Presentation on theme: "‘The Independent Director’"— Presentation transcript
Slide1
‘The Independent Director’
By CS Makarand Joshi
makarandjoshi@mmjc.inSlide2
Coverage of this PPTSlide3
EligibilitySlide4
Who is eligible to be Independent Director?
Non executive director, not being a nominee director
A director who is not a promoter or related to promoters or directors of the Company or its holding / subsidiary / associate company
A person who by himself or through his relatives is not having or had any material pecuniary relationship with Company / its holding / subsidiary / associate company / their promoters / directors during the 2 immediately preceding financial years or current yearSlide5
Who is eligible to be Independent Director?
A person who, in any of the 3 years immediately preceding the financial year in which he is proposed to be appointed, has not, directly or through his relatives, had the following relationship with Company/holding / subsidiary / associate company:-
KMP or employee
Employee / proprietor / partner of a firm of auditors / company secretaries in practice or cost auditors
Any legal or consulting firm that has / had transaction with the above amounting to 10% or more of gross turnover of such firmSlide6
Who is eligible to be Independent Director?
A person who does not hold together with his relatives 2% or more of the total voting power of the Company
A person who is not a Chief Executive or director, by whatever name called, of any non profit organization that receives 25% or more of its receipts from the Company, promoters, directors or its holding, subsidiary or associate company or that holds 2% of the total voting power in that company
A person who is not a material supplier, service provider, or customer or a lessor or lessee of the Company
A person who is not less than 21 years of ageSlide7
Code of ConductSlide8
Code of Conduct
The duties of Independent Directors should be mentioned in the Code of Conduct of the Company
All Directors and senior management personnel should affirm compliance with Code of Conduct on annual basis
Code of Conduct to be posted on Company’s websiteSlide9
Maximum DirectorshipsSlide10
Maximum Limit
He can be an Independent Director in max 7 listed companies
If he is a Whole Time Director in any listed company, then he can be an Independent director in max 3 listed companiesSlide11
Maximum TenureSlide12
Maximum Tenure
Max term of 5 consecutive years
Eligible for reappointment on passing of a special resolution by the company and disclosure of such appointment in the Directors Report.Slide13
Powers of Independent DirectorSlide14
Powers of Independent Director...
To hold separate meetings without attendance of non independent directors to review performance of non independent Directors and Board as a whole, Chairman, quality, quantity and timelines of flow of information, etc
Board meeting can be held at shorter notice only with the presence of at least 1 independent director
In case no independent director attends such Board meetings, decisions taken thereat must be ratified by at least 1 independent directorSlide15
Powers of Independent Director...
To report concerns about any unethical
behaviour
, actual or suspected fraud or violation of Company’s code of conduct under the Whistle blower policy of the Company
To report any such concerns to the Chairman of the Audit Committee – who shall be an Independent Director, for further investigationSlide16
Duties of Independent DirectorSlide17
Duties as per Companies Act
To act in accordance with Articles of Association
To ensure Company is operating to promote objects of the Company for the benefit of shareholders, employees and in best interest of Company
To exercise independent
judgement
while approving decisions on behalf of Company
Not to involve in a situation in which he may have direct or indirect conflict with the interest of CompanySlide18
Duties towards decision making
To attend Board / Committee Meeting
To discharge duties with diligence
To discharge duties with care
To discharge due skills
To ensure agenda is sufficient and proper
To ensure decisions are taken … and executedSlide19
Duty towards stakeholdersSlide20
Duty .. Not to have conflict
To give disclosure of interest in first BM of FY
To give disclosure about change in interest (either as Director or Shareholder)
Not to involve in situation of conflict of interest
Not to deal in forward dealing in securities
No to deal in insider trading of shares of the CompanySlide21
What is disclosure of interest?
To disclose list of relatives
To disclose list of companies / firms / Trust in which Director is owner / director / shareholder
To disclose list of firms in which his relatives has interest
Disclosure to be given every year and whenever there is change
Format is MBP 1Slide22
What is conflict?
Not to involve ‘self’ or ‘self benefited entity’ as supplier or customer or in other nature
Not to have competing business with that of companySlide23
Duty towards laws ….
To ensure compliance with all applicable laws
To ensure proper system to ensure compliance with all laws
To ensure that compliance system is adequate
To ensure that compliance system efficiently functioningSlide24
Stake holders protection visa a vis compliance of laws
Ensure compliance of all applicable laws
SHs
(Companies Act, SEBI)
Customers Contracts and
warrantee
Environment (Environmental Laws)
Employees
(
Labour
Laws)
Company
(Corporate Laws)
Government (Revenue Laws)
Economy [
Fema
& Customs laws] Slide25
LiabilitiesSlide26
Liabilities
Independent Directors are liable for acts / omissions occurred with his knowledge attributable through broad process
Penalties = monetary or imprisonment
Insurance can be taken to cover liabilitiesSlide27
Whether Director is liable for liabilities of the ‘Company’?
Towards borrowed funds – yes, if personal guarantee is given
Towards commercial liabilities – No
Towards contingent liabilities – No
Towards legal / compliance liabilities – Yes
Towards criminal liabilities – Yes, if involved either Directly or IndirectlySlide28
How to avoid liabilities ?
Discharge all duties diligently
Ensure system is set to take care of financial controls
Ensure system is set to take care of compliance
Ensure that there is a system for preparation of meaningful agenda
Ensure that there is a system to identify related parties and avoid any contract without board approval
Ensure Introduce doer .. Checker systemSlide29
Thank you
We will be happy to help you become successful Independent Director
MMJC
