In a recent Notification dated 22nd October, 2019, the Ministry of Corporate Affairs (“MCA”) has amended the Companies (Accounts) Amendment Rules, 2019 (“Amended Rules”).
By virtue of this amendment, effective 1st December, 2019, the company’s Board’s Report will also be required to contain a statement regarding the Board’s opinion with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year.
The expression “proficiency” means the proficiency of the independent director as ascertained from the online proficiency self-assessment test conducted by the Institute notified under sub-section (1) of Section 150.
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Section 150(1) of the Companies Act, 2013 – Subject to the provisions contained in sub-section (5) of section 149, an independent director may be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as independent directors, maintained by any body, institute or association, as may by notified by the Central Government, having expertise in creation and maintenance of such data bank and put on their website for the use by the company making the appointment of such directors:
Provided that responsibility of exercising due diligence before selecting a person from the data bank referred to above, as an independent director shall lie with the company making such appointment.
Section 149(5) of the Companies Act, 2013 – Every company existing on or before the date of commencement of this Act shall, within one year from such commencement or from the date of notification of the rules in this regard as may be applicable, comply with the requirements of the provisions of sub-section (4) of Section 149.
Section 149(4) of the Companies Act, 2013 – Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies. Explanation. — For the purposes of this sub-section, any fraction contained in such one-third number shall be rounded off as one.
Source: Ministry of Corporate Affairs
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