Amendment in the Companies Rules (Appointment and Qualification of Directors) 2014:
The Ministry of Corporate Affairs (MCA) has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 (“Rules”) vide Notification No. G.S.R. 439(E) dated 10th June 2022, thereby amending Rule 6 and inserting a provision, allowing restoration of Independent Directors whose names have been removed from the databank of the Institute (i.e., the Indian Institute of Corporate Affairs at Manesar) on account of not giving the Self-Proficiency Test within a period of two (2) years, as prescribed in sub-section (4) of Rule 6.
I. Compliances required by a person eligible and willing to be appointed as an independent director. (Rule 6)
As per the amendment, a new sub-rule has been inserted after sub-rule (4) of Rule 6, which states as follows: –
“(5) Any individual whose name has been removed from the databank under sub-rule (4), may apply for restoration of his name on payment of fees of one thousand rupees and the institute shall allow such restoration subject to the following conditions, namely:
(i) his name shall be shown in a separate restored category for a period of one year from the date of restoration within which, he shall be required to pass the online proficiency self-assessment test and thereafter his name shall be included in the databank, only, if he passes the said online proficiency self-assessment test and in such case, the fees paid by him at the time of initial registration shall continue to be valid for the period for which the same was initially paid; and
(ii) in case he fails to pass the online proficiency self-assessment test within one year from the date of restoration, his name shall be removed from the data bank and he shall be required to apply afresh under sub-rule (1) for inclusion of his name in the databank.”.
As per the existing provisions of the Rules, in the event the name of an individual (independent director) was removed under sub-rule (4), the said individuals were required to apply afresh under sub-rule (1) for his inclusion of name in to the databank of the institute, however, vide the present notification, an opportunity has been hereby provided to the individuals as an alternative to have their names restored in the databank, by paying a fees of INR. 1,000/-. However, the same is subject to following conditions:
(i) The name of the individual would be showcased in a separate category for a period of one (1) year from the date of restoration;
(ii) The said individuals would be required to pass the online proficiency self-assessment test within a period of one (1) year from the date of restoration;
(iii) The name of the individual shall be included in the databank, only on the passing of the proficiency self-assessment test;
(iv) On passing the test, the fees paid by the individual at the time of initial registration shall continue to be valid for the period for which the same was initially paid;
IMPACT OF THE AMENDMENT:
The amendment is a welcome step for independent directors who shall now be given the liberty to restore their name in the databank within a period of 1 years from their removal of name under Rule 6(4), via payment of a fee and passing the Self-Proficiency assessment within one year of such restoration. The said amendment allows omission of fresh application that was required by the independent directors in the event of their removal of names.