TMI BlogProposed Amendments in COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014X X X X Extracts X X X X X X X X Extracts X X X X ..... Proposed Amendments in COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014 - News and Press Release Dated:- 2-2-2016 - News - Appointment of Independent Directors 11.1 Section 149(4) of the Act, read with Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 prescribes appointment of independent directors in various classes of companies. The Committee noted in case of joint venture companies, wholly-owned subsidiaries, and dormant companies that fall within the purview of Section 455 of the Companies Act, 2013, there does not appear to be sufficient justifiable grounds to prescribe for independent directors, who were primarily there to protect the interests of dispersed minority shareholde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The Committee, therefore, recommended for an amendment to be affected in the Rules, to exclude such companies from the requirement of appointing an independent director. Removal/Resignation of Independent Directors 11.2 Clause (2) of item VI of Schedule IV of the Act provides that a new independent director shall replace an independent director who resigns, or is removed from the Board of the company within a period of not more than one hundred and eighty days from the date of such resignation or removal. The second proviso to Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 provides that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later than the immediate next Board meeting or three months from the date of such vacancy, whichever is later. The Committee noted that Regulation 25(6) of the SEBI (LODR) Regulations provides that an independent director who resigns or is removed from the Board shall be replaced by a new independent director at the earliest but not later than the immediate next Board meeting or three months from the date of such vacancy, whichever is later. The Committee recommended, with a view to harmonise the provisions, that Schedule IV of the Act may be amended to provide for filling up of the vacancy within three months in line with Rule 4 and SEBI Listing regulation. ESOPs issued to IDs Prior to Commencement of the Act 11.3 Clarity was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought as to whether an independent director vested with ESOPs prior to commencement of the Act i.e. 1 April 2014 can continue to hold such ESOPs and exercise these in the subsequent years. The Committee felt that prohibition under the Act cannot apply retrospectively and it is implied that any ESOPs issued or held prior to commencement of the Act would be valid and would be regulated as per the earlier regulations. The Committee felt that there was no need to issue any clarification on this matter. Separate Meeting of independent directors 11.4 Clause (1) of item VII of Schedule IV provides that the independent directors of the company shall hold at least one meeting in a year, without the attendance of non- independent directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and members of management. Stakeholders requested that the term year may be clarified as to whether it is a calendar year or financial year. The Committee felt that since the compliances under the Act are mostly aligned to a financial year, the requirement should be linked to the financial year. The Schedule may be amended accordingly . 11.5 The Committee also deliberated as to whether guidelines, for the separate meetings required to be held by Directors, need to be issued in light of demand from certain quarters in this regard. It, however, felt that these new concepts would evolve during the course of time and the Industry Chambers may guide their corporate members suitably through dissemination of best practices. There may not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be any need for guidelines to be issued by Government at this moment. 11.6 In the context of the above two paragraphs, the changes recommended in paragraph 12.7 of Part I of the Report may also be referred to. Woman Directors 11.7 The second proviso to Section 149 read with Rule 3 the Companies (Appointment and Qualification of Directors) Rules, 2014 lays the requirement for every listed company and every other public company having paid up share capital of Rupees one hundred crore or more; or turnover of three hundred crore rupees or more to appoint at least one woman director. The Committee deliberated on the suggestions to increase the prescribed thresholds, making the requirement optional and penal provisions for non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance. The Committee felt that no change in the rule position is necessary. Resignation of a director 11.8 The proviso to Section 168 read with Rule 16 lays down requirement for a director to forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in form DIR-11. It was pointed out that many of the directors do not have digital signature and the directors who are willing to resign from the board but do not have a DSC are forced to take a DSC for the limited purpose of filing form DIR-11, which may not be useful for them thereafter, if they are not on the Board of any other company(ies). The Committee noted that in the light of its recommendation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make intimation of resignation by the directors optional, the issue would be addressed. However, it was also noted that the proviso to Rule 16 already provides that a professional can file the relevant Form on behalf of a foreign director. 11.9 It has also been suggested that the resigning director should be allowed to file Form DIR-11 which should record his resignation in register of directors, if the company does not notify the resignation of director in Form DIR-12 within the prescribed period. The Committee understands that the Form DIR-11 is only a facility to the resigning director to intimate RoC of his resignation and filing of the said Form should not result in recording change of his status in the register of directors. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e change should get recorded only after DIR-12 is filed by the company. This safeguard is needed to prevent unilateral departures from the Board by the directors. The Committee s recommendation in paragraph 11.17 of Part I of the report removing the mandatory requirement may also be noted. - News - Press release - PIB Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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