MCA clears air on tenure of independent directors
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The government has clarified that the tenure of all independent directors who were appointed before April 1, 2014, will not be counted towards the mandatory ten-year period or two consecutive term limit under the new company law, provided firms make fresh appointment before March 31, 2015.
India Inc will also need to formalise the appointment of independent directors through a letter of appointment under the provisions of the new Companies Act 2013 and all independent directors appointed before April 1, 2014, (the date from which the new company law was implemented) will need to get re-appointed before March 31, 2015.
These are among the fresh clarification issued by the ministry of corporate affairs (MCA) on Tuesday after it received numerous queries and clarification from various industry chambers, companies and law firms.
Under the new Act, an independent director can have a maximum of two tenures of five consecutive years (a total of ten years), with a cooling-off period of three years. “It has also been clarified that if a company wants to continue with an existing independent director, his appointment would need to be made expressly afresh under the Act before March 31, 2015, and his earlier tenure will not be counted for such fresh appointment under the Act,” MCA said in a circular.
MCA also clarified that for independent directors, “pecuniary relationship” will not include receipt of remuneration from the companies. Under the new company laws, an independent director is someone who does not have any material or pecuniary relationship with the company/subsidiaries/ or its directors.
“The matter has been examined in consultation with Sebi and it is clarified that pecuniary relationship provided in Section 149(6)(c) of the Act does not include receipt of remuneration from one or more companies by way of fees, reimbursement of expenses for participation for Board/other meetings provided under sub-section (5) of section 197," MCA said in the circular.- CASANSAAR (Financial Express)
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