Lok Sabha Question No. 154 (UNSTARRED), answered on 2020-02-03
Subject: Exam for Board Members
Ministry: CORPORATE AFFAIRS
Asked by: Vishnu Dayal Ram

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS LOK SABHA

UNSTARRED QUESTION NO. 154 ANSWERED ON MONDAY, THE 03 rd  FEBRUARY, 2020 MAGHA 14, 1941 (SAKA)

## EXAM FOR BOARD MEMBERS QUESTION

154.  SHRI VISHNU DAYAL RAM:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

कारपोरेट कार्य मंत्री

- (a) the details of the qualifying examination that is to be held for independent members of the company boards in December every year;
- (b) the manner in which such a measure would boost corporate governance in India; and
- (c) whether such a step would reduce the pool of people who are eligible to be appointed as independent directors and if so, the details thereof?

## ANSWER

THE MINISTER OF STATE FOR FINANCE AND CORPORATE AFFAIRS

वित्त एिं कॉपोरेट कार्य मंत्रालर् में राज्र् मंत्री

- (a)  Keeping  in  view  the  enabling  provisions  of  Section  149(6),  Section  150, Schedule IV of the Companies Act, 2013 and the importance of role of Independent Directors in promoting accountability, transparency and good corporate governance, on 22 nd  October, 2019, the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019 have been notified through which Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 has been amended.     As per the said amended Rule 6, every individual -
- (i) who has been appointed as an independent director in a company, on the date of commencement of such Amendment Rules, 2019 (i.e. 01/12/2019), shall within a period of three months from such commencement; or

(SHRI ANURAG SINGH THAKUR) ( श्री अनुराग स ंह ठाकु र )

(ii) who intends to get appointed as an independent director [ID] in a company after such commencement, shall before such appointment, apply online to the Institute [i.e. Indian Institute of Corporate Affairs (IICA)] for inclusion of his name in the data bank. As per the said Rule, every individual whose name is so included in the data bank is required  to  pass  an  online  proficiency  self-assessment  test  conducted  by  the Institute within a period of one year from the date of inclusion of his name in the data bank. The test is available online without any separate charge and there is no restriction  on  number  of  attempts  for  passing  the  test.  An  individual  who  has experience of not less than 10 years as director or key managerial personnel in listed or bigger public companies is not required to pass such online test. (b) The person who is appointed as an Independent Director in a company has to function as a member of various committees of the Board of Directors.  Therefore, it becomes essential that such person should have reasonable knowledge relating to the basic corporate governance aspects, regulatory obligations and Board processes and its meetings, etc.  Keeping in view the importance of role of IDs from good corporate governance angle, this initiative will result into capacity building of the independent directors. (c) The newly amended Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 allows every eligible and willing individual, whether or not he is an existing independent director in a company to apply for inclusion of his name in  the  databank.  Thereby,  every  company  required  to  appoint  an  independent director may be able to get access to the details of such individuals. Therefore, such initiative is likely to enlarge the pool of persons who are willing and eligible to be appointed as IDs in companies. ************