On October 22, 2019, the Ministry of Corporate Affairs issued a notification pertaining to the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019 (“Amendment Rules”) to amend the Companies (Appointment and Qualification of Directors) Rules, 2014 (“Principal Rules”).

The Amendment Rules seek to substitute rule 6 of the Principal Rules, which provides for ‘Creation and maintenance of databank of persons offering to become independent directors’. The amended rule 6 provides for ‘Compliances required by a person eligible and willing to be appointed as an independent director’.

Rule 6, as amended by the Amendment Rules, provides, inter alia, as follows:

1. Every individual who has been appointed (on the date of commencement of the Amendment Rules), or intends to be appointed, as an independent director, shall before such appointment, apply online to the Indian Institute of Corporate Affairs at Manesar for inclusion of his name in the data bank for a period of 1 (one) year or 5 (five) years or for his lifetime.
2. Such individual shall also apply for renewal of the same from time to time, till he continues to hold the office of an independent director in any company. An application for renewal can be made for a further period of 1 (one) year or 5 (five) years or for his lifetime, within a period of 30 (thirty) days from the date of expiry of the initial period.
3. A declaration of compliance of the above requirements is also required to be submitted to the board of directors each time a declaration is submitted under section 149(7) of the Companies Act, 2013.
4. Every individual whose name is so included in such data bank, is required to pass an online proficiency self-assessment test conducted by the said institute within a period of 1 (one) year, failing which his name shall be removed from the data bank. An individual who has obtained a score of not less than 60% (sixty percent) shall be deemed to have passed the said test. There shall be no limit on the number of attempts an individual may make for passing the test.
5. An individual who has served for a period of not less than 10 (ten) years as on the date of inclusion of his name in the data bank as director or key managerial personnel in a listed public company or in an unlisted public company having a paid-up share capital of Rs. 10,00,00,000 (Rupees ten crore) or more shall not be required to pass the online proficiency self-assessment test.

The Amendment Rules shall come into force with effect from December 1, 2019.

This update has been contributed by Aastha (Partner) and Shradha Rakhecha (Associate).