Lok Sabha Question No. 1059 (UNSTARRED), answered on 2015-12-04
Subject: Independent Directors
Ministry: CORPORATE AFFAIRS
Asked by: VIRENDER KASHYAP, GOPALAKRISHNAN CHINNARAJ

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS LOK  SABHA

UNSTARRED QUESTION NO. 1059 ANSWERED ON FRIDAY, DECEMBER 04, 2015/

AGRAHAYANA 13, 1937 (SAKA)

## INDEPENDENT DIRECTORS QUESTION

1059. SHRI VIRENDER KASHYAP: DR. C. GOPALAKRISHNAN:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

कारपोरेट कार्य मंत्री

- (a)  the  criteria  laid  down  for  the  appointment  of  independent  director  in  the company including Public Sector Undertakings (PSUs);
- (b) whether the Government is aware that number of companies including PSUs have not appointed women directors in its board;
- (c) if so, the details thereof and the reasons therefor along with steps taken by the Government in this regard;
- (d) whether the Government has issued any direction to the listed companies to nominate  persons  belongs  to  SC/ST  as  Director  in  its  board,  if  so,  the  details thereof; and
- (e)  the  steps  taken/being  taken  by  the  Government  to  ensure  appointment  of women directors on listed companies board?

## ANSWER

THE MINISTER OF CORPORATE AFFAIRS                               (SHRI ARUN JAITLEY) कारपोरेट कार्य मंत्री ( श्री अरुण जेटली )

(a):Section 149(4) provides that every listed company shall have atleast 1/3rd of total  number  of  directors  as  independent  directors.      Clause  49(II)  of  Listing Agreement further requires that in case the listed company does not have a regular non-executive Chairman, at least half of the Board should comprise Independent Directors.   Further, where the regular non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the company shall consist of indpendendent directors.

Contd…P-2/

Rule  4  of  Companies  (Appointment  and  Qualification  of  Directors)  Rules,  2014 prescribe that unlisted public companies having a paid up capital of Rs. 10 crores OR more, OR turnover of Rs. 100 crores or more, OR having outstanding loans, debentures  and  deposits  exceeding  Rs.  50  crores,  should  have  atleast  two independent directors.  However, if the audit committee constitution requires a higher  number,  then  such  higher  number  of  independent  directors  shall  be appointed.   These provisions are applicable to Public Sector Undertakings (PSUs) also.

Section 149 (6) read with Rule 5 of Companies  (Appointment and Qualification  of  Directors)  Rules,  2014  prescribes  the  qualifications  etc.  for  an Independent Director.  In addition, Department of Public Enterprises has prescribed criteria for selection/appointment of non-official Directors on the Board of CPSEs as per Annexure-I.

- (b), (c) and (e):- Yes.  The number of companies, category wise, which have not appointed woman directors are as follows:-
- (i) listed companies including listed PSUs:- 1707
- (ii) unlisted companies including unlisted PSUs:- 329

SEBI had prescribed fines on listed companies (other than PSUs) between Rs. 50,000 and Rs. 1,42,000 depending upon period of default from 1st April, 2015 to 1st  October, 2015.   Additionally, a per day fine of Rs. 5,000 is being imposed for continued violation after 1st October, 2015.   SEBI had requested Government to advise  the  concerned  administrative  Ministries  to  take  appropriate  steps  for ensuring compliance by defaulting listed PSUs.  Prosecution has been launched against 121 defaulting unlisted companies(other than PSUs). (d):- No.                                                   *********

## Annexure-I

Criteria for selection/appointment of non-official Directors on the Boards of CPSEs as laid down by the Government.

- (A) Criteria of Experience
- (i) Retired Government officials with a  minimum of 10 years experience at Joint Secretary level or above.
- (ii) Persons who have retired as CMD/CEOs of CPSEs and Functional Directors of the Schedule 'A CPSEs. The ex-Chief Executives and ex-Functional Directors  of  the  CPSEs  will  not  be  considered  for  appointment  as  non-official Director  on  the  Board  of  the  CPSE  from  which  they  retire.  Serving  Chief Executives/Directors of CPSEs  will not be eligible to be considered for appointment as non-official Directors on the Boards of any CPSEs.
- (iii) Academicians/Directors of Institutes/Heads of Department and Professors having more than 10 years teaching or research experience in the relevant domain e.g. management, finance, marketing, technology, human resources, or law.
- (iv) Professionals of repute having more  than 15 years of relevant  domain experience in fields relevant to the company's area of operation.
- (v) Former  CEOs  of  private  companies  if  the  company  is  (a)  listed  on  the Stock Exchanges or (b) unlisted but profit making and having an annual turnover of at least Rs.250 crore.
- (vi) Persons  of  eminence  with  proven  track  record  from  Industry,  Business  or Agriculture or Management.
- (vii) Serving CEOs and Directors of private companies listed on the Stock Exchanges may also be considered for appointment as part-time nonofficial Directors on the Boards of CPSEs in exceptional circumstances.
- (B) Criteria of Educational Qualification

Minimum graduate degree from a recognized university.

## (C)     Criteria of Age

The age band should be between 45-65 years (minimum/maximum limit).  This could,  however,  be  relaxed  for  eminent  professionals,  for  reasons  to  be recorded, being limited to 70 years.

- (D)
- (E)
- Reappointment The  non-official  Directors,  will  not  be  re-appointed  in  the  same  CPSE  after completing a maximum of two tenures, each tenure being for a period of three

years.

- Appointment in number of CPSEs at the same time

One person will not be appointed as non-official Director on the Boards of more than three CPSEs at the same time.

- (F)   Directorship in private companies

A person being considered for appointment as non-official Director on the Board  of  CPSEs  should  not  hold  directorship  in  more  than  10  private companies.

- *******