
  • Directors
  • Independent Directors
  • Corporate Governance
  • Leader development
  • Gratitude, Purpose
  • decision making
  • Systematic Investment Plans in Emotional Intelligence
  • Corporate Governance
  • The Board’s Role in ESG!
  • Balance Boards
  • Agility and Compassion
  • Governance and Board
  • Diversity and Inclusion
  • Directors,Promoter Directors
  • Board Members, Directors and Independent Directors
  • Board and Senior Management
  • New Directors
  • Cyber Insurance
  • Salary Increment
  • Economy Growth
  • Human Resources
  • Generating Wealth Beyond Money
  • Agile Mindset for Leadership
  • Aspiring Independent Directors
  • Board Leadership
  • Corporate Governance & Women on Boards
  • BOARD MEMBER
  • SME
  • WOMEN DIRECTOR
  • BOARD MEMBERS

Archive

  • 2021
    • April (3)
      • Will you drive your vehicle without a dashboard?
      • Are you making SIPs to improve your Emotional Intelligence
      • Corporate Governance needs a Moral Compass – Ethics in Indian Boardrooms!
    • August (9)
      • Grow with Governance: ESG is the umbrella for CSR, says Vedanta's Roma Balwani
      • Grow with Governance: PadUp Ventures' Rajat Jain Demystifies Correlation of Governance and Economic Growth
      • Grow with Governance: Family governance impacts the culture of a family-run business, says Equations Advisors' Mita Dixit
      • Entrepreneurial Board
      • NEW REGULATORY PROVISIONS RELATED TO INDEPENDENT DIRECTORS
      • ESG & ITS IMPORTANCE FROM THE POINT OF VIEW OF BOARD MEETING
      • Start early, don't wait till retirement to become an Independent Director, says Increate Value Advisors' Milind Sarwate
      • The winding road of leadership coaching in the post-pandemic era
      • Challenges of Organizational Culture Change
    • February (4)
      • Re-examination of Purpose by the Boards in Post -Pandemic Era
      • What Makes Great Boards Great! Performance Evaluation by Boards and Role of Independent Directors
      • Promoter Director – Time to become Custodian of Governance!
      • Diversity and Inclusion – The Board Perspective!
    • January (2)
      • New Directors - Have you done your due diligence
      • Cyber Security Insurance and Boards
    • July (7)
      • Why Advisory Boards Are Important for Indian Business Corporates?
      • Grow with Governance: ESG essential to repair the damage economic activities caused to the earth, says CA Shailesh Haribhakti
      • Top 10 areas to contribute in Boards as Independent Directors
      • Top 10 Questions to Ask in Boardrooms!
      • Essential HOWs of Boardroom!
      • Kindness is key
      • How to Brand Yourself as a Leader of the Company?
    • June (6)
      • Leading from the Boardroom
      • Are you hesitant to speak in the Boardroom!
      • The Neem Project a Leadership case study
      • Directors Liability in India
      • Why do promoters need Independent Directors?
      • Corporate Governance Deviation – Infosys Case Study
    • March (4)
      • Board Refreshment: Finding the Right Balance for your Board!
      • HR Governance and Board – How Important Is It?
      • Agility and Compassion: Two Pillars for Boards in the Post Pandemic Era!
      • Modernizing Governance: The Board’s Role in ESG!
    • May (3)
      • Restructuring appraisals in 2021 – Gratitude, Purpose & Meritocracy
      • How do you make your personal Brand?
      • Leadership Coaching: How does it help Leaders
    • October (2)
      • Are Independent Director’s required on the Board?
      • 'Ethics & Governance' lesson should start from school, says Federal Bank's Independent Director, Sankarshan Basu
    • September (3)
      • Grow with Governance: As an Independent Director ensure your voice is heard, says Apurva Purohit
      • Grow with Governance: Push for ESG agenda; pool CSR funds to maximise impact, says Ranganath NK, former MD of Grundfos Pumps
      • Grow with Governance: Boards should prepare companies for different risks, says National Insurance Academy's G Srinivasan
  • 2020
    • August (4)
      • WOMEN DIRECTOR-An Emerge
      • ARE YOUR BOARD MEMBERS SAVVY WITH FINANCIAL TERMS AND EXCEL IN FINANCIAL LITERACY QUOTIENT AS PER COMPANIES ACT 2013 MANDATES.
      • BOARD MEMBER SELECTION- A TASK OF PERFECTION
      • SME IPO – AN OPPORTUNITY TO CAPITALIZE YOUR BUSINESS
    • December (3)
      • Good or bad, Salary Increments always cause a heartburn among employees
      • Is Economic Progress Enough?
      • Emotional Intelligence
    • November (3)
      • Generating Wealth Beyond Money
      • "Agile Mindset for Leadership"
      • Tips for Aspiring Independent Directors
    • September (3)
      • Independent Director
      • Lean Thinking Boards
      • Corporate Governance & Women on Boards
  • 2022
    • August (1)
      • Liability of Independent Directors – An Important Aspect of Corporate Governance
    • February (4)
      • A Hero's Farewell: How to handle employee exits with dignity
      • Green Bonds: An Instrument for Financing a Sustainable Future
      • Tool for effectiveness of Board Committees - Ask Right Questions
      • Russia-Ukraine war and India’s Business Implication
    • July (2)
      • Stagnation or Evolution – Mindset Shifts of Boards when Company sees Stagnated Growth
      • Risk Assessment and Minimization Procedures – Role of Board
    • March (2)
      • A study on Sustainability Report of Container Shipping Companies.
      • India and The ESG impact of Crypto Currencies
    • May (1)
      • Independent Directors liability under GST
    • November (1)
      • Workplace Sexual Harassment and the Role of Board
    • October (2)
      • How many Boards are too many?
      • Women in Indian Boardrooms Vs Diversity = Inversely Proportionate
    • September (2)
      • Organizing for the Future – Important keys to becoming future ready
      • Are you ready to serve on the Board?